A Publication of MACHA - The Mid-Atlantic Payments Association
Volume XXI, NO. 2, Spring 2008
Count Down to International ACH
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Currently, there are international ACH payments that receiving financial institutions cannot identify as such because these international payments enter the United States through correspondent banking relationships and then are introduced into the ACH Network payment system identified as domestic ACH entries. Consequently, receiving financial institutions may not be able to identify ACH transactions that might violate U.S. laws, such as the regulations of the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC).
The voting membership of NACHA approved new rules and formats for international ACH transactions (IAT) which becomes effective on March 20, 2009, and will enable all U.S. financial institutions to send and receive cross-border ACH payments that can be readily identified and that carry payment-related information identifying all the parties to the payment.
All U.S. financial institutions are affected by this change, even those that do not currently send or receive international ACH payments, as any financial institution could receive an IAT transaction. NACHA, the ACH Operators and the Regional Payments Associations are asking financial institutions to begin preparations now to ensure that they are ready for the implementation next year.
“Given the significance of this change, it is essential that financial institutions start now to understand and implement the rule,” said Richard R. Oliver, executive vice president and retail payments product manager
of the Federal Reserve System. “The testing process, both internally and with vendors, will be extensive, and it is critical that all U.S. financial institutions have this completed by March 20, 2009.”
NACHA and the ACH Operators, the Federal Reserve System and the Electronic Payments Network recently sent a letter addressed to the chief executive officers of U.S. financial institutions, explaining the necessary changes to the ACH Rules, encouraging implementation and testing, and offering resources and assistance. Both NACHA and the Federal Reserve Bank have IAT resources available to the industry on their websites. These resources can be accessed at: www.nacha.org or www.frbservices.org
“Even if your financial institution does not currently originate or receive international payments, it is critical that all financial institutions be ready for March 20, 2009,” said Rosanna F. Salaris, senior vice president of The Clearing House, responsible for EPN. “The U.S. payments system and the ACH Network are rapidly adapting to the globalization of commerce, and the new rule will permit financial institutions to perform due diligence with respect to each international ACH payment as required by OFAC.”
If you have any questions about preparation for changes to the ACH Rules regarding international ACH entries, please contact Kimberly Rector, AAP at the MACHA office (410-859-0090).
The PayItGreen™ Alliance, comprised of leaders in the financial and consumer billing industries and coordinated by NACHA, has launched PayItGreen—an industry initiative committed to educating businesses and consumers about the positive environmental impact of choosing electronic payments, bills and statements over paper. As part of this initiative, the Alliance is asking financial institutions and businesses to encourage their customers to turn off paper bills and statements and to make payments electronically. PayItGreen complements existing sustainability efforts, in which most financial institutions and businesses already participate.
As part of this initiative, the Alliance has named April PayItGreen Month. Launch activities include media interviews, bylined articles, a radio and television satellite news tour, and outreach to vertical market segments.
In addition, the Alliance has launched an interactive and informative website, www.payitgreen.org, where consumers can calculate the environmental impact they could make by switching to electronic bills, statements, and payments. Financial institutions and businesses will also find tools and resources, designed specifically to help them encourage customers to make the switch, at www.payitgreen.org/business. The toolkit contains a wide range of assets, including PayItGreen logos and Web icons, newsletter articles, statement stuffers, email signature icons, a business calculator and more. Resources are free but subject to terms and conditions.
2008 MACHA Scholarship Awards
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MACHA is once again pleased to announce that we are now accepting applications for our annual The Payments Institute Scholarship Awards. As in past years, we are again offering at least two fully-paid scholarships to The Payments Institute to be held July 27 – July 31, 2008 at the Emory Conference Center Hotel in Atlanta, Georgia. The MACHA Scholarship Award includes tuition, room and board expenses, and round-trip air transportation ¬to Atlanta, Georgia. (approximate value $2,500.00).
The Payments Institute is an intensive program, conducted in a classroom environment that offers challenging in-depth training in all major areas of the payments industry. ACH, cash management, marketing, strategic planning, security, risk management, check processing and on-line payment systems are all covered in one rigorous week. The Payments Institute is a unique adult learning experience that gives you the opportunity to focus on key applications, best practices and case studies in the payments arena.
Applications are welcomed from all members of MACHA regardless of size or industry. Members of MACHA’s Board of Directors, Committee Members, and Advisors are not eligible for our scholarship awards. Applicants should have made a contribution to promote, utilize, or assist with ACH services. There are no restrictions on the applicant’s job function, title or official status. We do request that all applications be signed by the applicant’s supervisor, manager, or an officer of the institution.
Scholarship recipients are expected to commit fully to the program, including attendance at all scheduled sessions and recipients may not be accompanied by their spouse or dependents.
All scholarship applications must be received by the MACHA office by the close of business on May 23, 2008. Applications should be sent to:
MACHA-The Mid-Atlantic Payments Association
2008 TPI Scholarship Award
1344 Ashton Road, Suite 202
Hanover, Maryland 21076
Applications are available at the MACHA website: www.macha.org. You may also contact the MACHA office at 410-859-0090 to request an application and The Payments Institute brochure.
Rules Connection
Q: Do the ACH Rules permit the conversion of home equity line of credit checks into ARC, BOC or POP entries?
A: No, currently home equity line of credit checks are defined as ineligible source documents. This definition means that these types of checks should not be converted by Originators into ACH entries. RDFIs may return any ARC, BOC, or POP entry that is the result of a converted home equity line of credit check. RDFIs can use the ACH Return Reason code R39-Improper Source Document. The entry must be made available to the ODFI by the opening of business on the second banking day following the Settlement Date of the original entry. 2008 ACH Rules, Appendix Five.
