Topic: Automated Clearing House (ACH) Transactions
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Our bank has contracted with a third party vendor to provide a personal payment service (facilitating person-to-person payments). Customers may access the service through their mobile devices and our online banking website. The transfers are executed by ACH transfer. The disclosures that we provide to our customers state that “we must hear from you no later than sixty (60) days after the transaction in which the problem or error appears is first posted in the transaction history.” Does Regulation E apply to this service, and if so, are we violating its disclosure requirements?
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Yes, we believe that Regulation E would apply because the person-to-person payments are executed by ACH transfer. As a result, your disclosures should comply with Regulation E’s disclosure and error resolution provisions. From what you have told us, your error resolution notice does not appear to comply with Regulation E (and it may confuse customers…
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How long do corporate customers have to report an unauthorized “PPD” ACH transaction? Our account agreements provide that customers must notify us of unauthorized transactions within 30 days of receiving a statement showing the unauthorized transaction, and a customer did notify us within that time frame.
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Generally, a business customer’s time frame for reporting an unauthorized ACH transaction for a commercial account will be governed by your account agreement, which in your case requires business customers to report unauthorized transactions within thirty days. However, your bank’s deadline for reporting a transaction for reimbursement from the originating depository financial institution (ODFI) is…
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How many withdrawals from a passbook savings account are you limited to, to be compliant monthly or quarterly? And does the term “withdrawals” include ACH transfers, loan payments, and in-person withdrawals?
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To meet the definition of a “savings deposit” under Regulation D, a passbook savings account must be limited to six withdrawals “per calendar month or statement cycle (or similar period) of at least four weeks.” The term “withdrawals” does include ACH transfers and loan payments for loans outside of your institution. However, in-person withdrawals and…
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A customer just notified us of unauthorized transactions on the customer’s personal account made through prearranged PPD ACH transactions. Some are from last month, and others are from over four months ago. Which, if any, do we have to reimburse him for?
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Regulation E requires you to reimburse the customer for the unauthorized ACH transactions that occurred within the first sixty days after your bank provided a periodic statement showing the unauthorized transactions. For unauthorized transactions on consumer accounts that do not involve a debit card or other access device, Regulation E requires banks to reimburse only…
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We are a small servicer, and we are switching from loan passbooks to a new billing system that will send out bills to mortgage customers for each payment. Are we required to send bills to customers who have signed up for an autopay or ACH option? What about customers who have prepaid that month’s mortgage payment?
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No, you are not required to send autopay or prepaid borrowers with periodic billing statements. However, you are required to send notices or other means of confirming ACH payments from another institution, as mentioned below. Because your institution qualifies as a small servicer, you are exempt from Regulation Z’s mortgage periodic statement requirements. Consequently, we…
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For a joint deposit account, should we be accepting a form reporting an unauthorized ACH debit from just one of the joint owners? For example, it doesn’t seem logical to return an ACH as unauthorized unless all owners are willing to attest that the charge was unauthorized.
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Yes, you may accept a “written statement of unauthorized debit” (WSUD) from a joint account holder without the other joint account holder’s signature. Under the NACHA rules, the “Receiver” must sign the WSUD. Because the term “Receiver” is defined to include “all Persons whose signatures are required to withdraw funds from an account,” and either…
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Do Regulation E’s error resolution procedures apply to ACH transactions? If so, do we need to start sending a letter to the customer after we conclude an investigation and credit the customer’s account?
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Yes, Regulation E's error resolution procedures do apply to ACH transactions. However, if you determine that an error occurred, Regulation E does not require you to send an actual letter to inform the customer after concluding an investigation and crediting the customer's account. Regulation E's error resolution procedures are triggered whenever a consumer gives notice…
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One of our customers initiated an ACH credit transaction to pay an individual who is a politically exposed person. The dollar amount is below $10, and after calling our customer, we learned that the payment was for an item the customer had purchased online. What the risks of processing the ACH transaction?
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From what you have told us, the risks of processing the ACH credit transaction appear to be low. The FFIEC BSA/AML Examination Manual requires financial institutions to establish policies, procedures and processes that provide for the appropriate scrutiny and monitoring of politically exposed persons (PEPs), particularly when a PEP is opening an account. However, financial…
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One of our customers is a governmental entity that originates large ACH transactions that exceed our legal lending limit. We currently require special approval for ACH transactions that exceed our lending limit, which can delay the transaction; is that necessary?
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We are not aware of any laws or regulations that require you to institute approval procedures for ACH transactions that exceed your institution’s legal lending limit. Your approval processes and policies on ACH transfers are risk management decisions left to your institution’s discretion. The FFIEC’s Retail Payment Systems IT Booklet has general guidance on setting…
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Can we charge a fee for ACH loan payments or payments that are made by check that are returned to us NSF?
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We do not believe that there are any limitations on charging reasonable NSF fees that would apply to a bank. There are very few limitations on interest rates and fees charged by banks under Illinois law. However, any NSF fees must be agreed to by your customers in your loan agreement. Section 5e of the…