Common Questions

Following is a summary of questions asked by Federal agencies and financial institutions.  The answer to each question contains a reference to the specific section of Part 210 where the issue is addressed in greater detail.

• 210 Preamble
• 210.2 -Definitions
• 210.4 - Authorizations and revocations of authorizations
• 210.6 - Agencies
• 210.8 - Financial Institutions
• 210.10&11 - RDFI Liability & Limited Liability

I.210 Preamble

Q1.  If recurring ACH debits are to be initiated to an agency, must each ACH debit be authorized in writing?

A1.  No, only one authorization is required, prior to the first entry.  210 preamble.

Q2.  What constitutes "commercially reasonable business practices" in the reclamation process?

A2.  The phrase "commercially reasonable business practices" is used in Part 210 in the same way as it used in UCC Article 4A. Some factors that would be relevant in assessing commercial reasonableness in this context are the size of the financial institution, the formality of the information of death provided, the reliability of a person providing information of death, steps taken by the financial institution to confirm any information of death, and the ease or difficulty of confirming information of death.  The concept is a flexible one since, for example, what is a commercially reasonable business practice for a large money center bank may not be commercially reasonable for a small rural bank, and vice versa.  210 preamble.

Q3. Must a financial institution act on unofficial or unconfirmed information regarding the death of a recipient?

A3.  Whether a financial institution is deemed to have constructive knowledge of the death of a recipient based on such information depends on whether a similarly situated financial institution would reasonably conclude that the information was reliable (see Q2.above).   210 preamble.

Q4.   Are financial institutions required to check obituaries?

A4 - No. However, if a financial institution did in fact check obituaries, and thereby learned of the death of a recipient, the financial institution would have actual knowledge of the death.  210 preamble.

II.   210.2 - Definitions

Q1.   Are agencies subject to fines or penalties for failing to comply with the NACHA Rules?

A1.  No.  Part 210 preempts the requirement under the NACHA Rules that participants agree to be subject to a national system of fines to ensure compliance with the ACH Rules.   210.2(d)(3).

Q2.   When does a financial institution have actual or constructive knowledge of the death of a recipient?

A2.   A financial institution has actual knowledge when it finds out, through whatever means, that the recipient is deceased and has had an opportunity to act on such knowledge. A financial institution has constructive knowledge if the financial institution would have learned of the death if it had followed commercially reasonable business practices.  210.2(b)

Q3.  How long does a financial institution have to take action after it learns of a recipient's death by whatever means?

A3.  One business day, i.e., twenty-four hours (excluding holidays and weekends).  210.2(b)

Q4.   Will a financial institution be liable to an agency for ATM withdrawals from an account that occur after the financial institution has received a notice of reclamation?

A4.  The basis for calculating a financial institution's reclamation liability is the "amount in the account," which is the account balance at the time the financial institution receives a notice of reclamation and has had a reasonable opportunity to take action on the notice. One business day will normally constitute a reasonable opportunity to take action. Thus, a financial institution's liability is not affected by any ATM withdrawals that occur within one business day of the financial institution's receipt of the notice of reclamation.  210.2(b); 210.11(a).

III.   210.4 - Authorizations and revocations of authorizations

Q1.  When a financial institution is enrolling a recipient, what must the financial institution verify?

A1.  The financial institution must verify that the recipient is who he or she claims to be. However, the financial institution is not required to verify that the recipient is entitled to the Federal payment.  210.4(a)(1)

Q2.   What are the requirements that apply to the initiation of a debit entry to an agency?

A2.  Other than to reverse a credit entry previously received by an agency, no person or entity (including any financial institution) may transmit a debit entry to an agency without written authorization from the agency. 210.4(a)(2)

Q3.   Does Part 210 specify when a financial institution can or must close a recipient's account?

A3.   No, except that Part 210 requires a financial institution to provide 30 days written notice to a recipient before the financial institution closes an account to which benefit payments currently are being sent, except in cases of fraud.   210.4(c)(3).  (Note:  This requirement is not intended to apply when the customer has requested that the account be closed.)

