Request for Comment: Risk Management Enhancements

ACH Participant Survey, 4/29/11, Page 2

Risk Management Enhancements

ACH Participant Survey

April 29, 2011

Survey Responses Due by Friday, June 24, 2011

NACHA requests comment on amendments to the NACHA Operating Rules entitled “Risk Management Enhancements.” These amendments address several risk management topics. In addition, NACHA requests information from the industry related to another potential proposal related to risk management.

The survey should be completed online at http://www.surveymonkey.com/s/YT657VT by Friday, June 24, 2011. For convenience, the survey questions are also provided within this document to assist respondents in gathering information from within their organizations.

NACHA Staff Contacts

Administrative questions: Maribel Bondoc, Manager, ACH Network Rules

Fax (703) 787-0996

E-mail:

Questions: Deborah Shaw, Managing Director, Network Enforcement & Risk

Management

Phone: (703) 561-3919

E-mail:

Michael Herd, Managing Director, ACH Network Rules

Phone: (703) 561-3924

E-mail:

Section I - Respondent Information

All Respondents

Name:
Title:
Organization:
Phone: / E-mail:

Please indicate your organization’s role(s) in the ACH Network:

ODFI / Regional Payments Association
RDFI / NACHA Direct FI Member
ACH Operator / Third-Party Service Provider
Originator / Software Vendor
Receiver / Industry Association
Government
Other:

Financial Institution Respondents

Asset Size / less than $250 million
$250 million - $999 million
$1 billion - $100 billion
greater than $100 billion

What areas of your organization provided input for the responses to this survey?

Operations / Wholesale/Corporate Banking/Treasury Management
Product Management / Customer Service
Legal / Compliance
Information Technology/Software / Retail/Online Banking
Other:

Section II – Request For Comment Proposals

A.  Excused Delay

1.  Does your organization agree that removing the language related to “suspension of payments by another Participating DFI” is appropriate to address systemic risk in the Network? / Yes
No
Don’t know
Why or why not?

B.  Data Passing

2.  Does your organization support the proposal to prohibit an ODFI from disclosing a Receiver’s routing and account information to a third party for use in initiating a debit entry that was not part of the original authorization? / Yes
No
Don’t know
Why or why not?
3.  Does your organization support the proposal to require ODFIs to ensure that Originators and Third-Party Service Providers do not disclose Receivers’ routing and account information to third parties for use in initiating debit entries under separate authorizations? / Yes
No
Don’t know
Why or why not?
4.  Does your organization support the proposal to require Originators to obtain routing and account number information directly from Receivers? / Yes
No
Don’t know
Why or why not?

C.  Social Security Number Suppression

5.  Does your organization have a legitimate need to send complete Social Security Numbers within ACH entries? / Yes
No
Don’t know
If yes, why?
If yes, is it feasible for the Originator to encrypt the SSN in a way that only the Receiver can decrypt it? / Yes
No
Don’t know
If yes, how this is accomplished?
6.  Does your organization agree with the proposal to prohibit Social Security Numbers and individual taxpayer identification numbers from being included in ACH entries unless the first five digits are suppressed? / Yes
No
Don’t know
Why or why not?

D.  ODFI Return Rate Reporting

7.  Does your organization support a reduction in the threshold for returns of unauthorized entries (currently at 1%)? / Yes
No
Don’t know
Why or why not?
If yes, do you support the proposed reduction to 0.75%? / Yes
No
Don’t know
Why or why not?
If yes, do you support the proposed longer-term reduction to 0.50%? / Yes
No
Don’t know
Why or why not?
If no, what do you think the threshold should be?
If yes, do you support the proposed phased approach – a reduction to 0.75% for the first year, followed by a further reduction to 0.50%? / Yes
Yes, with a longer transition in between
No
Don’t know
8.  Does your organization agree with the proposal to create a threshold for entries returned due to invalid account information? / Yes
No
Don’t know
Why or why not?
If yes, do you support the proposed threshold level of 1%? / Yes
No
Don’t know
If no, what threshold level do you support?
9.  Does your organization agree with the proposal to eliminate the 60-day period for reducing the return rate below the applicable threshold before being subject to the System of Fines? / Yes
No
Don’t know
Why or why not?

