Nacha's Meaningful Modernization Rule 2 - Oral Authorizations Rule

9/10/2021

Currently, Nacha’s Rules do not provide oral authorizations of an ACH payment outside of a telephone call. Only the Telephone-Initiated Entry (TEL) Standard Entry Class Code (SEC) has requirements to address the risks specific to an oral authorization.  

Rule Overview

Effective September 17, 2021, the Oral Authorizations Rule will:

  • Define “Oral Authorizations” as a remote (not in-person) oral authorization of one or more entries to a consumer account
  • Allow Oral Authorizations as a valid authorization method for consumer debits distinct from a telephone call
  • Enable the broader use of Oral Authorizations, which will allow businesses to adopt ACH payments in transactional settings that make use of verbal interactions and voice-related technologies
  • The Rule will not change how existing TEL transactions are used and authorized
  • An oral authorization obtained via any channel will need to meet the requirement of an Oral Authorization
  • An Oral Authorization obtained over the Internet that is not a telephone call will need to meet the risk and security requirements that currently apply to Internet-Initiated/Mobile (WEB) entries and will use the WEB SEC type code
  • Allow for Standing Authorizations to be obtained orally and allow for Subsequent Entries initiated under a Standing Authorization to be initiated through voice commands, instructions or affirmations

Impact to Participants

ODFIs

Determining if the existing TEL volume will migrate to WEB, ODFIs should prepare for a potential impact on the application of risk management practices specific to SEC Codes and on the tracking of SEC Code volume, returns and return rates.  ODFIs should update its ACH Origination Agreement, as needed, to address allowed SEC Codes.  ODFIs should also educate applicable originators regarding this new Rule.

Originators

Originators may choose to use the expanded applicability of Oral Authorizations but are not required to do so. The originators that want to use Oral Authorizations will need to modify or add to their authorization practices and language to ensure they meet all Oral Authorization requirements. Originators may find that their digital storage needs will be impacted by using Oral Authorizations.

RDFIs

RDFIs should have no impacts to their receipt and posting of entries.

Questions?

Staying in compliance can be challenging, so if you have any questions or need assistance, email paymentadvisors@saltmarshcpa.com or a member of our Financial Institutions Team so we can help. 

About the Bank Advisors

The Bank Advisors at Saltmarsh have provided audit, tax and consulting services to a wide range of financial institutions since our founding in 1944, making it the firm’s largest specialty practice and industry of focus. Our Financial Institution Advisory Group has the talent, expertise and insight to help you and your institution thrive. Our team members are also industry leaders who have the knowledge and experience to provide you with unparalleled service and guidance.


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