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Federal R eserve B ank
O F DALLAS
W IL L IA M
H. WALLACE
DALLAS, TEX AS 7 5 22 2
FIRST V IC E PR ES ID E N T
AND C H IE F O PER A TIN G O FFIC ER
March 7, 1989
Circular 89-13
TO:
The Chief Executive Officer of all
member banks and others concerned in
the Eleventh Federal Reserve District
SUBJECT
Automated Clearinghouse Transactions
DETAILS
The Federal Reserve Board has requested public comment by March 31,
1989, on a series of revised proposals regarding the finality accorded
automated clearinghouse (ACH) credit and debit transactions processed by
Federal Reserve Banks.
Comment was previously requested on a series of proposals in December
1986 (Docket No. R-0515-C). Since a majority of commenters opposed those
proposals, the proposals have been revised to include the following
provisions:
grant finality to receivers of ACH credit transactions at 6:30
p.m. local time on the settlement day;
treat credits given to originators of ACH debit transactions
final payments at 10:00 a.m. local time on the business day
following settlement day;
as
in cases where payments must be reversed, endeavor to advise
financial institutions with on-line connections to Fedwire of
that fact by the time set for finality of ACH payments;
reserve the right to debit the reserve/clearing accounts of
financial institutions originating ACH credit transactions at
any time during the settlement day; and
grant credit for debit-item adjustments only when the Reserve
Banks can recover credit from the originating financial
institution.
For a d ditiona l copies of any circ u la r please co n ta c t the P ublic A ffa irs D epartm ent at (214) 651-6289. Banks and others are
encouraged to use the fo llo w in g incom ing WATS num bers in c o n ta ctin g th is Bank (800) 442-7140 (intrastate) and (800)
527-9200 (interstate).
c
o
This publication was digitized and made available by the Federal Reserve Bank ofDallas' Historical Library (FedHistory@dal.frb.org)
-
2
-
Comments should be addressed to William W. Wiles, Secretary, Board of
Governors of the Federal Reserve System, Washington, D.C. 20551. All
correspondence should refer to Docket No. R-0661 and must be received by March
31, 1989.
ATTACHMENTS
The Board's request as published in the Federal Register is attached.
MORE INFORMATION
For further information regarding this circular, please contact
Sharon Sweeney at (214) 651-6228. For additional copies of this circular,
please contact the Public Affairs Department at (214) 651-6289.
Sincerely yours,
FEDERAL RESERVE SYSTEM
[ D o c ke t No.
R-0661]
Ri sk on A u t o m a t e d C l e a r i n g Ho us e T r a n s a c t i o n s
AG ENC Y:
B o a r d of G o v e r n o r s of the F e d e r a l R e s e r v e Sy stem.
ACT I ON :
Request
for co mm e n t .
SU MM AR Y:
The Bo ar d of
Governors
("Board")
is p r o p o s i n g
several
Reserve
Banks
transactions.
tr ea t
These
in i m p l e m e n t i n g
of
changes
automated
changes
the risk
the
are
reduction
Federal
in
clearing
intended
policy
Reserve
System
the w a y that Fed era l
ho u s e
("ACH")
as a d d i t i o n a l
adopted
by
the
steps
Boa rd
*
in
May,
1985.
Large-Dollar
21120.)
(S e e , p o l i c y
Electronic
Fu nd s
The c h a n g e s p r o p o s e d
statement,
"R e d u c i n g
Transfer Systems,"
Ri s k s
on
50 Fed.
Reg.
incl ude :
°
g r a n t i n g f i n a l i t y to
t r a n s a c t i o n s at 6 : 3 0
s e t t l e m e n t day;
r e c e i v e r s of A C H c r e d i t
p.m.
lo c a l time on the
°
t r e a t i n g c r e d i t s g i v e n to o r i g i n a t o r s of A C H de bi t
t r a n s a c t i o n s as fina l p a y m e n t s at 1 0 : 0 0 a.m.
local
time on the b u s i n e s s d a t e f o l l o w i n g the s e t t l e m e n t
day;
0
advising
depository
institutions
wi th o n - l i n e
c o n n e c t i o n s to F e d w i r e th at p a y m e n t s are bei ng
r e v e r s e d by the time set for f i n a l i t y of ACH
payments;
°
endeavoring
to a d v i s e o f f - l i n e i n s t i t u t i o n s
t e l e p h o n e that p a y m e n t s are be i n g r e v e r s e d ;
°
r e s e r v i n g the ri gh t to d e b i t the r e s e r v e / c l e a r i n g
a c c o u n t s of d e p o s i t o r y i n s t i t u t i o n s o r i g i n a t i n g ACH
credit
transactions
at
any
time d u r i n g
the
s e t t l e m e n t day; and
by
2
-
°
DATE:
may
Comments,
be m a i l e d
System,
D.
g r a n t i n g c r e d i t for d e b i t item a d j u s t m e n t s on l y
wh e n the R e s e r v e Ba nks can re co ve r c r e d i t from the
o r i g i n a t i n g d e p o s i t o r y in st it u t i o n .
