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Federal R eserve Bank



FIRST V IC E p r e s i d e n t

MSTCh 24, 1989

Circular 89-19


All ACH Contacts in the Eleventh
Federal Reserve District

On April 7, 1989, the Federal Reserve Bank of Dallas will install a
new release of the Federal Reserve System's Automated Clearing House (ACH)
processing software which will enable us to support the 1989 NACHA Rules
changes and service enhancements identified below.
Some of the 1989 NACHA Rules changes could have a substantial impact on
financial institutions' timely handling of ACH transactions. The major
changes are explained below.
For a complete list of the changes that are
effective April 7, please refer to the 1989 NACHA Rules.
If you do not have a
copy of the 1989 Rules, please contact appropriate personnel as indicated at
the end of this circular for information on how to obtain a copy.
Standard Entry Class Code
Use of a valid Standard Entry Class (SEC) Code in the Batch Header Record will
be mandatory. ACH operators will reject any batch that contains an invalid
SEC code, i.e. a code other than those listed on page OR 78 of the 1989 NACHA
(Although the SEC edit is a batch level edit, file rejection will
occur if the sending point has elected file level rejection.)
Please note
however, that the SEC code "RET" is not valid for use by financial
institutions when returning ACH items.
Financial institutions should use the
SEC code from the original transaction when creating a return item batch.
In January 1989, Federal Reserve processing offices began producing "warning"
reports to advise originators of batches containing invalid SEC codes. These
warning reports will continue to be forwarded to originating financial
institutions until April 7. If your institution has received a warning
report, you should assure yourself that the related problems have been

For addition al copies of any c ircu lar please conta c t the Public Affairs D ep artm en t at (214) 6 5 1 -6 2 8 9 . Banks and others are
encouraged to use the follow ing incom ing W A TS numbers in conta c ting this Bank (800) 4 4 2 -7 1 4 0 (intrastate) and (800)
5 2 7 -9 2 0 0 (interstate).

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (




corrected to ensure that your deposits of batches or files are not rejected
for an invalid SEC code.
Refused Notifications of Change
This rule change provides the mechanism and the format for an originating
financial institution to refuse a Notification of Change entry which cannot be
processed due to incorrect or improperly formatted information.
The 1989 Rules specify seven new change codes, C61 thru C67, that may be used
to indicate a refused Notification of Change. The refusal change code should
be entered in positions 65-67 of the Addenda Information Field in the COR
addenda record. The change code specified in positions 4-6 of the original
COR addenda record should not be altered by the institution refusing the item.
The table of change codes for refused Notification of Change entries and the
addenda record format for automated refused Notifications of Change are
specified on pages OR
130and OR 135, respectively, of the 1989 NACHA Rules.
Federal Reserve Banks will accept and process paper refused Notifications of
Change only for a period from April 7, 1989, through July 7, 1989. After July
7, 1989, an originating financial institution refusing an NOC must automate
the refusal or must address the refusal directly with the receiving
institution that sent the NOC.
Miscellaneous Rules Changes
Errors, (e.g., all blanks or zeroes) in the Company Name or Company Entry
Description fields of
the Batch Header Record, will result in batch level
rejection rather than item level rejection.
The Rules changes identified below require new edits that, if failed, will
cause an item to be rejected and returned by the ACH operator.
Addenda Type Code 01 is no longer a valid addenda type code.
The Addenda Information Field (positions 36-79) of a Notification of Change
(COR) item addenda record (addenda type code 98) is a mandatory field.
field must contain at least one alphanumeric character.
The Addenda Record Indicator (position 79) in the entry detail record for
Notifications of Change, return items, and MTE/POS/SHR entries other than
prenotes, must be equal to 1.
Change codes C06, C07, and C08 in a COR addenda record are now reserved and
are not available for use.
SHR entries must not have blanks or zeroes in the Card Transaction Type
field (positions 77-78) of the entry detail record.
The night cycle surcharge on automated return items will be eliminated.





Special Notes for PC Users
The Dallas Fed will issue a new version of the ADVANCE PC software
around April 7 to support most of the changes discussed previously in this
Edits for the Standard Entry Class Code and removal of support for
Addenda Type 01 and change codes C06, C07 and C08 will be in the new release
of ADVANCE, but the software will not support the refusal of a Notification of
Change. Other changes (Company Name or Company Entry Description edits and
Addenda Information Field edits) have been supported in the ADVANCE software
for several years.
Not all Standard Entry Class Codes and their associated formats have
been supported in the ADVANCE software in the past. CTX and POS have not been
supported in the past and SHR will now be added to the list of unsupported
class codes and formats. The ADVANCE software has not supported these class
codes and their formats because Eleventh District institutions have not
expressed a need for them. Use of one or more of these class codes will
result in edit errors and an inability to complete a batch using the invalid
(POS, CTX, SHR) class code. Nonsupport of these three class codes means, of
course, that ADVANCE users attempting to return items received with any of
these three Standard Entry Class Codes will need to use another method for
automating those items such as CATIE or returning the item to their local
Federal Reserve office on paper for processing.
Because of the changes to the Standard Entry Class Code edits, we
expect that for a few days some items will have to be returned to the Fed on
paper or automated by the institution through CATIE or the dedicated terminal
facility. Consider the case in which an institution receives an item for
settlement on April 6 or 7 with a Standard Entry Class Code that is no longer
valid and must return the item: Because the SEC was not edited prior to April
7, the batch containing the item was processed, but a return item batch with
the now invalid SEC will reject. Although the receiving institution may
normally automate its returns, it will have to return this item through the
Fed using CATIE or the dedicated terminal service. Use of either facility
will create an automated return with the "RET" SEC which will pass the SEC
edits. Should your institution have need to return such an invalid debit item
with a value of $2,500 or more on or after April 7, and cannot automate it
through CATIE or the dedicated terminal, be sure that you call the ACH
department of the Federal Reserve Office that serves your institution and have
the Fed create the return item for you. This action will be necessary to
avoid a late return claim by the originator.
(Please note that use of CATIE
or the dedicated terminal ACH return facility will cause a SEC of "RET" to be
used for return items, which allows institutions to automate these returns
themselves and avoid the $4.00 per item charge assessed by the Fed for
converting paper returns.)




If you have any questions concerning the 1989 NACHA Rules changes or
service enhancements described above, please contact:
Larry C. Ripley at the Dallas Office
Local: (214) 651-6118
Toll Free: TX (800) 442-7140, LA (800) 527-9200
Tracy Whitten or B. B. Sessions at the Dallas Office
Local: (214) 698-4349 or 651-6403
Toll Free: TX (800) 442-7140, LA (800) 527-9200
Eloise Guinn or Jane Pyke at the El Paso Office
Local: (915) 544-4730
Toll Free: TX (800) 592-1631, NM (800) 351-1012
Louis Moore or Lilia Hice at the Houston Office
Local: (713) 659-4433
Toll Free: (800) 392-4162
Carrie Perkins or Jennifer Pruitt at the San Antonio Office
Local: (512) 224-2141
Toll Free: (800) 292-5810
Sincerely yours,

Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102