IV.   210.6 - Agencies

Q1.   May an agency reverse a duplicate or erroneous file or entry?

A1.  Yes, but the agency must certify that the reversal does not violate applicable law or regulations. For example, the agency may be required by statute to provide notice and a hearing prior to taking action to recover an overpayment. It is the agency's responsibility to determine that the reversal does not violate any such laws or regulations.  210.6(f)

Q2.   If an agency makes a mistake in crediting or debiting a person's account, what is the agency's liability to that person?

A2.  The agency's liability under Part 210 is limited to the amount of the erroneous credit or debit. For example, if an agency mistakenly debits a person's account twice, the agency is liable to the account holder for the amount of the second debit. If the person did not realize that money had been mistakenly removed from his or her account, he might have incurred late fees or penalties on bills that were not paid. Part 210 does not require an agency to reimburse the account holder for these costs.   210.6(c).  However, Part 210 would not prohibit an agency for reimbursing the person for these costs if the agency wished to do so or was required to do so under its governing statutes and regulations.

V.   210.8 - Financial Institutions

Q1.   If an agency sends a payment to the wrong account, can the agency ask the financial institution to return the payment?

A1.  The agency can ask the financial institution to return the payment, but the financial institution is not required to do so. In general, if an agency sends a payment to the wrong account, the agency cannot recover the funds from the financial institution unless the mistake occurred because the financial institution provided the incorrect account number to the agency, either when it enrolled the recipient or in a Notification of Change.  210.8(b)(2)

Q2.   If an agency believes that a payment was sent to a wrong account because the financial institution provided the incorrect account number to the agency, may it instruct the appropriate Federal Reserve Bank to debit the financial institution's reserve account?

A2.  Yes. However, before issuing such an instruction, the agency must carry out an investigation to determine the cause of the error and, if the agency determines that the loss in fact resulted from a financial institution's transmission of an incorrect account number, notify the financial institution of the results of its investigation and provide the financial institution a reasonable opportunity to respond.   210.8(b)(2)

Q3.   Does part 210 specify what documents a financial institution reviews to verify a recipient's identity when enrolling the recipient?

A3.  No. It is up to the financial institution to decide what steps it will take to verify the recipient's identity. 210 preamble.  However, if the recipient is not who he or she claimed to be, the financial institution will be liable for any debits or credits made by an agency in reliance on the authorization.   210.8(b)(2)

VI.  210.10&11 - RDFI  Liability & Limited Liability

Q1.   Must a financial institution return a benefit payment if the recipient is deceased on the payment date?

A1.  No. The financial institution must return a benefit payment only if the financial institution has actual or constructive knowledge of the recipient's death at the time the post death payment was credited to the recipient's account.   210.10(a).

Q2.   How long does a financial institution have to take action after it learns of a recipient's death by whatever means?

A2.  One business day, i.e., twenty-four hours (excluding holidays and weekends).  210.2(b); 210.10(a); 210.11(a)(1).

Q3.   If a financial institution fails to comply with the requirements of 31 CFR 210, Subpart B, does it lose its right to limit its liability under Subpart B?

A3.  No. However, the financial institution will be liable for any loss resulting from the financial institution's failure to comply with the requirements of Subpart B in a timely and accurate manner. For example, if the financial institution learns of a recipient's death and fails to notify the paying agency, the financial institution could be liable for losses incurred by the agency because it continued to send payments to the recipient's account.  210.11(d).

Q4.   Will a financial institution be liable to an agency for ATM withdrawals from an account that occur after the financial institution has received a notice of reclamation?

A4.  The basis for calculating a financial institution's reclamation liability is the "amount in the account," which is the account balance at the time the financial institution receives a notice of reclamation and has had a reasonable opportunity to take action on the notice. One business day will normally constitute a reasonable opportunity to take action. Thus, a financial institution's liability is not affected by any ATM withdrawals that occur within one business day of the financial institution's receipt of the notice of reclamation.  210.2(b); 210.11(a).