C o m m e n t s m u s t oe r e c e i v e d
ADDRESS:
C.
20th
FOR
to
only,
the
attention
delivered
Ru les
of
to r o o m
may
be
to
Docket
Mr.
B-2223
inspected
N.
No.
Regarding
W.,
William
between
in r o o m
e x c e p t as p r o v i d e d
INFORMATION
of
I.
Federal
Ir el an d,
M.
Availability
CO NT A C T :
Reserve
R-0661,
W.
Wile s,
8:45
a.m.
B-1122
of
Re se rv e
Washington,
and
between
in s e c t i o n
26 1. 8
Information,
S e ni or
Board
Washington,
of
Hi ll or
SUPPLEMENTARY
Young,
Operations
D.
Attorney,
Governors
C.
Telecommunications
Earnestine
Bank
Florence
of
12
of
2055 1.
Device
For
for
Dorothea Thompson
Adviser,
( 2 0 2 /4 52 -3 95 5) ;
Associate General Counsel
Boucilier,
(202/45 2- 24 18 ),
Sy st em,
refer
1989.
§ 2G1.8.
Division
Elaine
should
31,
Bo a r d of G o v e r n o r s of the F e d e ra l
and 5:00 p.m.,
FURTHER
O l iv er
the
Comments
Board's
C.F.R.
wh i c h
by Ma r c h
S t r e e t and C o n s t i t u t i o n A v e n ue ,
or
p.m.
9: 0 0 a.m.
the
to
20551 ,
Secretary,
5:15
( 2 0 2 /4 52 -3 62 5) ,
Legal
the
or
Division
Federal
the
hearing
the
De af
Reserve
im pa ir ed
("TDD"),
(202/452-3544).
INFORMATION:
Background
Two
credit
credit
payment
typ es
of
payments
t r a n s a c t i o n s and d e b i t
transactions,
to
tne
fund s
receiver.
flow
the
transactions.
flow
The
over
from
majority
the
of
ACH me ch an is m
In the
ca se
of
-
ACH
originator
of
ACH
payments
credit
the
-
are
pa yr ol l,
deoit
pe ns io n,
transactions,
originator.
collect
In
the
funds
addition,
the
originated
or
night
The
cy cl e.
Reserve
credits
All
ACH
Ba n k s
given
to
of
un t i l
the o p e n i n g of
right
may
mortgage
are
used
do w n
for
loan
for
balances
l o c a te d
the
largest
mechanism.
before
the
reserve
are
settlement
currently
business
on
be
the
Transactions
settlement
cycles
--
a day
provisional
the
day,
ri g h t
and
receiving debit
and
or
a
payments.
to
reverse
transactions
reversed
day
date
may
credit
until
given
the
for
by a R e s e r v e Bank
following
settlement.
t r a n s a c t i o n s ha ve
the
and c o m m e n t s .
In D e c e m b e r
proposals
°
the
them.
Previous proposal
following
draw
account
transactions
institutions
to r e t u r n
and
subsidiaries
r e c e i v e r s of A C H c r e d i t
transactions
audition,
or
to
two o p e r a t i n g
currently
deoit
to
v a l u e of A C H t r a n s a c t i o n s .
e n t r i e s are p o s t e d on the
In
is,
they
two d a y s
m a y be p r o c e s s e d on one
receiver
transactions
that
is a v a l u e - d a t e d
one
the
In the ca se of AC H
pa ym en ts ,
debit
and
p r o p o r t i o n of the d o l l a r
be
fr om
affiliates
co un t r y ,
The AC H
pa y m e n t s .
bi ll
ACH
of
-
of A C H d e b i t t r a n s a c t i o n s are used to
purposes,
accounts
throughout
flow
pr em i u m s ,
concentration
from
annuity
majority
insurance
payments.
ca sh
The
or
3
1986,
tne
(Docket No.
Bo a r d
requested
comments
on
the
R-05 91) :
to p r o v i d e f i n a l i t y to r e c e i v e r s of A C H
credit
t r a n s a c t i o n s a m o u n t i n g to $ 5 , 0 0 0 or less at 1:00
p.m. local time on tne s e t t l e m e n t date;
° to p r o v i d e f i n a l i t y to r e c e i v e r s of AC H c r e d i t
t r a n s a c t i o n s a m o u n t i n g to m o r e than $ 5 , 0 0 0 wh en the
R e s e r v e Ba n k s h a v e r e c e i v e d a c t u a l l y and f i n a ll y
c o l l e c t e d funds;
-
-
°
to n o t i f y r e c e i v e r s of A C H c r e d i t t r a n s a c t i o n s if
p a y m e n t s we re r e v e r s e d b e f o r e the time of fi na l i t y
on a "best e f f o r t s " basis; and
°
to
retain
the
ri gh t
to r e v e r s e
ACH debit
t r a n s a c t i o n s at any time un til the R e s e r v e Ba nk
r e c e i v e d a c t u a l l y and f i n a l l y c o l l e c t e d funds.
