NAFCU letter to treasury re: Federal Gov’t participation in the Automated Clearing House
WASHINGTON, DC (January 31, 2017) —
Bureau of the Fiscal Service
401 14th Street SW., Room 400B
Washington, DC 20227
RE: Federal Government Participation in the Automated Clearing House
On behalf of the National Association of Federally-Insured Credit Unions (NAFCU), the only national trade association focusing exclusively on federal issues affecting the nation’s federally-insured credit unions, I am writing in regard to the Department of the Treasury, Bureau of the Fiscal Service’s (Fiscal Service) proposed rule amending its regulation governing use of the Automated Clearing House (ACH) network by federal agencies. NAFCU welcomes efforts to ensure that federal participants in the ACH network have aligned their operations with the latest rules and amendments promulgated by NACHA: The Electronic Payments Association (NACHA). NACHA’s Operating Rules clarify the roles and responsibilities of all participants in the ACH network to better facilitate the transmission of payments between federal agencies and financial institutions.
However, NAFCU is concerned that some proposed changes to Part 210 may impose additional burdens on credit unions and their members. The uncertain implementation schedule for same-day ACH processing and origination may represent an ongoing challenge for credit unions and their members—particularly those receiving federal benefit payments. Additionally, NAFCU asks that Fiscal Service evaluate and correct certain practices related to agency handling of payroll file numbers.
Delayed Implementation of Same-Day ACH Processing
The proposal notes that implementation of Phase 1 same-day ACH amendments will be delayed with respect to government receipt of same-day credit entries. The proposal also explains that Fiscal Service “plans to enable agencies to originate Same-Day Entries in appropriate situations.” Processing of same-day credit entries received by agencies will not start until August 30, 2017; however, the same cannot be said for origination of same-day entries, which will be governed by future guidelines. NAFCU is concerned that selective participation in same-day ACH defeats the purpose of the financial sector’s transition to the same-day standard. Fiscal Service has explained that this delayed implementation date for same-day processing reflects coding and reporting changes, and that testing must be undertaken on Fiscal Service’s ACH credit processing systems. However, federal agencies have had more than a year to anticipate and plan for Phase 1 implementation.
The Federal Reserve’s Board of Governors has indicated that the transition to the same-day standard would entail only minimal operational and technological upgrades that could be funded through ACH network fees. See Federal Reserve System, Enhancements to Federal Reserve Bank Same-Day ACH Service, Request for Comments, 80 Fed. Reg. 30246 (May 27, 2015). On the other hand, the proposal asserts that payment of such fees would be undesirable for most agencies originating ACH payments. Yet to achieve the benefits of same-day ACH, the service must be ubiquitous and the private sector alone cannot be expected to provide same-day service with reasonable effectiveness. Accordingly, NAFCU asks that Fiscal Service adhere as close as possible to the original implementation schedule for same-day ACH agreed upon by NACHA, the Federal Reserve System, and participating financial institutions. The notion that the federal government might opt-out, on a selective basis, from what was originally intended as a ubiquitous standard raises fundamental questions of fairness. NAFCU believes that Fiscal Service should direct federal agencies charged with disbursing federal benefit payments to adhere to the same-day ACH implementation schedule without deviation.
Exemption from Reversal Notification Requirement
For reversing entries originated by federal entities, the proposal would exempt federal entities from NACHA’s notification requirement in Operating Rule 2.9.1. This exemption may present challenges for credit union members who are sensitive to unplanned account activity. NACHA Operating Rule 2.9.1 requires that the originator of a reversing entry make a reasonable attempt to notify the receiver of the reversing entry and provide the reason for the reversing entry no later than the settlement date of the entry. NAFCU disagrees with Fiscal Service that notification efforts on behalf of federal agencies are typically unavailing and asks that it not seek a government-wide exemption from this requirement.
Further Improvements Necessary
NAFCU has received several complaints from our members about federal agencies changing ACH payroll file numbers without notice. These changes are particularly disruptive for credit unions that seek to expedite the deposit of federal payments into customer accounts. When a federal agency changes a payroll file number, the affected credit union must verify the file before processing; however, unannounced changes to the payroll ID disrupt automated processing systems that handle ACH payments. In some cases, this disruption causes payments that members have scheduled to be rejected because of the manual ACH process times involved.
NAFCU asks that Fiscal Service develop guidelines and procedures for federal agencies to ensure that changes to payroll file numbers are accompanied by timely notifications to RDFIs. Ensuring that changes are documented will improve the functioning of automated processing systems and reduce the probability of member payments being delayed. NAFCU does not think that a notification requirement would be particularly burdensome for federal agencies and asks that the Fiscal Service study the issue to identify an optimal solution.
NAFCU appreciates the Fiscal Service’s efforts to conform federal ACH operations with the latest amendments to the NACHA Operating Rules and welcomes any future opportunity to suggest improvements to government participation in the ACH network. Should you have any questions or concerns, please do not hesitate to contact me at email@example.com or (703) 842-2266.
Regulatory Affairs Counsel
The National Association of Federally-Insured Credit Unions is the only national trade association focusing exclusively on federal issues affecting the nation’s federally-insured credit unions. NAFCU membership is direct and provides credit unions with the best in federal advocacy, education and compliance assistance. For more information on NAFCU, go to www.nafcu.org or @NAFCU on Twitter.