Payment System Rules and Regulations. What will you learn? After this course, you will be able to:

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1 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. What will you learn? After this course, you will be able to: 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 Check Regulation J Regulation CC Check 21 UCC 3 UCC 4 Card Association Regulation Z Regulation E Regulation GG OFAC BSA USA Patriot Act ACH ACH Rules Regulation E UCC 4A 31 CFR Part 210 Wire Wire Transfer Regulation J Regulation CC UCC 4A Regulation E Subpart B 3

2 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 check equivalent to original item

3 UCC 3 Uniform Commercial Code (UCC) Article 3 Rules for paper based transactions Defines negotiable instrument Identifies endorsement types Warranties Transfer Presentment Endorsements Blank Restrictive Special Qualified 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 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

4 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?

5 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

6 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 Disclosure requirements 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

7 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.

8 Send it Back What rules and/or regulations apply in this 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

9 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 Error resolution 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

10 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 What rules and/or regulations apply in this scenario?

11 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

12 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 Disclosure requirements Ability to cancel Refund requirements Error resolution Safe harbor clarification Name that Rule or Regulation

13 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 What rules and/or regulations apply in this scenario? All Payment Systems

14 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

15 BSA Bank Secrecy Act Implemented to deter money laundering 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) USA Patriot Act 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 Name that Rule or Regulation

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