I have worked with ACH on the RDFI side for years, but am new to the ODFI side. I have a situation I haven't encountered before & am wondering what is the right way to proceed. A customer had a recurring EFT set up through us to pull from a checking at another bank to pay his loan here. The loan was paid in full yesterday. Today the EFT is in my rejected items as it tried to pull as well. Should I return the payment to the other bank as R02 or post the funds to his deposit account here? There are differing opinions about this on my end.

You have to return it as account closed. You cannot just put it somewhere other than where it was headed.

Thank you. That is what I thought.

We have a situation where the customer has setup a recurring transaction to pay their loan, HELOC, or credit card via our payment portal (third-party provider). The payment could be coming from the customers deposit account at another institution or from a credit card. If the payment continues after the loan is paid off or the line of credit has a zero balance, should the return be made through the payment portal, the way it came in? Would it be acceptable to return as a cashier's check?

ideally it would be returned via ACH (R23, credit entry refused by reciever), but you only have 2 days to use this code. hopefully someone is reaching out to the customer to alert them to stop it in their bill pay, but you could also return via cashier's check if greater than the 2 days has occured.

Also review 1026.11—Treatment of credit balances; account termination.

I am assuming these accounts are still open. If they we closed, then the ACH should be returned immediately. If they are still open, you are not really required to do anything for 6 months unless they make a request in writing.

In most cases the accounts are paid off and closed therefore the payment non-posts. Is there any timing requirement for mailing the cashier's check?

I thought ACH rules required for those to be returned as account-closed? You used to always have to clear non-posts the next day.

We clear the non-posts the next day by issuing a cashier's check.

Someone with an ACH background can chime in, but I thought a RDFI had to return any item that tried to post against a closed account - debit or credit.

It sounds like your system operates similar to ours. Ideally, the consumer would have shut off the automatic payment, but they didn't. As the ODFI, you cannot return the funds. We end up posting the funds to an existing saving account and reach out to the consumer to let them know what happened and make sure they stop the automatic payments. Randy, the RDFI is where the payment is being pulled from not where it is posting so all they know is that they have the funds to send out and not that the loan was paid off.

So, we are the initiator since it is our payment portal?

We do reach out to the customer but we're not always successful. These customers typically do not have accounts with us. Are there any timing rules for delivering the cashier's check?

yes, in that case it should be returned as R02-account closed or R-03 - no account/unable to locate.

when i originally stated credit entry refused i did not realize this was a loan payment or revolving line that was closed. by all means they should be automatically returned, per the Nacha rules. failure to do such opens the bank to nacha rules violation.

Yes, you are the ODFI. As for how to proceed, we are a credit union, so every borrower had to have a shares account. Some close them out when they payoff the loan, so our ACH staff re-open that account while trying to reach the individual. In your case, it may be the best approach to send a Cashier's Check to the last address on file.

We are mailing to the last address on file however we are holding on to the Cashier's check for 10 business days in case a stop payment is placed on the ACH. Even if the customer calls and asks for the funds we still delay mailing 10 business days. Are there any concerns with this?

If the consumer did a stop payment then that should predate your request and stop the payment before the RDFI sends it. What I think you mean is that you expect an Unauthorized Debit (ACH) to come through requesting the funds back. That can be done up to sixty days, but then there should be ample evidence that the consumer failed to revoke authorization and that the transaction was authorized. Holding the check ten days really serves no point in my opinion.

That is what I mean. I appreciate the information. Thank you, Paul!