The
The
4
Bo ar d
majority
of
received
commenters
112
comments
opposed
the
on
thes e
proposals.
proposals.
In the case
of the p r o p o s a l s c o n c e r n i n g A C H c r e d i t
transactions,
stateo
to d i s t i n g u i s h
small
th at
and
th ere
was
large-dollar
amounts
proposed
granted
at
a specific
percent
smail-aoliar
credit
opening
oelieved
of
believed
reason
transactions,
arbitrary,
ti me
of
for
the
business
on
creait
and
all
ACH
the
oetween
should
believed
be
treated
more
transactions
dollar
be
transactions.
s e t t l e m e n t day.
and
commenters
the
finality
time s h o u l d be set
credit
th a t
credit
should
transactions,
th at all A C H
that
commenters
transactions
tn at a s p e c i f i c
large-dollar
good
credit
were
Eighty-five
the
no
has
that
as
fin al
at
All c o m m e n t e r s
for
the
than
finality
50
should
be
of
percent
treated
as
fi na l at the o p e n i n g of b u s i n e s s on the s e t t l e m e n t day.
Commenters
creait
transactions
transactions
rinaily
collected
participating
that
tne
un ti l
oelieved
amounting
the
Reserve
funds
would
institutions
increased
th at
and
uncertainty
proposal woula reduce
the
to
delaying
$5,000
Ba n k s
add
had
or
finality
mo re
received
substantially
their
customers.
resulting
attractiveness
and
fr o m
of
for
ACH
ACH
debit
actually
and
to the risk of
Th e y
in di c a t e d
a d o p t i o n of this
the
ACH
mechanism.
5
-
A m a j o r i t y of c o m m e n t e r s a r g u e d
at
a
specific
the
same
time
time
and
De
-
that f i n a l i t y
indicated
designated
that
th ey
should
wo u l d
for
both
debit
we re
to g r a n t
be
granted
pref er
and
that
credit
transactions.
If
AC H
cue
credit
day,
suggested,
the
institutions
to
surflcient
credit
the
be
settlement
granted
day,
Reserve
Ba n k s
balance
the
receiving
ACH
a
at
faced
by
transactions
late
Banks
to
r e c o ve r
originator
is
unable
or iy m a t e d .
enough
larg e
opening
the p a y m e n t s .
and
small-dollar
would
of
s h o u l d be made
pr ef er
business
on
to
be
tne
so me
the
believes
granted
settlement
funds,
cov er
the
if
it
that
at
the
faced
by the
In order
finality
to
p.m.
permit
that
it
for
local
is d e t e r m i n e d
payments
to
th at faced by
6: 30
day
ACH
that
on
risk
R e s e r v e Ba n k s wi t h
should
they wo ul d
had
this p r o p o s a l .
Board
risk,
institution
to a d o p t
the
receiving
day
that
the
the
settlement
oelieves
is too g r e a t
risk
because
the
all
on
Banks'
distinction
commenters
the
Bo ar d
on
for
proposal
by
Reserve
to co ver
no
1986
faced
originating
th at
While
time
Reserve
an
the
The
accorded
institutions,
credit
time,
finality
business
the
increased
the
believes
on
payments
finality
of
currently
in its a c c o u n t
transactions.
finality
any
whether
Ttie Bo a r d
concerning
commenters
suostantially
to
funds
opening
eliminated.
reverse
regard
the
exposure
be
be
at
many
would
ab l e
without
as
credit
nowever , would
be
Ba nk s
transactions
settlement
not
Reserve
the
that
has
6
-
With
ACH
debit
regard
to
transactions
actually
and
comiaenters
specific
opposed
time
the p r o p o s a l
as
finally
final
be
unde r
the
proposal
Reserve
terms
of
adopted
certainty
for
treat
credits
final
at
for
10 :0 0
had
comment
majority
which
operating
in
a
Reserve
a
Bank
transactions.
To
the
of
that
substantially
circular
1986.
institutions,
re ce i v e d
indicated
for AC H d e b i t
current
depository
gi v e n
the
They
after
they
B a n k s ’ risk w o u l d n o t d i f f e r
the
published
after
funds,
proposal.
wouici not r e v e r s e c r e d i t s gi v e n
The
to tr ea t c r e d i t s gi ve n for
only
collected
this
should
-
or
provide
Boar d
the
g r e a te r
proposes
to
to o r i g i n a t o r s of A C H d e b i t t r a n s a c t i o n s as
a.m.
local
time
on
the
business
day
following
the s e t t l e m e n t day.
