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Highlights of New NACHA Rule Making Process

NACHA Industry Bulletin

BACKGROUND

At their September meeting, NACHA's Board of Directors approved a new Rule Making Process for developing amendments to the NACHA Operating Rules. The new process was proposed by the Rules & Operations Committee based on the recommendations of the Strategic Planning Task Force. The revised Rule Making Process becomes effective on January 1, 2006.

HIGHLIGHTS

Under the new Process, the Board of Directors will provide general oversight of the Rules & Operations Committee, will provide input, and be kept apprised of issue development. The Committee will have an increased role in providing strategic direction for the Rule Making Process, categorizing rules proposals and determining time frame for development, identifying participants for groups, and selecting proposal sponsors.

• Rules proposals will be categorized as follows: (A) Major impact to Network; (B) Moderate impact to Network; or (C) Minor impact to Network. Depending on the category of the rule, the issue will be considered using one of three specific processes.
• Only members will be able to submit rules proposals. Other parties wishing to submit an issue will need to work with a member have that member sponsor the issue.
• The process will be streamlined for issues with a minor impact to the industry (i.e., some issues will not be distributed as a Request For Comment).

THE PROCESS

Initial Submission

Issues will be presented by a member or key party to NACHA staff as a rules proposal. The issue will be presented as a 1-2 page initial business case which describes the proposal and meets certain submission requirements. Members are Regional Payments Associations and their Financial Institution members, and Direct Financial Institution members of NACHA. Key parties are the ACH Operators, the U.S. Department of Treasury, Federal regulatory agencies, and the NACHA Board of Directors and Standing Committees. Any other party wishing to submit an issue will need to work with one of those members noted above and have that member sponsor the issue.

Rules & Operations Committee Review

The Rules & Operations Committee will consider the issue to ensure that it is consistent with NACHA's strategic plan and appropriate to the Network. The Committee will either: 1) accept the proposal for review under the Rule Making Process, 2) request additional information from the submitter, or 3) reject the proposal. If the Rules & Operations Committee accepts the proposal, the Committee will:

• Determine the estimated time needed to develop the proposal.
• Evaluate the issue to determine which of three categories of rule changes the proposal would fall under: (A) Major impact to Network; (B) Moderate impact to Network; or (C) Minor impact to Network. Depending on the category of rule, the Rules Committee will forward the issue to be considered under one of three specific processes.
• If the proposal would cause a major or moderate impact to the Network, then the Committee will identify a financial institution or RPA sponsor.

Categories of Rules Proposals

Category A changes would have a major impact on ACH participants. Types of Category A changes will include: (1) new products; (2) new services; and (3) major modifications to current Rules. The business case for Category A proposals will include an increased level of detail in the economic analysis and a balanced articulation of divergent viewpoints.

Category B changes would have a moderate impact on ACH participants. Types of Category B changes would include: (1) regulatory changes; (2) modifications to address marketplace changes; (3) emergency changes and Board-driven directives; and (4) moderate modifications. (e.g., modifications to the reversal or NOC process). The business case for Category B proposals will not include the level of detail in the economic analysis that will be included with Category A changes.

Category C changes would have a minor impact on ACH participants. They should have no significant economic impact. Types of Category C changes will include: (1) editorial changes to address corrections in grammar, spelling, and similar errors; (2) changes to correct inconsistencies between various rules; (3) changes to rules with the purpose of clarifying intent; (4) minor modification to incorporate current practices (e.g., Operator edits, return code descriptions), and (5) changes that may involve minor software modifications. There will not be a need for a full business case or Request For Comment (RFC) because there would not be a significant impact to the Network participants.

Participation in the Process

Category A - Product Groups
Each Category A issue will have a Product Group made up of a maximum of 15 representatives from the Direct FI members, Regional Payments Associations and their financial institution members who are experts on the subject matter.

Category A - Industry Support Groups
Industry Support Groups will be formed for each Product Group to assist and provide input on the development of the business case. Industry Support Groups will be comprised of Council members, companies, software vendors, third party processors, government agencies, and other interested parties as selected by the Product Group.

Category A - Rules Work Groups
Rules Work Groups will also be formed for each Product Group. The Rules Work Group will consist of any industry participant wishing to contribute to the research and development of that particular issue who is not participating in one of the other groups.

Category A & B - Industry Input
Proposals under Category A & B will each distribute Requests for Information and or Requests For Comment on their issue. The industry is encouraged to review and provide input for these Requests.

For More Information:

For additional information, including the actual flow of the process for each Proposal Category, an Industry Briefing will be available on NACHA's website from October 24 - December 31, 2005.

If you have any questions concerning this Industry Bulletin, please contact the Network Rules Department at NACHA at (703) 561-1100.