Contact the MACHA office (410-859-0090) if you have a payment related question.
Delayed Implementation
The Financial Management Service (FMS) is temporarily delaying the implementation of the suppression of SSNs in Supplemental Security Income (SSI) payments originally scheduled for April 1, 2008. This will allow additional time for financial institutions to make preparations for the change and for FMS and the Social Security Administration (SSA) to evaluate the impact on return and notification of change entries. A new date will be announced soon.
The Federal Reserve Banks Announce
New Pricing Policy for Carrier Documents
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As more forward collection and return items are deposited in image cash letters, the continuing use of carrier documents impacts the progress toward an all-electronic check collection system. As a result, effective August 1, 2008, the Federal Reserve Banks will modify the pricing on forward collection and return items in carrier documents.
• Any qualified return item cash letter containing carrier documents will be reclassified as unqualified (raw) returns, with associated pricing and availability.
• Forward collection machineable cash letters that contain carrier documents will be charged an additional $0.02 per item on each item in the cash letter. This fee is in addition to the published fees.
• The new fee for items placed in carrier documents in machineable cash letters that fail IQA will be increased from $4.00 per item to $10.00 per item.
In addition to the new pricing policy, financial institutions (FIs) should be aware that Operating Circular 3 (OC 3) imposes the risk of loss on an FI that sends a carrier item to a Federal Reserve Bank in a mixed cash letter. OC 3 requires that items in carriers be sent to the Federal Reserve Banks in cash letters that are separate from mixed cash letters intended for machine processing. An FI that includes a carrier item in a mixed cash letter indemnifies the Federal Reserve Banks against any resulting loss.
Carrier documents should continue to be used for photos-in-lieu and items with attachments. These items should be deposited in a non-machineable cash letter (for forward collection) or an unqualified (raw) return cash letter.
To promote greater interoperability, The Federal Reserve Banks are recommending that all depositing and returning financial institutions use strips rather than carrier documents.
FRB Check Processing Centers to Close Sooner
The Federal Reserve Banks have announced modifications to the schedule for previously announced check processing infrastructure changes as the shift from using paper checks toward electronic payments continues to grow and as financial institutions rapidly adopt electronic check processing.
In June 2007, the Federal Reserve Banks selected Philadelphia, Cleveland, Atlanta, and Dallas as regional check processing sites that are expected to provide a full range of paper check processing services and receive processing volume from other sites in a phased transition. Other remaining sites will have their operations scaled back. The revised schedule will take effect immediately, with seven sites transitioning in 2008 as opposed to the five that were originally scheduled. The overall transition schedule has been shortened and is set to conclude in early 2010 instead of early 2011.
The revisions include the Baltimore office of the Federal Reserve Bank. The original transition date for the Baltimore office was the fourth quarter of 2009. The Baltimore office is now scheduled to be only printing substitute checks by the first quarter 2009. The complete revised schedule is available at www.frbservices.org.
Fuel Surcharge on Paper Cash Letters
The Federal Reserve Banks recently announced surcharges on all paper cash letters effective May 1, 2008.
• A surcharge of $2.00 per cash letter will be assessed on all forward and return legacy paper cash letters.
• A surcharge of $0.002 will be assessed on each consolidated item shipped via the Check Relay network.
Note that direct send cash letters transported via private vendors will not be affected by the surcharge.
If you have any questions about the new fuel surcharges you can contact your account executive at the Federal Reserve Bank.
AAP Exam Goes Electronic!
NACHA—The Electronic Payments Association and MACHA are pleased to announce that beginning in 2008, the Accredited ACH Professional (AAP) program exam will be offered electronically at more than 500 LaserGrade computer-based testing centers nationwide. With the new system, applicants can now select a test date within a three-week window in October, and choose from testing sites across the country. Unofficial results will be available immediately upon completing the exam.
There are considerable environmental benefits to offering the exam electronically. Doing so will save more than 20,000 sheets of paper, and will also help the environment in terms of reduction in fuel consumed in shipping tests and transporting applicants, testers, and reviewers to and from the testing and review sites.
“The growth of NACHA’s Accredited ACH program reflects the growing importance of ACH payments to financial institutions and their customers,” said Elliott C. McEntee, president and chief executive officer of NACHA.
MACHA will conduct a four-part evening review session in September 2008 and a two-part all day review session in October 2008. MACHA also recommends that AAP candidates attend our regularly scheduled ACH workshops throughout the year as part of a candidate’s preparation for the exam. Please contact Kimberly Rector, AAP at the MACHA office (410-859-0090) with any questions about the exam or preparation for the test.
Upcoming Educational Programs
Individual program announcements are mailed to all MACHA members four to six weeks prior to each program. If you have questions please contact the MACHA office or visit our website at www.macha.org.
May 6 ACH Origination
(Morning) Columbia, Maryland
May 6 ACH Origination
(Afternoon) Columbia, Maryland
May 15 ACH Audit for RDFIs
(Morning) Columbia, Maryland
May 15 ACH Audit for ODFIs
(Afternoon) Columbia, Maryland
May 29 Check Fundamentals
(Morning) Columbia, Maryland
May 29 Check Fundamentals
(Afternoon) Columbia, Maryland
June 3 Check Returns & Regulation CC
(Morning) Laurel, Maryland
June 3 Check Returns & Regulation CC
(Afternoon) Laurel, Maryland
June 12 Essentials of the ACH
(Morning) Laurel, Maryland
June 12 Essentials of the ACH
(Afternoon) Laurel, Maryland
Member National Automated Clearing House Association