P i s c u s s ion
Th r e e
finaiity
and
for
ACH
customs;
Reserve
chat
may
and
ACH
in
the
in s h i f t s
to
tor
an
considered
the
timi ng
current
of
practices
faced
by
the
F e d e ra l
and
(3)
the
potential
institutions;
of
in
(1)
exposure
treatment
finality
for A C H
transactions
in the use of p a y m e n t m e c h a n i s m s .
--
indicates
transactions
At the sa me
settle
credit
Practices
currently
credit
day.
the
be e n
transactions:
by d e p o s i t o r y
Current
circular
ha v e
credit
(2)
ciianges
result
is su es
time,
The
that
Reserve
credit
is a v a i l a b l e
the R e s e r v e
item af ter
for
Ba nk s 1 ACH o p e r a t i n g
given
to
receivers
of
use on the s e t t l e m e n t
Banks reserve
the
right
not
n o t i c e of tne s u s p e n s i o n or c l o s i n g
7
-
of
the
the
originator
Reserve
or
Ba nk s
may
item if a R e s e r v e
funas
in
tne
co ve r
the
itern.fl/
have
the
rignt
on
are
E,
institutions'
funds
business
preempt
no
aay
depository
notices
on
may
the
n o t be
and
CC
via
later
clearing
the
until
accounts
Reserve
typically
day
to
Reserve
be
Banks
all
have
Ban ks
institutions before
would
sufficient
settlement
transactions
Fu rt he r,
for a c r e d i t
be en
are
not
transactions
provided
the
the r e v e r s a l of t r a n s a c t i o n s .
regulations
rule s
treatment
of
ACH
the
th at
$ 2 2 9 . 10 (b ))
institutions
the
--
also
credit
opening
of
2/
Ibid . , p a r a g r a p h
31.
Let ter ,
do es
Regulation E
paragraphs
for
the
not
availability.
requires
accounts
s e t t l e m e n t d a y b u t do e s not s p e c i f y a time of day,
Uniform ACH Operating
to ma ke
on
but
earlier
to c r e d i t c o n s u m e r s '
x/
The
available
business
date ,
require
Board's
depository
institutions
transactions
ma y
CC,
transactions.
settlement
The
Regulation
influence
depository
credit
than
ru le s
—
ACH
requires
following
existing
C.F.R.
day.
NACHA
Regulation
withdrawal
(±2
and
or
depository
ru le s
received
there
credit
reserve
following
Ot he r
that
account
reverse
althougn
business day
Board's
to
In ad di tio n,
on or s e t t l i n g
Base d on th es e provisions,,
settlement
reversed
is r e c e i v e d . 1/
a c ti ng
Bank j u dg es
to n o t i f y
Regulation
ce a s e
affecting
the
obligated
receiver
originator's
transactions
posted
the
-
as of the
and
24 and 25.
it does
8
-
not
require
depository
use
on
and
Official
the
day
Staf f
incorporated
Let t er ,
to
are
make
payments
they
in
mo r e
tunas
on
encourage
institutions
are
Reserve
stringent
available
the
(12
Banks'
for
fun ds a v a i l a b l e
C . F. R.
Ql O- 13 .)
and
settlement
depository
to m a k e
credited.
Commentary,
the
-
consumer
d a y . 2/
Fu rt he r,
to
ACH
Operating
depository
both
institutions
§ 20 5. 10 (a) (2 )
N A C H A rules, w h i c h are
Uniform
require
make
and
institutions
corporate
NACHA guidelines
funds
available
c o n s u m e r s at the o p e n i n g of b u s i n e s s on the s e t t l e m e n t
Current
payments
are
typically
s e t t l e m e n t date,
receiving
of
avaiiaole
settlement
consumers
day.
typically
La rge r
vary;
on
fu nds
settlement
before
the
may
day,
one
to
at
or
the
dollar
at
pe ns i o n ,
or
ma de
no t
date.
the se
of
wi t h
payments
on
da te.
Fu nd s
available
the
to
the
the
payments
transaction
at
to
The
business
institutions
the
provided
corporate-to-corporate
nigh t,
until
make
annuity
before
generally
to
d a y . 4 /
and
two d a y s
settlement
opening
receiving
settlement
be
the
institutions
processed
generally provided
ousiness
Pa yr o l l ,
processed
depository
to
—
and t r a n s a c t i o n d a t a are
institutions
majority
are
Practices
for
da t a
opening
of
availability practices
customers
business
da y
on
the
following
the
s e t t l e m e n t day.