E.  Incomplete Transactions and the Return of Funding Debit Entries

10.  Does your organization support the proposal to recredit a Receiver for an Incomplete Transaction? / Yes
No
Don’t know
Why or why not?
11.  Does your organization support using existing return codes and timeframes for returns of Incomplete Transactions? / Yes
No
Don’t know
Why or why not?
12.  Does the existing two-day return time frame provide business Receivers adequate time to identify an Incomplete Transaction? / Yes
No
Don’t know
Why or why not:
If two days is not enough time, what time period would be sufficient? / 5 banking days
7 banking days
10 banking days
Other?
Other, please specify:
If more than two days are needed, what is the preferred approach to providing more time? / An extended return time frame
Required acceptance of a late return
Please describe or estimate the impact of a longer time period on ODFI credit underwriting and risk management:
13.  Does your organization support any of these alternatives to address risks related to Incomplete Transactions? (check all that apply) / a requirement that the ODFI ensure that its Third-Party Senders segregate funds by Originator to ensure debits and credits of multiple clients are not co-mingled
a time limit on the amount of time a Third-Party Sender can hold funds from a debit before transmitting the corresponding credit to the third-party payee
a requirement that ODFI have a fiduciary responsibility to pay any credit obligation owed, but not otherwise completed, by its Third-Party Sender
Why or why not?

F.  Annual Audit Date

14.  Does your organization agree with the proposal to change the date for completion of the audit from December 1 to December 31? / Yes
No
Don’t know
Why or why not?

Section III – Potential Impacts and Proposed Implementation Dates

A.  Potential Impacts

15.  Would the following proposed changes have a substantial impact on your organization? / Yes / No / Don’t Know / If yes, please explain:
A. Excused Delay
B.  Data Passing
C. SSN Suppression
D. ODFI Return Rate Reporting
E. Incomplete Transaction and the Return of Funding Debit Entries
F. Annual Audit Date
16.  Would the following proposed changes require your organization to make changes to ACH software? / Yes / No / Don’t Know / If yes, please rate the level of change as Minimal, Moderate, or Extensive.
A. Excused Delay
B.  Data Passing
C. SSN Suppression
D. ODFI Return Rate Reporting
E. Incomplete Transaction and the Return of Funding Debit Entries
F. Annual Audit Date
17.  Would the following proposed changes require your organization to make changes to other (i.e. non-ACH) systems or software? / Yes / No / Don’t Know / If yes, please rate the level of change as Minimal, Moderate, or Extensive.
A. Excused Delay
B.  Data Passing
C. SSN Suppression
D. ODFI Return Rate Reporting
E. Incomplete Transaction and the Return of Funding Debit Entries
F. Annual Audit Date
18.  What is the net financial impact on your organization if the following changes are made? / Net positive / Net Negative / Neutral / Don’t Know / If net negative or positive, please estimate dollar amount.
A. Excused Delay
B.  Data Passing
C. SSN Suppression
D. ODFI Return Rate Reporting
E. Incomplete Transaction and the Return of Funding Debit Entries
F. Annual Audit Date

B.  Proposed Implementation Dates

19.  Does your organization agree with the proposed effective date of September 16, 2011 for the following proposals: / Yes / No / Don’t Know / If no, what implementation date do you believe would be more appropriate?
Excused Delay
Annual Audit Date
20.  Does your organization agree with the proposed effective date of March 16, 2012 for the following proposals: / Yes / No / Don’t Know / If no, what implementation date do you believe would be more appropriate?
Data Passing
SSN Suppression
ODFI Return Rate Reporting (0.75% level for unauthorized and 1% for invalid account information)
Incomplete Transactions and the Return of Funding Debit Entries
21.  Does your organization agree with the proposed effective date of March 15, 2013 for the following proposals: / Yes / No / Don’t Know / If no, what implementation date do you believe would be more appropriate?
ODFI Return Rate Reporting (0.5% level for unauthorized)

Section IV– Request For Information Questions

A.  Third-Party Sender Registration

22.  Does your organization support the concept of Third-Party Sender registration for the purpose of quantifying the risk profile for these relationships? / Yes
No
Don’t know
Why or why not:
If yes, would you support using a process similar to the registration process currently in place for direct access relationships? / Yes
No
Don’t know
Why or why not?
23.  Does your organization support the concept of collecting aggregate origination volume and exception processing information related to Third-Party Senders in order to analyze their risk profile? / Yes
No
Don’t know
Why or why not?

Section V - General

24.  What benefits does your organization believe would be derived from this proposal? Please specify:
25.  Does your organization have any concerns or foresee any negative effects/risks related to this proposal? Please specify:
26.  Are there any sections of the proposal that your organization believes should be balloted separately? / Yes
No
Don’t Know
Please specify:
27.  Would your organization be willing to be contacted in order to provide more information on the topics included within this survey? / Yes
No
28.  Please identify any other specific issues that have not been addressed elsewhere in this ACH Participant Survey: