Demystifying ACH Payments to Canada NACHA Payments 2008
- Slides: 22
Demystifying ACH Payments to Canada NACHA Payments 2008 May 18 -21, 2008 Elizabeth Mc. Querry Assistant V. P. , Retail Payments Office Federal Reserve Doug Kreviazuk V. P. , Policy & Research Canadian Payments Association
Presentation Overview Ø Ø Ø Ø Opportunities for X-Border Payments Canada – U. S. Comparison Role of the Canadian Payments Association Canadian Rules for Credits & Debits X-Border ACH Payment Flow Processing Tips & Considerations Future Opportunities 1
Opportunity for X-Border Payments Top 5 U. S. Trade Flows (Source: US Census Bureau) 2
Opportunity for X-Border Payments U. S. – Canada Trade Increasing (Source: US Census Bureau) 3
Opportunity for X-Border Payments 4
Canada – U. S. Comparison (2007) CANADA: Canadian Payments Association Population: 33 million GDP: $1. 6 trillion (US) Retail Payment Volumes: 5. 5 billion Avg. Transactions per Person: 167 UNITED STATES: ACH Federal Reserve NACHA Population: 301 million GDP: $14. 1 trillion (US) Retail Payment Volumes: 14 billion Avg. Transactions per Person: 46 5
Role of the Canadian Payments Association (CPA) Ø Oversees Canada’s national clearing system § § § Ø Not an ACH § Ø Automated Clearing Settlement System U. S. Dollar Bulk Exchange System Large Value Transfer System Clearing & settlement only (member to member) Establishes domestic rules framework 6
CPA Rules for Credits Ø Ø Set out in CPA Rules Section F - Automated Funds Transfers Focus on inter-member exchange Only contemplate domestic transactions Recourse for misdirected credits: § § § Initiated by originating FI: error correction must be done within 4 days after delivery or 3 days after the date funds are to be made available Originators encouraged to get a void check to avoid misdirected credits Initiated by receiver: currently no restrictions on timing 7
ACH Gateway Cross-Border Transaction (Direct Deposit Example) ACSS US$ or CDN$ Receiving FI Payee Handles currency exchange & format conversion. Canadian Receiving Gateway Operator Originating FI U. S. Originating Gateway Operator US$ • Originates credit using NACHA formats & SEC codes CBR/PBR. • Pays all fees (no fees for Canadian receiver). Payor 8
CPA Rules for Pre-Authorized Debits Ø Rule H 1 – Only contemplates domestic PADs Ø Underlying Agreements required between: § § Payee & Originating FI (Letter of Undertaking) Payee & Payor (Payor’s PAD Agreement) Ø Mandatory elements for Agreements Ø Requirements for remote PAD Agreements Ø Recourse: Consumers 90 days, Businesses 10 days Ø 10 days notice required for variable date PADs Ø Additional authorization required for variable date PADs 9
Upcoming Changes to CPA PAD Rule Ø Ø Ø Mandatory minimum elements for all PAD Agreements New process for remotely authorized PAD Agreements (e. g. over the telephone/Internet) New requirements for canceling PAD Agreements New notice requirement in cases where a Payee’s name has changed Properly authorized one-time debits will be permitted 10
Implementation of CPA’s New PAD Rule Ø New rule effective June 20, 2008 (will be published on www. cdnpay. ca) Ø Grace period: compliance mandatory by February 28, 2010 Ø Existing PAD Agreements grandfathered (i. e. will not have to be re-established/re-signed) 11
Processing Tips & Considerations…
Learn Canadian 13 1) The timeframes allowed by the CPA exceed those in the current NACHA rules.
Account Numbers are Different Ø To use the numbers on a Canadian check to populate the NACHA record: Average Company Ltd. N 408911 0234567 = Foreign Receiver’s Account Number (max. 12 digits) 408911: 95042 : 002 : 0694: 0234567 95042 = Branch Transit Number 555 Main Street East Toronto, Ontario M 5 K 1 X 1 ____20___ Pay to the order of ______________________ $_______ VOID ___________________________/100 DOLLARS The Scotiabank Bank Toronto Centre Branch 55 King St. W. & Bay St. Toronto, Ontario M 5 K 1 A 2 408911: 95042 : 002 : 0694: 0234567 002 = Institution Number To create Foreign Receiving DFI Identification ⇨ 000295042 1) Add leading 0 to Institution Number 2) Combine with Branch Transit Number 14
Understand Differences in Rules Ø Longer Return Timeframes for Debits § § § Ø Consumer PADs – up to 90 days after the debit Businesses PADs – up to 10 days business days Credits – error correction process within 3 -4 days No Dishonored Returns § All disputes regarding returns must be handled between the ODFI and the receiver 15
Understand Differences in Rules Ø Debit rules vary substantively § § See previous section on rules differences One time debits not currently allowed (will be permitted as of June 20, 2008) Ø NACHA Reversals not allowed Ø NACHA Pre-notes not allowed 16
Learn Processing Schedules Ø Fixed to Variable (FV) and Fixed to Fixed (FF) items have different ACSS processing schedules § § Ø Canadian RDFIs can post funds according to their own internal procedures § Ø 10: 00 ET – exchange of FV and FF items 14: 30 ET – exchange of FV items A survey of posting times varied: o FV items - 17: 30 ET on Day 1 to 08: 00 ET on Day 2 o FF items - 11: 00 ET on Day 1 to 08: 00 ET on Day 2 Processing schedules may be leveraged to guarantee posting of payroll and pensions 17
Other Tips Ø Banking holidays vary somewhat § Ø No trace requests for items under US $20 § Ø Generally 10 days each; some provinces may observe an additional heritage day Only send low value test payments to accounts where you have a direct relationship and can verify result Returned CAD payments may have different value due to foreign exchange conversions § If in doubt on the account number, send a low value test payment first 18
Prepare for IAT Ø International ACH Payments must use SEC Code “IAT” Ø IAT payments must include “Travel Rule” information as set out in the Bank Secrecy Act Ø Applies to all international payments made via the ACH Network Ø To be implemented in March 2009 19
Future Opportunities Ø CPA Strategic Priority: Facilitate interaction and global interoperability of the CPA’s systems with other payment-related systems. Ø CPA work with NACHA & Fed. Reserve § Format interoperability § Rules framework 20
Discussion Elizabeth Mc. Querry Doug Kreviazuk Assistant V. P. , Retail Payments Office Federal Reserve 404 -498 -7888 Elizabeth. mcquerry@atl. frb. org Vice President, Policy & Research Canadian Payments Association 613 -238 -4173 ext. 3281 dkreviazuk@cdnpay. ca 21
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