3_/
O p e r a t i n g Ru le s of the
A s s o c i a t i o n , pa g e s O R 12.
National
4/
O p e r a t i n g G u i d e l i n e s of the
H o u s e A s s o c i a t i o n , p a g e s OG V - 8 .
Automated
National
Clearing
Automated
House
Clearing
-
Creait
depository
Exposure
institutions
inversely
ba se d
transactions.
depository
da y
customers
and
are
depository
originator
is
current
the
the
settlement
day
reverse
and
customers
do
for
the
a
funds
loss.
in w h i c h
to
fund
funds
though
not
th ey
as we l l
Th is
the
the
payments
time
If
their
used,
the
Banks'
it is no t d i s c o v e r e d
its
un t i l
to
Reserve
reimburse
Reserve
is
available
p o s t ed .
ha v e
as
risk
un ti l
be e n
The
generally
day
transactions
ha ve
re duced,
operating
day.
ev e n
accounts
is
are
settlement
va ri es
credit
ACH
institutions
by
the
risk
that an
day
the s e t t l e m e n t day.
Wnile
r.inanciai
reduce
to
ACH
risk
Banks'
on
experience
unable
Reserve
to rise.
settlement
situations
accorded
p r a c t i c e of m a k i n g
clearing
wo u l d
to
of
the
reversed
limited
following
loss
faced
Reserve
tends
depository
of
exposure
Federal
Federal
Reserve
institution
institution
the
risk
the ri g h t
reserve
payments
as
following
on
credit
finality
institutions'
Ba n k s r e s e r v e
is
the
to so me risk
d u e to m o s t
all
is,
receiving
business
tneir
the
-
The
and
institutions'
circular,
the
on
Th at
Unde r
exposed
--
9
loss,
this
procedures
" p ro b l e m "
receiving
risk.
to
institutions
the
Federal
The
monitor
institutions,
Reserve
Reserve
ACH
positions.
In
audition,
procedures
that
permit
Ba nk s
credit
th at
the
th em
is
exposed
has
ha ve
institutions
Ba n k s
require
to
ta ken
the
step s
risk
to
implemented
transactions
Reserve
to
are
originated
in we a k
are
problem
by
financial
implementing
depository
-
institutions
of
credit
transactions
depository
loss
are
value
highly
originated
at
to co ve r
the
time
the va lu e
they
are
for p r o c e s s i n g .
Furthermore,
median
-
to p r e f u n d or p l e d g e c o l l a t e r a l
transactions
deposited
10
over
p a yr ol l,
of
the se
fa ceu
pe ns io n,
of
and
is
all
annuity
less
As
a
institutions
result,
than
the
receiving
ACH
credit
payments.
$600,
r e c e i v i n g su ch p a y m e n t s
gr ou p.
by
percent
payments
institutions
diverse
90
and
The
the
are
generally
potential
fi na n c i a l
small-dollar
payments
a
is
not s u b s t a n t i a l .
Changes
not
appear
tne
ACH.
finality
in the Use
th at
th e r e
Nevertheless,
for
ACH
credit
on the s e t t l e m e n t d a y
AC H
and
the
funu s
for d e p o s i t o r y
practices,
the
Bank s,
transactions,
policies
mo r e
grant
the
certainty
depository
the day.
Board
regarding
the
The
l e ss en
funds
believes
the
to c h a n g e
Te r m s
—
It do es
transfers
that
to
granting
distinction
between
and
incentives
has
receivers
time
of
r e v i e w of
Ba nk s.
that
ACH
the
therefore,
and
payments
Federal
objective
cl o s e
in
credit
First,
the c u r r e n t
institutions
shifts
at w h i c h
this
typically
Banks,
for
the
payment practices.
of d e p o s i t o r y
determined
the
provide
their
-- Af te r
potential
Reserve
Reserve
of
mechanisms
Accomplishing
institutions
a shift
Bo ar d
exposure
provide
finality.
for
could
the
Transactions
t r a n s a c t i o n s at the o p e n i n g of b u s i n e s s
Finality
and
should
proolems
the
transfer
credit
Payment
be e n
institutions
Proposed
Reserve
has
of
Reserve
transactions
Reserve
po s e s
several
supervisors
institutions
generally
Banks
of
late
would
not
in
be
-li
able
to
begin
originator
notifying
is
Second,
over
all of
th ese
be in g
20,000
receiving
closed
un ti l
institutions
institutions
of
amount
of
institutions
time
may
be
that t r a n s a c t i o n s w i l l
In o r d e r
Ba nk s
that
tne
and
ACH
credit
receiver
settlement
may
aa_* .
