Applicable Rules to ACH Stop Payments

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Question:

We recently had ACH training and found out that according to NACHA rules, we were doing stop payments incorrectly for ACH items. Are the NACHA rules the only governing force for ACH transactions, or is there some overlap with Reg E? Before we change our internal policy we want to be sure that strictly going by NACHA rules won't have us violating Reg E.

Answer:

Regulation E only deals with one type of stop payment - recurring debit (preauthorized) transactions. The consumer has a right to stop payment of individual transactions if the order gets to the bank at least 3 business days before the settlement date of the transaction.

Technically, NACHA does not permit (and Reg. E does not require) "standing" stop orders covering a series of transactions. NACHA rules require the consumer to cancel his authorization with the originator, and permit a return of the transaction if the originator fails to act on the cancellation. NACHA also gives customers stop payment rights on RCK and XCK entries (covering the original check and its electronic derivative), and on POP, ARC, WEB and TEL entries. These stops have to get to the bank "in time for the bank to act on them."

First published on BankersOnline.com 11/1/04