UCC 4A Disclosure

I am conducing my first ACH Audit, and trying to determine if our new account disclosures have the language needed to be in complicance with the UCC 4a disclosure requirements. Any assistance would be appreciated.

[Provisional Payment Disclosure]
"Credit given by [us] to [you] with respect to an automated claring house credit entry is provisional until [we] receive final settlement for such entry through a Federal Reserve Bank. If [we do not receive such final settlement, [you] are hereby notified and agree that [we] are entitled to a refund of the amount credited to [you] in connection with such entry, and the party making payment to [you] via such enter (i.e. the originator of the entry) shall not be deemed to have paid [you] in the amount of such entry."

[Notice Disclosure]
"Unter the operating rules of the National Automated Clearing House Association, which are applicable to ACH transactions involving your account, [we] are not required to give next day notice to [you] of receipt of an ACH item and [we] weill not do so. However, [we] will continue to notify you of the receipt of payments in the periodic statements we provide to you."

[Choice of Law Disclosure]
"[We] may accept on [your] behalf payment to [your] account which have been transmitted through one or more Automated Clearing Houses (ACH) and which are not subject ot the Electronic Fund Transfer Act and [your] rights and obligations with respect to such payments shall be construed in accordance with and governed by the laws of the state of [New York] as provided by the operating rules of the National Automated Clearing House Association, which are applicable to ACH transaction involving your account."

Refer to Section 2.1.8 in the Operating Rules (OR3 pg)

Thanks for you help MackenzieS!

Your welcome. Its funny, you can tell how many of us are asking questions regarding ACH, must be that annual audit we are all working on huh? So much for the December 1st deadline, I have mine sprawled all over my desk!

So. . .since you guys are working on this, too. . .

Do you have to provide those disclosures to consumers as well as businesses? My inclination is yes, but what do y'all think?

Both.

Exactly where are these disclosures typically located?...on the account agreement or the electronic funds transfer disclosure?...or are they required to be a stand alone disclosure?

Sincerely,

Confused

Ours has always been included in the Terms and Conditions portion of our New Account Brochure. Actually, be sure not to include them with your Reg E disclosures because UCC4A is applicable to wire transfers as well as ACH transactions and wire transfers are not covered under Reg E.

Thanks a million!

Mackenzies you say we must provide the disclosure to both. Since UCC 4A is a consumer Reg., do we have to provide the disclosure regarding ACH credit entries to a business? Can you show me where it says that?

The Uniform Commercial Code 4A is not a law that is biased towards consumers vs. commercial customers like federal regulations or even other UCC laws. Therefore, it is applicable to both. We do not differentiate in our Terms & Conditions who it is applicable to, we just insert the required text.

If you need further guideance, go to the NACHA rules book and check out Appendix 8.2 & 8.3 UCC4A Compliance for the audit requirements, OR3 §2.1.7 - Notice by ODFI, OR3 §2.1.8 - Notice by RDFI, and OG 16 - SAMPLE AGREEMENT ODFI-ORIGINATION (CORPORATE) AGREEMENT (CREDIT ENTRIES), (this gives the bank a sample agreement incorporating much of the UCC4A security requirements.)

Although it's true that 4A covers all sorts of electronic transfers, it does not cover those that are subject in any way to Regulation E. Therefore, EFTs to and from consumer accounts via almost anything other than Fedline, SWIFT and CHIPS will be excluded from Article 4A's scope.

We have questions about how often the UCC-4A Choice of Law/Payment/etc disclosure is required. We have heard it is required 3 different ways. These are annually, at opening, and on the statement message. When and how often is REALLY required. Since only commercial accounts are supposed to have CTX/CCD transactions, are you sure consumers need it, or is it "just in case"?