The
p.m.
na me
transactions
will
be
institutions
wi th
on-line
on-line
items
receiving
wi ll
tnat
do
Bank
wi l l
local
attempt
Due
for
be
given
afternoon.
be
Wh il e
affected
a potentially
and
a
by
large
considerable
th o s e
fac ed
treated
time
Ba n k s
institutions
for
to
the
for
the
the
payments
receiver
provide
on
means
of
of
to
is
by 6: 30 p.m.
final.
by
of
institutions
day,
the
that
Therefore,
6:30
an
then
the
institutions
the
by
Reserve
6: 30
p.m.
potentially
ha ve
does
accrue
the
to
to
time,
making
Board
ma y
se n t
Fedw ire ,
th at
wh os e
before
th os e
telephone
the
notice
not
local
For
to
wire
Fedwire
reversal
to
receiving
a
the l o s s e s
p.m.
the Boar d p r o p o s e s
by
difficulty
to
R e s e rv e
institution
notice
calls
the
fi na l
wi l l
connections
gi v e
as
by
originating
to be
to
6: 3 0
not
notify
connections
notice
accept
by
be
tne
on-line
business
it s h o u l d
of
institution
telephone
wo u l d
institutions,
reversed
If
the
an
ACH mechanism.
ri sk s
lo ca l
considered
ha ve
time.
closed
not
be
not
numerous
that
time.
the
Reserve
tne
lo ca l
to
that
be r e v e r s e d .
transactions
6: 30
the
affected
required
institutions
p.m.
be
depository
at
use
in
institution,
to b a l a n c e
receiving
late
ordinarily
the c l o s i n g of one o r i g i n a t i n g
nu mb er
institutions
fi rm
already
no t
believe
if n o t i c e
6:30
p.m.
can
-
fi n a l i t y
only
applies
in s t i t u t i o n s ,
the
to
12
-
on-line
institutions.
the R e s e r v e Ba nk wi l l a t t e m p t
transactions
wi ll
not
become
final
For
to give
if such
ot he r
no tic e,
notice
but
is not
g i v e n by 6 : 3U p.m.
The
Bo ar d
f i na li ty .
The
notice
useful
is
accompanying
this
notice
requests
Bo ar d
also
to
institution.
be
through
computer
now tne
t>:30 p.m. time
handled
if
receiving
(1)
data,
and
oe
a Reserve
Bank's
institution's computer
it
Banks
incurred
not
fu nd ed
was
to so me
if
an
c l o s ea .
In
closed
are
institution
institutions
the
transactions
reversed before
in
the
in
in
the
loss.
the
Central
and
p.m.
provided
requests
comments
reversals
should
is down;
on
be
or
(2)
a
co u l d
and
we r e
by
the
time.
Eastern
example,
closed
and
pa r t s
at
if
5:00
had
if
of
the
an
p.m.
to n o t i f y r e c e i v i n g
Pacific
time
institution
would
Because
time
time
may
b e fo re
incurred
western
For
and
originated
be
the
losses
unexpectedly
it had
day.
Mountain
time e x p o s e s
Specifically,
Ba nk s may be ab le
lo c a l
the
6: 30
best
loc al
closed
losses
originated
6: 30 p.m.
p.m.
mid-west
the
without
is do w n or sh u t off.
California
in
of
this
to the r e c e i v i n g
be
computer
were
in
Reserve
located
can
transactions
late
located
Time,
of
whether
aft er
useful
Boar d
6: 30
addition,
country
li na li ty
risk
tne A C H c r e d i t
located
that
at
originator
institutions
Pacific
notice
the
on
la te
be
for n o t i f i c a t i o n
Granting finality
Reserve
how
st il l
connections,
p r o p o s e d 6: 30 p.m.
institution
and
timely
the
comment
receiving
given
Because
on
requests
the
transaction
may
comments
the
zon es
would
zones
be
set
have
for
13
-
pas sed
before
the
Banks
would
Re s e r v e
those
regions
inc ur r ed .
California
of
The
not
the
Bo a r d
appropriate
for
and
commenters
whether
the
be
institution
able
country
to
and
requests
Federal
-
reverse
would
comments
Reserve
believe
was
closed,
transactions
absorb
on
the
any
in
l o ss es
whether
it
is
to a c c e p t such risk of loss
th at
a
private
ACH
processor
w o u l d a c c e p t this type of risk.
