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When the Direct Deposit Recipient and Account Owner Don't Match

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Question: 
Is there a regulation that prohibits us from accepting direct deposits, when the person on the direct deposit is not on the account the money is going into? (ie. child support payments, rent payments)
Answer: 

From Ken: If no federal government payment is involved, NACHA rules only require the RDFI to verify the account number. On federal payments, the tip of the iceberg is that the receiving institution is responsible for verifying that the name of the person entitled to the benefit appears in the account title. (One of the noted exceptions to this requirement is when a representative payee has been appointed.)

From Financial Management Service/Department of Treasury web site citing to 31CFR 210, the federal government's revisions to the NACHA rules applying to government payments:

In addition to the foregoing five provisions of the ACH Rules which Part 210 entirely preempts through the definition of "applicable ACH Rules," six other provisions of the ACH Rules are preempted in part by operation of specific sections of Part 210. Those provisions are:

6. Account requirements for Federal payments (see Section 210.5). Part 210 imposes a requirement with respect to ACH credit entries representing Federal payments other than vendor payments that is not imposed under the ACH Rules, i.e., that such payments be deposited to an account at a financial institution "in the name of" the recipient, with three exceptions discussed in the section-by-section analysis. [Abridged]

First published on BankersOnline.com 4/01/02

First published on 04/01/2002

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