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Payment System Rules
and Regulations
Regional Payments Associations, through their Direct Membership in NACHA, are specially
recognized and licensed providers of ACH education, publications and support. Regional
Payments Associations are directly engaged in the NACHA rulemaking process and Accredited
ACH Professional (AAP) program. NACHA owns the copyright for the NACHA Operating Rules &
Guidelines. The Accredited ACH Professional (AAP) is a service mark of NACHA.
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What will you learn?
• Given a scenario, identify the rules and/or
regulations that apply to various payment
systems
• Identify the impact and obligations regulations
have on your financial institution
• Respond appropriately to some frequently
asked account holder questions
After this course, you will be able to:
3
CheckRegulation J
Regulation CC
Check 21
UCC 3
UCC 4
ACHACH Rules
Regulation E
UCC 4A
31 CFR Part 210
CardAssociation
Regulation Z
Regulation E
Regulation GG
OFAC
BSA
USA Patriot Act
Wire TransferRegulation J
Regulation CC
UCC 4A
Regulation E Subpart B
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Wire
Check
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UCC 3
Regulation J
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• Legal framework
for check
collection through
the Federal
Reserve
• Warranties and liabilities
• Settlement of payments
• Time schedule and
availability
Regulation CC
• Funds Availability Act of 1987
– Availability schedules
– Endorsement standards
– Disclosure requirements
• Subpart D
– Check 21
– Substitute checkequivalent to original item
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UCC 3
Uniform Commercial Code (UCC) Article 3
• Rules for paper based transactions
• Defines negotiable instrument
• Identifies endorsement types
• Warranties
– Transfer
– Presentment
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Endorsements
John Q. Doe For Deposit
Only
John Q. Doe
Pay to the
Order of
Harry Johnson
John Q. Doe
Pay to Your
Bank
Without
Recourse
John Q. Doe
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Blank Restrictive Special Qualified
UCC 4
Uniform Commercial Code (UCC) Article 4
• Check collection, payment, liabilities, timeframes
and responsibilities
– Late returns
– Stop payment
– Special circumstances
• Outlines relationship with Paying Bank and
account holder
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Name that Rule
or Regulation
$25,000 Question(s)
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Sally Sunshine deposits a
$25,000 check from her mother
into her checking account.
Sally endorses the item “For
Deposit Only Sally Sunshine.”
The teller informs Sally there
will be a 7 day hold on the
item and provides her with an
exception hold form.
$25,000 Question(s)
• What rules and/or regulations apply in this
scenario?
• What type of endorsement is it?
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ACH
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ACH Rules
• Commercial ACH transactions
• Contract law
• Developed and maintained by NACHA
• Operating Guidelines
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Regulation E
Electronic Fund Transfer Act
• Consumer protections
• Includes consumer debit ACH transactions
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Regulation E
• Error resolution
– Consumer notification within 60 days
of statement
– Provisional credit
– Resolution within 10 days or provide
provisional credit
– Exceptions and special circumstances
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Regulation E, Subpart B
• Consumer-Initiated International Remittance
– Disclosure requirements
– Ability to cancel
– Refund requirements
– Error resolution
– Safe harbor clarification
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UCC 4A
• Governs wholesale credits including CCD
and CTX transactions
• Commercially reasonable security measures
• Disclosures required by ACH Rules
– ODFI
– RDFI
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31 CFR Part 210
• Federal government’s ACH rules
– Benefit payments, vendor payments and IRS
refunds
– Green Book
• Procedures manual for financial institutions processing
federal government payments
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Name that Rule
or Regulation
Send it Back
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John Black notices an ACH
credit on his statement that
is not his. The credit is from
the IRS with an entry
description of Tax Refund.
John wants the credit
returned to the IRS.
Send it Back
• What rules and/or regulations apply in this
scenario?
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Card
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Regulation Z
Card Association Rules
• Facilitate authorization, clearing and settlement
• Ensure secure processing
• Rules and regulations
– Creation, enforcement and standards
– Dispute resolution
– Merchant acceptance
– Physical card design
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Regulation Z
Credit Cards
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Truth in Lending Act
Required disclosures
• Right to cancel
• Resolution to
billing disputes
• Interest rates
Regulation E
Electronic Fund Transfer Act
• Rights, liabilities and responsibilities
• Consumer protections
– Debit/ATM transactions
• Financial institution responsibilities
– Disclosures
– Statements
– Stop payments
– Error resolution
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Regulation E
• Error resolution
– Consumer notification within
60 days of statement
– Provisional credit
– Resolution within 10 days or
provide provisional credit
– Exceptions and special
circumstances
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Name that Rule
or Regulation
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Turn it Off
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Bill has a recurring debit on his
statement for a monthly TV subscription.
The transaction is processed with
information from his debit card. He
comes into your institution and tells you
he does not want the debit to hit his
account anymore.
Turn it Off
• What rules and/or regulations apply in this
scenario?
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Wire Transfer
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Regulation J, Subpart B
Check Collection and Funds Transfer Act
• Establishes procedures, duties and responsibilities
of Federal Reserve Bank, sender and recipients
• Incorporates certain provisions of UCC 4A
• Directs FRB to issue operating circulars
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Regulation CC
Expedited Funds Availability Act of 1987
• Requires immediate availability to Beneficiary
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UCC 4A
Uniform Commercial Code (UCC) Article 4A
• Governs “wholesale credits”
– Unique payment method with unique rules
– Commercially reasonable security
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Regulation E, Subpart B
• Consumer-Initiated International Remittance
– Disclosure requirements
– Ability to cancel
– Refund requirements
– Error resolution
– Safe harbor clarification
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Name that Rule
or Regulation
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Truck Load Size Grocery Bill
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The local grocery store needs to
send a $100,000 to a supplier
immediately. The supplier will not
let the truck driver unload the
produce before receiving the funds.
Truck Load Size Grocery Bill
• What rules and/or regulations apply in this
scenario?
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All Payment Systems
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Regulation GG
Unlawful Internet Gambling Enforcement Act
• Prohibits business from accepting payment in
connection with unlawful Internet gambling
• Requires financial institutions to identify and
block payments
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OFAC
Office of Foreign Assets Control
• Administers and enforces economic and trade
sanctions against targeted foreign countries,
terrorism sponsoring organizations and
international narcotics traffickers
• Requires financial institutions to take the
appropriate steps to investigate, suspend, reject,
block and report on transactions as necessary
• Written compliance policy and procedures manual
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OFAC
• Report all blocked transactions within 10 business
days of occurrence
• Annual report of all property blocked as of June 30
each year is due to OFAC by September 30
• Retain reports for 5 years
Visit website at www.treas.gov/OFAC
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• Financial institution requirements
– Obtain proper taxpayer ID number for
all deposit accounts
– File Currency Transaction Report
(CTR) for any currency transaction
over $10,000
• Aggregate during business day
– File Suspicious Activity Report (SAR)
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BSA
Bank Secrecy Act
• Implemented to deter money laundering
Uniting and Strengthening America by
Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001
• Verify the identity of any person seeking to open
an account
• Maintain record of the information used to verify
identity
• Consult government or suspected terrorist lists
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USA Patriot
Act
Name that Rule
or Regulation
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