It
is
institution
Banks will
proposed
notice
ma k e
the
on
This
transaction
on
the
of
ca s e
individual
the
Ba n k s
Federal
Reserve
no
institutions
mail,
or
the
o f f i ce ,
whose
proposal,
latest
reversal
time
than
day
that
business
receiving
their
reversed
also
and
on
still
the
the
night
to
of
via
In
the
at
be
c y cl e.
a
ma d e
For
courier
or
d e l i v e r e d on
In a d d i t i o n
to c o m m e n t s
that c o m m e n t e r s give
insitution
update
day
would
transactions
requests
depository
opening
transactions
delivered
included with
a
the
reversed.
connections
ACH
of
are
institutions
being
transactions
close
the R e s e r v e
the s e t t l e m e n t day.
electronic
up
Bo a r d
are
before
following
with
the
th at
to the i n s t i t u t i o n .
the
a
depository
provided
transactions
transactions
for
be
pi ck
tne d a t a w o u l d be
this
opening
will
th a t
later
giving
receiving
transactions
business
the n e x t d e l i v e r y
on
to
institutions
Reserve
availaDle
data
afte r
the c l o s i n g of an o r i g i n a t o r ,
available
data
business
of
that,
its
following
could
receive
accounts
b e fo re
the
scheduled
potential
losses,
s e t t l e m e n t dat e.
As
Bo a r d
charge
an
added protection
p r o p o s e s that the R e s e r v e
against
Ba n k s
the a c c o u n t s of o r i g i n a t i n g
reserve
institutions
the
any
right
time
the
to
during
14
-
tne s e t t l e m e n t da y
that day.
where
ACH
The
all
credit
transactions
reverse
As
business
also
or
items
on
oe
the
Reserve
settling
the
had
Reserve
been
it w o u l d
Ban ks
the
not
be
day
a debit
funds
return
Ba n k s
to
fund
c h an ge
wo u l d
need
to r e c e i v i n g
risk
faced
by
transactions.
currently
for
This
delivered
reduce
on
in s i t u a t i o n s
day.
—
The
Reserve
indicates
that
reversed
af te r
following
in
it em
the
if
the
the
item.5_/
does
not
change
gi v e n
opening
for
of
the s e t t l e m e n t day.
it
to p e r m i t
ju dge s
originator's
of
B a n k s ' ACH
credits
th at a R e s e r v e Bank m a y r e f u s e
sufficient
or
th at
th at
business
given
chargeback
transactions
settlement
Transactions
will
tne
indicates
credit
not
Debit
circular
debit
the
a re sul t,
r e c e i v e r s of A C H c r e d i t
ACH
on
transactions
ACH
credit
a b o u t an o r i g i n a t o r ’s a b i l i t y
the p r o b a b i l i t y
institutions.
operating
ACH
R e s e r v e Ba nk s w o u l d use this ri g h t
th er e we re c o n c e r n s
would reduce
to
for
-
Th is
the
th at
finality
receiver's
the
there
account
It
to
use
may
cover
granted
right
by
of
r e t u r n .6/
Credit
originating
ACH
suostantially
In m o s t
oy
received
da^s
by
cases,
receiving
by
Exposure
debit
the
some
--
following
finality
portion
originating
the
ri sk
granted
of
and
debit
the
Unif or m ACH Operating
0/
I b i d , paragraph
33.
is
by
L e t t er ,
by
institutions
not
the
affected
Federal
transactions
return
institution
settlement
5/
faced
transactions
institutions,
tne
The
day.
items
until
Most
paragraph
23.
Re se rv e.
are r e t u r n e d
may
as m a n y
not
be
a"s five
depository
15
-
institutions
oack
such
collected
financial
ha ve
Alternatively,
thr ou gh
the
ACH
if
s t a b i l i t y of their
are
obligated
the
settlement
be en
wi t h
items.
Because
whether
agreements
debit
posted
for
day,
the
items
ha ve
they
th ey
place
are
th em by
be en
or
reversed
settlement
institutions,
originators
local
If
a
on
receiver
transactions
originators
±0: 00
the
the
pa id
clearing
are
debit
a.m.
on
the
data
institutions
wi th
or
that
thos e
Reserve office
business
be
day
day
all
thes e
no later
tr ea t
as
the
tnan
the
transactions
on
to d e t e r m i n e
have
a re sult,
payments
a
needed
following
the
original
transactions
would
be
included
institutions
served
by c o u r i e r s or
on
of
settlement
day.
being
the
ACH
to a d v i s e
of
the
reversed
settlement
by
day.
be m a d e a v a i l a b l e
to
the
the
next
the P o s t a l
Reserve
at
day
settlement
the
a.m.
na me
the
to
10 :0 0
and
transactions
the c l o s e
gi v e n
at
the
are
the
depository
proposes
of
connections
their
the
Board
would
for
credits
fails
following
reversals
up
funds
business
As
final
following
payments
day
electronic
pick
on
transactions
whether
transactions
business
on
to
reversed,
whose
ab le
certainty
transactions
debit
institutions
Transaction
to
to
ACH
greater
transactions
of
c h ar ge
the b u s i n e s s d a y f o l l o w i n g
debit
business
of
accounts.
proposes
the
are
of
provide
cl o s e
wh e n
Bo ard
of A C H
time
receiving
To
to
ab o u t
ACH debit
Ba n k s
in the m o r n i n g on
day.
