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Payment System Rules

and Regulations

Regional Payments Associations, through their Direct Membership in NACHA, are specially

recognized and licensed providers of ACH education, publications and support. Regional

Payments Associations are directly engaged in the NACHA rulemaking process and Accredited

ACH Professional (AAP) program. NACHA owns the copyright for the NACHA Operating Rules &

Guidelines. The Accredited ACH Professional (AAP) is a service mark of NACHA.

©2015, EPCOR®. All Rights Reserved.

What will you learn?

• Given a scenario, identify the rules and/or

regulations that apply to various payment

systems

• Identify the impact and obligations regulations

have on your financial institution

• Respond appropriately to some frequently

asked account holder questions

After this course, you will be able to:

3

CheckRegulation J

Regulation CC

Check 21

UCC 3

UCC 4

ACHACH Rules

Regulation E

UCC 4A

31 CFR Part 210

CardAssociation

Regulation Z

Regulation E

Regulation GG

OFAC

BSA

USA Patriot Act

Wire TransferRegulation J

Regulation CC

UCC 4A

Regulation E Subpart B


Wire

Check


UCC 3

Regulation J


• Legal framework

for check

collection through

the Federal

Reserve

• Warranties and liabilities

• Settlement of payments

• Time schedule and

availability

Regulation CC

• Funds Availability Act of 1987

– Availability schedules

– Endorsement standards

– Disclosure requirements

• Subpart D

– Check 21

– Substitute checkequivalent to original item


UCC 3

Uniform Commercial Code (UCC) Article 3

• Rules for paper based transactions

• Defines negotiable instrument

• Identifies endorsement types

• Warranties

– Transfer

– Presentment


Endorsements

John Q. Doe For Deposit

Only

John Q. Doe

Pay to the

Order of

Harry Johnson

John Q. Doe

Pay to Your

Bank

Without

Recourse

John Q. Doe


Blank Restrictive Special Qualified

UCC 4

Uniform Commercial Code (UCC) Article 4

• Check collection, payment, liabilities, timeframes

and responsibilities

– Late returns

– Stop payment

– Special circumstances

• Outlines relationship with Paying Bank and

account holder



Name that Rule

or Regulation

$25,000 Question(s)


Sally Sunshine deposits a

$25,000 check from her mother

into her checking account.

Sally endorses the item “For

Deposit Only Sally Sunshine.”

The teller informs Sally there

will be a 7 day hold on the

item and provides her with an

exception hold form.

$25,000 Question(s)

• What rules and/or regulations apply in this

scenario?

• What type of endorsement is it?


ACH


ACH Rules

• Commercial ACH transactions

• Contract law

• Developed and maintained by NACHA

• Operating Guidelines


Regulation E

Electronic Fund Transfer Act

• Consumer protections

• Includes consumer debit ACH transactions


Regulation E

• Error resolution

– Consumer notification within 60 days

of statement

– Provisional credit

– Resolution within 10 days or provide

provisional credit

– Exceptions and special circumstances


Regulation E, Subpart B

• Consumer-Initiated International Remittance


– Ability to cancel

– Refund requirements

– Error resolution

– Safe harbor clarification


UCC 4A

• Governs wholesale credits including CCD

and CTX transactions

• Commercially reasonable security measures

• Disclosures required by ACH Rules

– ODFI

– RDFI


31 CFR Part 210

• Federal government’s ACH rules

– Benefit payments, vendor payments and IRS

refunds

– Green Book

• Procedures manual for financial institutions processing

federal government payments



Name that Rule

or Regulation

Send it Back


John Black notices an ACH

credit on his statement that

is not his. The credit is from

the IRS with an entry

description of Tax Refund.

John wants the credit

returned to the IRS.

Send it Back


scenario?


Card


Regulation Z

Card Association Rules

• Facilitate authorization, clearing and settlement

• Ensure secure processing

• Rules and regulations

– Creation, enforcement and standards

– Dispute resolution

– Merchant acceptance

– Physical card design


Regulation Z

Credit Cards


Truth in Lending Act

Required disclosures

• Right to cancel

• Resolution to

billing disputes

• Interest rates

Regulation E

Electronic Fund Transfer Act

• Rights, liabilities and responsibilities

• Consumer protections

– Debit/ATM transactions

• Financial institution responsibilities

– Disclosures

– Statements

– Stop payments



Regulation E

• Error resolution

– Consumer notification within

60 days of statement

– Provisional credit

– Resolution within 10 days or

provide provisional credit

– Exceptions and special

circumstances


Name that Rule

or Regulation


Turn it Off


Bill has a recurring debit on his

statement for a monthly TV subscription.

The transaction is processed with

information from his debit card. He

comes into your institution and tells you

he does not want the debit to hit his

account anymore.

Turn it Off


scenario?


Wire Transfer


Regulation J, Subpart B

Check Collection and Funds Transfer Act

• Establishes procedures, duties and responsibilities

of Federal Reserve Bank, sender and recipients

• Incorporates certain provisions of UCC 4A

• Directs FRB to issue operating circulars


Regulation CC

Expedited Funds Availability Act of 1987

• Requires immediate availability to Beneficiary


UCC 4A

Uniform Commercial Code (UCC) Article 4A

• Governs “wholesale credits”

– Unique payment method with unique rules

– Commercially reasonable security


Regulation E, Subpart B

• Consumer-Initiated International Remittance


– Ability to cancel

– Refund requirements


– Safe harbor clarification


Name that Rule

or Regulation


Truck Load Size Grocery Bill


The local grocery store needs to

send a $100,000 to a supplier

immediately. The supplier will not

let the truck driver unload the

produce before receiving the funds.

Truck Load Size Grocery Bill


scenario?


All Payment Systems


Regulation GG

Unlawful Internet Gambling Enforcement Act

• Prohibits business from accepting payment in

connection with unlawful Internet gambling

• Requires financial institutions to identify and

block payments


OFAC

Office of Foreign Assets Control

• Administers and enforces economic and trade

sanctions against targeted foreign countries,

terrorism sponsoring organizations and

international narcotics traffickers

• Requires financial institutions to take the

appropriate steps to investigate, suspend, reject,

block and report on transactions as necessary

• Written compliance policy and procedures manual


OFAC

• Report all blocked transactions within 10 business

days of occurrence

• Annual report of all property blocked as of June 30

each year is due to OFAC by September 30

• Retain reports for 5 years

Visit website at www.treas.gov/OFAC


http://www.treas.gov/OFAC

• Financial institution requirements

– Obtain proper taxpayer ID number for

all deposit accounts

– File Currency Transaction Report

(CTR) for any currency transaction

over $10,000

• Aggregate during business day

– File Suspicious Activity Report (SAR)


BSA

Bank Secrecy Act

• Implemented to deter money laundering

Uniting and Strengthening America by

Providing Appropriate Tools Required to

Intercept and Obstruct Terrorism Act of 2001

• Verify the identity of any person seeking to open

an account

• Maintain record of the information used to verify

identity

• Consult government or suspected terrorist lists


USA Patriot

Act

Name that Rule

or Regulation


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