Topic: Automated Clearing House (ACH) Transactions
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We are implementing procedures for processing Single Entry Telephone-Initiated (TEL) Entry ACH loan payments. For Single Entry TEL Entries, the updated Nacha rules going into effect on September 17, 2021, state that an Originator must make an audio recording of the oral authorization or provide written notice confirming the oral authorization to the Receiver. If we provide the written notice electronically, must we follow the E-Sign Act and related Illinois laws? The Nacha rules state that Originators must comply with Regulation E for authorizations of Recurring TEL Entries but are silent on this point for Single Entry TEL Entries.
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We do not believe you are required to follow the E-Sign Act or related Illinois laws when providing electronic written notices confirming consumers’ oral authorizations for Single Entry TEL Entries (in lieu of making audio recordings of the oral authorizations). We believe that the E-Sign Act applies only to statutes, regulations, and other rules of…
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A potential customer would like to open a deposit account with our bank to accept deposits made at a Bitcoin ATM that they own. We believe the customer is a money services business (MSB), and it would use a security service (like Garda or Brinks) to pick up the cash from the Bitcoin ATM and count the funds, which would then be sent to the customer’s account at our bank via ACH. Funds would flow out of the account by ACH transfer to a Bitcoin exchange. What BSA/AML concerns should we be aware of when considering whether to do business with this customer?
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We believe your bank should confirm that the customer is registered as an MSB and is licensed as a money transmitter under Illinois law and review the BSA/AML requirements for providing banking services to MSBs generally, as well as federal and state guidance on MSBs that transmit convertible virtual currency (CVC) such as Bitcoin. The…
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Are there any Illinois regulations that would require us to collect a loan customer’s voided check before initiating ACH payments from their deposit account at another bank to make loan payments to our bank?
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We are not aware of any Illinois law or regulation requiring banks to collect a voided check from a customer before initiating an ACH debit from their account at another financial institution. While some banks may ask customers to provide a voided check to confirm the accuracy of account and routing numbers before initiating an…
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A customer just notified us that ACH fraud has occurred on their account for the last six months. Does Regulation E require that we credit the customer for unauthorized transactions made during the sixty-day period preceding the notification, or for the sixty-day period occurring after the first unauthorized transaction that occurred when the fraud first began?
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Your bank likely will be required to credit the customer for unauthorized transactions that occurred during the first sixty days after you transmitted a periodic statement showing an unauthorized transaction. Under Regulation E, when a customer fails to report an unauthorized transaction within sixty days after transmittal of the statement showing the unauthorized transaction, the…
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Is it permissible to charge both a dormancy fee and a service fee if they are disclosed to the customer as separate fees? Our dormancy fees are charged every month an account goes unused, provided that the account balance is under a certain level and the account has been inactive for at least a year. Our service fees vary based on the account type. For example, we charge a service fee on certain checking accounts if they do not have at least one ACH credit during a statement cycle and charge a service fee on certain savings accounts if the account balance falls below a certain level. We disclose the dormancy fees on our fee schedule and our service fees on our Truth in Savings Act disclosure.
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We are not aware of any Illinois or federal laws that would generally prohibit you from charging both a dormancy fee and a service fee if they are disclosed to the customer as separate fees and agreed to by the customer. Under the Illinois Revised Uniform Unclaimed Property Act (Illinois RUUPA), dormancy fees may be…
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We are seeing joint economic impact payments (sent via ACH) being rejected because one spouse died after December 31, 2019. The check is for $2,400, and the surviving spouse still has an account at our bank and has not yet updated the ownership. Should we post this ACH payment?
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We recommend following your existing policy for ACH tax refund payments made to deceased accountholders (as explained below, the economic stimulus payments are treated as tax refunds). For a joint account for which one accountholder died in 2020, we do not believe that the economic stimulus payment should be returned. The economic impact payments authorized…
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When posting a tax refund to a customer’s account, must the account numbers on the tax refund and the customer’s account match? Must the names on the tax refund and the account also match? For example, if we receive a tax return in a husband’s name with an account number matching his wife’s account (on which he is not a joint owner), should we post the payment or return it?
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We believe that banks are required to return payments for tax refunds to the IRS when the account number on the tax refund does not match the customer’s account number, and we also recommend returning tax refunds when the name on the payment does not match the name on your account. The Treasury Department’s Guide…
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We are considering offering an interest-bearing checking account that allows for transfers only to and from a business’s operating account. Check writing, ACH credits and debits, and bill pay will be prohibited. Is R20 the most appropriate ACH return code for outside transactions on this account, even though we would not place a limit on the number of internal transactions between the customer’s accounts? What FRB check return code should we use if external paper checks or remotely created checks are presented for payment?
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Yes, we believe the ACH return code R20 is the most appropriate for an external transfer to or from an account that prohibits external transfers. R20 is the designated ACH return code for payments sent to non-transaction accounts as defined in Regulation D, which includes “an account against which transactions are prohibited or limited.” Even…
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We are considering establishing a new business product that would be a tiered interest-bearing checking account that only allows for internal transfers to and from a business’s operating account. There would be no limit on the number of internal transactions between accounts, but check-writing, ACH credits and debits, and online bill pay would be prohibited for these accounts. Customers would have the option of setting up an automatic sweep between the accounts or manually authorizing transfers through online banking. Will placing transaction limitations on this account subject it to Regulation D’s six-transaction limitation? If the customer sends external payments to these accounts, what return reason code should we use for ACH items, and what are the appropriate return actions for remotely created checks and paper checks?
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We do not believe the account described here would be subject to Regulation D and its six-transaction limit for savings deposits, since your proposed account terms authorize more than six internal transactions. To meet the definition of a “savings deposit” account under Regulation D, the account agreement must reserve the bank’s right to require at…