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Nacha's Reversals Rule

5/18/2021 - By Janice Weisz, AAP

Currently, the Rules define a limited number of permissible reasons for reversing entries; but, they do not explicitly address improper uses of reversals. Nacha’s Reversals Rule will explicitly address the improper uses and will expand the permissible reasons for a reversal to include an error in the entry effective date.  

Effective June 30, 2021, the Reversals Rule will explicitly state that the following reasons for reversing entries is improper and is therefore prohibited:

  • The Originator or Third-Party Sender failed to provide funding for the original entry or file
  • The initiation of the reversal is outside the time period permitted by the Rules
    • The Rules require that a reversing entry must be transmitted in such time that it is made available to the RDFI within five banking days following the settlement date of the erroneous entry.
  • For any reason that is not explicitly permitted under the Rules

Currently, the Rules state that the following reasons for reversing entries is proper and is therefore permitted:

  • A duplicate file or entry was improperly initiated
  • Payment was processed for the wrong dollar amount
  • Payment was processed for the wrong receiver
  • Upon separation from employment, the employee was properly paid via check and was improperly paid via Direct Deposit

Effective June 30, 2021, the Reversals Rule will also:

  • Expand the permissible reasons for a reversing entry to include an error in the entry effective entry date.
  • Define explicit formatting requirements for reversing entries.
  • Explicitly permit an RDFI to return an improper reversal entry, as follows:
    • Upon receiving a consumer claim, an RDFI may return an improper reversing entry using return reason code R11. The RDFI must obtain a Written Statement of Unauthorized Debit from the consumer receiver and must return the entry in such time that it is made available to the ODFI no later than the opening of business on the banking day following the sixtieth (60th) calendar day following the settlement date of the improper reversing entry.
    • Upon notification from a non-consumer, an RDFI may return an improper reversing entry using return reason code R17. The RDFI must return the entry in such time that it is made available to the ODFI no later than the opening of business on the second banking day following the settlement date of the improper reversing entry. RDFIs will also be permitted to use R17 to return an improper reversing entry that it identifies without customer contact within the same 2-day return timeframe.

Impact to Participants

ODFIs

ODFIs should educate its Originators and Third-Party Senders regarding the Reversals Rule requirements, to include proper and improper reversing reasons, reversal timeframe requirements, and ACH file formatting requirements.

Originators and Third-Party Senders

Originators and Third-Party Senders may want to review their practices, policies and controls regarding the proper use and formatting of reversals.

RDFIs

RDFIs that want to take advantage of the return process should review and update, as needed, policies and practices to facilitate the return of an improper reversal and to provide training to ensure applicable personnel understand the applicable return process requirements. 

For more information, you can visit Nacha’s website.

Staying in compliance can be challenging, if you have any questions or need assistance preparing for these new Nacha Rules, email me or a member of our Financial Institutions Team so we can help. 


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