NACHA Rules Changes that will Impact Financial Institutions

NACHA rules regarding Unauthorized Entry Fees have changed. They will begin impacting agencies and financial institutions later in 2016. These rule changes will impact financial institutions that take paper checks as well as some other non-agent-involved transactions.

First, it is important to remember that Original Depository Financial Institutions (ODFIs) will directly bear the costs of the Unauthorized Entry Fees. Under this Rule, an ODFI will pay a fee of $4.50 to the Receiving Depository Financial Institution (RDFI) for each ACH debit that is returned as unauthorized (return reason codes R05, R07, R10, R29 and R51).

Effective September 18, 2015, the Unauthorized Return Rate Threshold has been reduced.

This Rule reduces the return rate threshold for unauthorized debit Entries from 1.0 percent to 0.5 percent of the total debit Entries originated.

  • Unauthorized Return Reason Codes include:
    • R05 – Unauthorized Debit to a Consumer Account using a Corporate SEC code
    • R07 – Authorization revoked by Customer
    • R10 – Customer advises Unauthorized, Improper Ineligible, or part of an Incomplete Transaction
    • R29 – Corporate Customer advises Not Authorized
    • R51 – Item related to Re-Presentation Check Entry (RCK) is Ineligible or RCK Entry is improper. (RCKs are returned checks converted to ACH.)

Effective October 3, 2016 (pertaining to entries originated on or after August 1, 2016), the Unauthorized Entry Fee will increase.

  • Under this Rule, an Originating Depository Financial Institution (ODFI) will pay a fee for each ACH debit that is returned as unauthorized (return reason codes R05, R07, R10, R29 and R51).
  • Originators could be charged the Unauthorized Entry Fees, which could be in excess of $5.00 per Unauthorized Entry.
  • This Rule will become effective for applicable return Entries with a Settlement Date of October 3, 2016 or later.

These two rule changes mean that the fee the ODFI is charged will increase and the threshold at which the ODFI begins to be charged the fee is lowered. Simply put: an ODFI could be charged higher fees more frequently if that institution is not carefully monitoring and managing unauthorized ACH entries. Originating financial institutions should begin to implement systems, tools and processes to reduce unauthorized debit returns as soon as possible. Check with your payment processing company to determine how their software monitors and/or stops transactions for unauthorized entries. Doing so will position your organization to possibly avoid NACHA Rules violations and fees.