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Managing. The risk of Payment System - Turner P.

Turner P. Managing. The risk of Payment System - John Wiley & Sons, 2003. - 253 p.
ISBN 0-471-32848-0
Download (direct link): managingtherisksofpayment2003.pdf
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Moreover, the ACH Rules require the Originator to give notice to the consumer of a change in the date on or after which entries to be initiated by the Originator are scheduled to be debited to the consumer’s account. The notice is to be sent within at least seven calendar days before the first entry to be affected by the change is scheduled to be debited to the consumer’s account.58
Finally, the Originator must provide the consumer with an electronic or hard copy of the consumer’s authorization for all debit entries to be initiated to the consumer’s account.59
The discussion now turns to the other side of the ACH transactions— the Receiving Depository Financial Institutions (RDFIs) and the
Receipt of Entries: RDFIs and Receivers
Receivers. These are the entities that are receiving ACH payment transactions, either debits or credits. Reliably unbending ACH Rules are critical to minimizing ACH payments system risk. Thus, the ACH Rules bind the RDFI, but not to as many obligations as those that apply to the ODFI.
Rights and Obligations of RDFI. Before acting as an RDFI for a
Receiver, an RDFI has a right to request in writing that the ODFI provide the RDFI with a copy of the Receiver’s authorization for entries other than cash concentration and disbursement (CCD), corporate trade payment (CTX), and destroyed check (XCK) entry.60 Upon receipt of the RDFI’s request, the ODFI must obtain the original or a copy of the Receiver’s authorization from the Originator. The RDFI may not require the Receiver to provide other information concerning the Receiver or entries to be initiated to the Receiver’s account.61
An RDFI that receives a prenotification must verify that the account number contained in the prenotification is for a valid account. If the prenotification does not contain a valid account number or is otherwise erroneous or unprocessable, the RDFI must reject the prenotification and transmit a return entry.62 The RDFI must accept prenotifications that comply with the ACH prenotification rules.63
If the name of the Receiver and the account number contained in an entry do not relate to the same account, the RDFI may rely solely on the account number.64
Warranties of RDFI. The RDFI warrants to the ODFI, ACH Operator, and the member ACH associations that it has the power under applicable law65:
• To receive entries as provided in the rules, and
• To comply with the requirements of the rules concerning RDFIs and other participating depository financial institutions.
Risks of Automated Clearing House Payments
An RDFI that breaches the warranty must indemnify the ODFI, ACH Operator, and member associations from expenses and claims, including attorney’s fees, resulting from the breach.
Receipt and Availability of Entries
RDFI and Credit Entries. The RDFI has broad rights under ACH Rule 5.1 to return entries. Subject to these rights to reject and return entries, the RDFI must make the amount of a credit entry it receives from its ACH Operator available to the Receiver no later than the settlement date.66 In the case of a consumer preauthorized credit entry that is made available67 to an RDFI by its ACH Operator by 5:00 p.m. on the banking day prior to the settlement date, the entry must be made available to the consumer at the opening of business on the settlement date.68
Provisional Credit Rule for Businesses. The credit availability rules, however, are subject to the provisional credit rule. A credit entry that is subject to U.C.C. Article 4A—typically a business transaction—is provisional until the RDFI has received final payment through a Federal Reserve Bank or has otherwise received payment as provided in Article 4A.69 If such settlement or payment is not received, the RDFI is entitled to a refund from the Receiver. In that event, the payment between the Receiver and its bank is reversed.
Under U.C.C. Article 4A, if a bank makes a payment that is provisional under the funds-transfer system rule, the bank is entitled to a refund under Article 4A if the following rules have been observed:
• Both the beneficiary and the originator have been given notice of the provisional nature of the payment—so businesses should be alert to any “provisional” payment notices,
• The beneficiary, the beneficiary’s bank, and the originator’s bank have agreed to be bound by the rule, and
• The beneficiary’s bank has not received payment.
Receipt of Entries: RDFIs and Receivers
Debit Entries. In regard to debit entries, the RDFI may not debit the Receiver’s account prior to the settlement date of the entry, even if the date on which the Originator expects payment to occur is different from the settlement date.70 The settlement date is the date an exchange of funds, with respect to an entry, is reflected on the books of the Federal Reserve.71
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