How to Manage Notifications of Change

Wrestling Payments Podcast: Season 1 - Episode 2

Episode Summary

Welcome to another episode of Wrestling Payments. We dedicate this session to Notifications of Change (NOCs), or as many refer to them, No One Cares. In this episode, our host Joe Casali shares three cases where receiving financial institutions* wrestled with NOCs. As part of the analysis, Joe describes the causes and the consequences of not addressing the issues. Finally, he shares valuable tips on how to prevent unpleasant scenarios caused by ignoring NOCs. *Names have been changed to protect the actors in the cases.

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Podcast Expert

Host: Joe Casali
Company: NEACH

Podcast Insights

🎙Educate your originators on what notifications of change are. While analyzing the background, including the response and the consequences of the first case (you can find out more about it in the highlight section below), Joe says that ODFIs must train their originators on how to act regarding NOCs. Otherwise, they risk penalties. ''They have to know what a NOC is. They have to know how to deal with it. They have to be set up right to get the information.''

🎙If you receive entries you must wrestle with, file a notice of possible rule violation. Based on a case initiated on the suspicion that an originator acted against the norms, Joe suggests notifying Nacha, or ''You can say something directly to an ODFI, not just as a contact registry. You can reach out, but the system fines and rules enforcement will make it official if you need to escalate it to that point.''

🎙You must receive NOC reports regularly. That's the third and final tip Joe shares in this episode, adding: ''If you don't have any NOCs, something's wrong. That may not be totally true, but you should probably get at least one NOC over a year or two. So check to confirm that you're getting the NOC report, understand what it's saying, and make the changes as soon as possible.''

Episode Highlights

#1 McCormick Bank and Its Originator Failed to Respond to Notifications of Change

''We have ODFI, the originating sending bank, whatever you wanna call it. The sending institution received a notice of possible NOC violation involving its originator, Pritchard Employer Group.

We can figure out that that's maybe a payroll company working through McCormick Bank, something's happened, and because Nacha can only talk to the sending bank or the receiving bank, they're talking to the sending bank because the receiving bank has been fixing something and it's not getting fixed.

They've been sending NOCs; no one's paying attention to them. So McCormick Bank and Pritchett Employer Group acknowledged this initial violation and stated they would resolve the issue. [...] McCormick Bank responded by saying, 'Guilty. We did it. We've ignored him. We're going to fix it.'

Nacha continues to receive additional reports of possible violations from RDFI, citing the same rules and fraction. So even though Pritchard Employer Group said they were going to fix it, and McCormick Bank said, ‘We're going to fix it.’ It didn't get fixed.''
 

#2 Riley Bank Received a Notification of Possible Rules Violation Regarding a NOC Involving Its Originator, Bonner Employer Group

''Riley Bank and Bonner Employer Group acknowledged the violation. [...]

A discussion with Riley Bank revealed that Bonner Group thought that as long as its customers, the receiver, and the person received the money owed to them, and the transaction wasn't being returned, Bonner Employer Group didn't need to act on the NOCs.

So there's a case where these entries come in, RDFIs wrestle with them, get them in the right place, but then send the note to say, 'Hey, can you change the account number? Hey, this is a checking account, not a savings account. Can you fix it?' And in this case, Bonner Employer Group was ignoring them and saying, 'Hey, everyone's getting paid. What do we care?'

The ACH Rules Enforcement Panel reviewed the issue and determined that the ODFI is responsible for the originator to act properly on each NOC.

As a violation submission had escalated to class two status, they were subject to a fine between $0 and $100,000 per month until the issue was resolved. And the ACH Rules Enforcement Panel decided in this case to issue a one-time fine of $10,000.''
 

#3 Emerson Bank Received a Notice of Possible Rule Violation Regarding an NOC Involving Originator, Riley Health Group

''Emerson Bank and Riley Health Group acknowledged the violation and stated they would resolve the issue. Again, critical because it looks bad from a review perspective if you said, 'Nope, we're not ignoring NOCs.' But then the evidence shows you weren't responding to NOCs.

So the original incident, and now we have 15 additional months of reports of violations that they're ignoring NOCs from several RDFIs. So it's not just one institution complaining; it's systemwide related to the same rule infraction. Each time, Nacha escalated the issue with Emerson Bank via ongoing notice of possible rule fines and imposing escalating fine amounts for each infraction. Emerson Bank met with the Health Group to address this ongoing issue.

This is great; this should probably happen in each case so the parties understand what's happening. What's going wrong? Why are you continuing not to address NOCs?

Riley Health Group determined that the underlying cause of the unresolved NOCs related to an internal issue with the delivery of their NOC file. Whoa. We got an operational issue.''

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