NACHA Adopts a Third-Party Processor Rule

The Herndon, Va.-based National Automated Clearing House Association announced its members have approved a new rule governing third-party processing of automated clearing house (ACH) transactions. The rule, an amendment to the NACHA Operating Rules that goes into effect next December, requires that third parties agree to be bound by the operating rules even if the third party's client does not have any such agreement with the originating bank. “Ensuring that all ACH users are bound to the rules will enable NACHA to better enforce the rules, and enable (originating institutions) to better manage the risks associated with originating ACH payments,” says Elliott C. McEntee, NACHA's chief executive, in a statement released today. NACHA says third-party processors most commonly are involved in direct-deposit payroll transactions and with consumer bill payments. In some cases, the association says, the client company has agreements with its processor but not with its originating bank. In these cases, there is nothing legally binding either the client or its processors to the operating rules of the ACH. The new rule requires that the company's agreement with its processor, and the processor's agreement with the originating bank, call for all parties to be bound by the NACHA rules. NACHA's rules provide for standard ACH payment formats and set out the rights, obligations, and warranties of all parties to ACH transactions. The ACH is increasingly being used as a network to process Internet transactions as well as check and debit card transactions at the point of sale. Earlier this week, NACHA announced that Pittsburgh-based PNC Bank N.A. has become the ninth bank to join NACHA since the group reorganized and reopened membership in January 2001. PNC's membership brings to 17 the total number of financial institutions with direct membership in NACHA. The association now claims a total of 36 direct members, with 19 regional associations also holding memberships. Of the country's 16 largest ACH originators, 12 are now NACHA members. Among the association's 17 bank members are four that are in the process of merging: J.P. Morgan Chase & Co. announced last week it will acquire Bank One, and last fall Bank of America announced its acquisition of FleetBoston Corp.