ho l d s
concerned
R e s e r v e Bank wo u l d be ab le to d e t e r m i n e
to be
customers
receiving
Reserve
to r e s e r v e
their
corporate customer.
institutions
to s e t t l e
-
a
to
Banks
Federal
cycle
date .
delivery
Se rv i c e .
on
the
Reversal
to
16
-
Debit
Item
Adjustments
receiving
institutions
to
45
about
days
-
--
The
NACHA
to r e t u r n c o n s u m e r
after
the
settlement
debit
date,
provides notice
that such d e b i t e n t r y was,
not
by
authorized
debit
for
the
c o n s u m e r .2./
item a d j u s t m e n t s
them.
before
If
the
currently
the
item
of
submitted
for
is
be
institution
and
would
or p o s s i b l y
the
f a il ed
transactions
if
a
returns
up
co ns u m e r
in w h o l e
Such
permit
or
in part,
are
called
the R e s e r v e Ba nk s p r o c e s s and se tt le
originator
would
adjustments,
and
ru le s
obligated
the
debit
item
processing,
to
credit
has
fail ed
the R e s e r v e Banks
the
returning
o n l y ha v e a c l a i m a g a i n s t the fail ed bank
t h e r ef or e,
bank's
customer.
exposes
the
Processing
Reserve
Ba nk s
debit
item
to some
risk
of l o s s .
T h is
right
of
a consumer
to o b t a i n c r e d i t on the bas is
th at an A C H d e o i t t r a n s a c t i o n was not a u t h o r i z e d
customer's
altered
right
check.
In
(r eceiving)
ba nk
indorsement
or
alteration
The
intermediary,
the
banKS
Bo a r d
the
of
a
the
the
ca se
forg ed
risk.
ch ec k,
and
in
In
the
of
a
ch ec k,
the
ca se
customer
receiving
forge d
the
of
or
payor
a
must
bank
from a
forged
pr ov e
must
the
claim
on the b a s i s of b r e a c h of w a r r a n t y .
do e s
su ch as a
not
the
believe
Reserve
to a s s u m e
be b o r n e by
credit
case
altered
forg ery ,
transaction
should
the
be a r s
an
or
a g a i n s t pr i o r
to o b t a i n
differs
the
parties
l_l
O p e r a t i n g Ru le s of the
A s s o c i a t i o n , pa g e O R 17.
it
Bank,
risk
reasonable
without
of loss.
in vo l v e d .
National
is
any
an
knowledge
Ra ther,
Therefore,
Automated
for
of
this risk
the
Clearing
Board
Ho use
-
proposes
th at
adjustments
the
on l y
Reserve
wh e n
originating depository
Proposals
Bo a r d
of
Governors
proposals
concerning
Banks
th ey
-
grant
can
credit
rec o ve r
for
credit
debit
from
item
the
institution.
Ba s e d
on
requests
the
preceding
public
comment
discussion,
on
the
the
fo ll o w i n g
the f i n a l i t y of A C H t r a n s a c t i o n s :
°
granting
f i n a l i t y to
t r a n s a c t i o n s at 6: 3 0
s e t t l e m e n t day;
°
t r e a t i n g c r e d i t s g i v e n to o r i g i n a t o r s of A C H de b i t
t r a n s a c t i o n s as final p a y m e n t s at 10 :0 0 a.m. local
time on the b u s i n e s s day f o l l o w i n g the s e t t l e m e n t
aate;
°
advising
receiving depository
i n s t i t u t i o n s wi th
o n - l i n e c o n n e c t i o n s to F e d w i r e th at p a y m e n t s are
bei ng r e v e r s e d by the time set for f i n a l i t y of ACH
payments;
°
e n d e a v o r i n g to a d v i s e o f f - l i n e
institutions
t e l e p h o n e th at p a y m e n t s are b e i n g r e v e r s e d ;
r e c e i v e r s of A C H c r e d i t
p.m.
lo ca l time on the
by
0
r e s e r v i n g the r i g h t to d e b i t the r e s e r v e / c l e a r i n g
accounts
of i n s t i t u t i o n s o r i g i n a t i n g A C H c r e d i t
t r a n s a c t i o n s at a n y time d u r i n g the s e t t l e m e n t day;
and
°
granting
c r e d i t for d e b i t it em a d j u s t m e n t s on l y
wh e n the R e s e r v e Ba n k s can r e c o ve r c r e d i t fr om the
originating depository institution.
By or de r
Reserve
--
17
Sy stem,
of
the
Board
F e b r u a r y 23,
of
Governors
of
the
Federal
1989.
(signed) W i l l i a m W. W i l e s
W i l l i a m W. W i l e s
S e c r e t a r y of the Board
@FedFRASER