1. © 2015, EPCOR®. All Rights Reserved. 1 2015 Northern Ohio AFP Conference ACH Rules Update September 21, 2015 Cleveland, Ohio

2. This material is not intended to provide any warranties or legal advice, and is intended for education purposes only. NACHA owns the copyright for the NACHA Operating Rules & Guidelines. The Accredited ACH Professional (AAP) is a service mark of NACHA. © 2015, EPCOR®. All Rights Reserved. 2

3. What’s Happening in ACH? © 2015, EPCOR®. All Rights Reserved. 3 Enforcement & Quality Rules Same-Day ACH Rules New Rules Just Approved Third-Party Registration Request for Comment

4. ACH Network Risk & Enforcement © EPCOR 2015. All Rights Reserved. Return Rates Percentages – September 18, 2015  Unauthorized Debit Threshold – 0.5%  R05/R07/R10/R29/R51  No change to investigation or enforcement process  Admin Returns/Overall Returns Process  Inquiry process – evaluate origination activity  Rules Enforcement Panel will determine next steps

5. © 2014, EPCOR®. All Rights Reserved. 5  Return Rate Levels:  Administrative Return Rate Level – 3%  R02/R03/R04  Overall Debit Return Rate Level – 15%  Excluding RCK Rules do not require an ODFI to “track” these levels but you may want to if you feel you could have an Originator that may exceed it ACH Network Risk & Enforcement

6. © EPCOR 2015 All Rights Reserved. Reinitiation of Entries – September 18, 2015  Clarify valid reinitiation circumstances  What is a reinitiated entry and what is not  Formatting requirements Identical Company Name/Company ID / Amount Required Company Entry Description – RETRY PYMT

7. ACH Network Risk & Enforcement © EPCOR 2015 All Rights Reserved. Reinitiation of Entries – September 18, 2015 Return upon customer request R10 and WSUD

8. ACH Network Risk & Enforcement © EPCOR 2015 All Rights Reserved. Third-Party Sender Issues – January 1, 2015  Direct Obligation to monitor, assess and enforce limitations on their customer’s ACH origination activity  Provide proof of annual ACH audit to NACHA NACHA’s Enforcement Authority – January 1, 2015  Bring an enforcement action based on the origination of unauthorized entries  Validated by Rules Enforcement Panel first

9. Improving ACH Network Quality © EPCOR 2015 All Rights Reserved. Unauthorized Entry Fee – October 3, 2016  ODFI required to pay a fee to RDFI for unauthorized returns  R05/R07/R10/R29/R51  IAT is excluded  Methodology for Setting Fees  Based on cost data collected from RDFIs Amount is set and reviewed every three years

10. Improving ACH Network Quality © EPCOR 2015 All Rights Reserved. Unauthorized Entry Fee – October 3, 2016  Collection and Disbursement of Fees  ODFIs agree to pay fee  ODFIs and RDFIs authorized debits and credits to their accounts  ACH Operators will collect and distribute fees

11. Same Day ACH History © EPCOR 2015. All Rights Reserved. 2010 – FRB announces Fed SameDay ACH program  Opt in / debits only / limited SEC codes  Few participants 2012 – NACHA Expedited Processing & Settlement Proposal and Ballot  Ubiquitous Rules based approach  Ballot was defeated 2013 – FRB expands Same Day ACH  Opt in / debits and credits / almost all SEC codes  Slight increase in participation 2015 – NACHA Same-Day ACH  Ballot Approved May 18, 2015

12. Same Day ACH Benefits © EPCOR 2015. All Rights Reserved. Primary Use Cases  Same Day Payroll  Hourly workers / Emergency Payroll / Terminated Employee  B2B  Faster settlement of invoices and remittance information  Expedited Bill Payment  Make on time bill payments / eliminate late payments  Account to Account Transfers  Faster credit for consumers moving funds between accounts they own at other financial institutions

13. Same-Day ACH – Phased Implementation ©2015, EPCOR®. All Rights Reserved. ACH Credits Only 10:30 am & 3 pm ET Transmissions 1 & 5 PM ET Settlement ACH Credits & Debits 10:30 am & 3 pm ET Transmissions 1 & 5 PM ET Settlement ACH Credits & Debits 10:30 am & 3 pm ET Transmissions 1 & 5 PM ET Settlement Credit Funds Availability – 5 pm RDFI Local Time SEP 23 2016 SEP 15 2017 MAR 16 2018 No IATs or Transactions Over $25,000 Credit Funds Availability – End of RDFI Processing Day

14. Same Day ACH Rules © EPCOR 2015. All Rights Reserved. Implementation Dates  Phase 1 – September 23, 2016  Phase 2 – September 15, 2017  Phase 3 – March 16, 2018  Implementation dates are contingent on Federal Reserve support for the Rule change  Path to support by FRB through a 60-day public comment period Comments sought on changing FRB current same day ACH offering from optional to mandatory and the potential longer term effects on the Network

15. Effective Dates Contingent on the Federal Reserve 15 If written confirmation received: Then: by: 9/23/2015The Rule Phases will become effective as shown in the ballot between: 9/23/15 and 11/13/15 Each Rule Phase will become effective 6 months later than dates in ballot Between: 11/13/15 and 5/18/16 Each Rule Phase will become effective 12 months later than dates in ballot If written confirmation not received by May, 18, 2016, the Rule will not go into effect.

16. Same Day ACH Rules © EPCOR 2015. All Rights Reserved. Identifying Same Day ACH Payments  Effective Entry Date Field in Batch Header Record  Today’s date in Effective Entry Date Field, deposited at one of the two deposit windows  Optional standard for ODFIs desiring an additional indicator to be used by Originators to signify intent

17. Example: 17 ODFI receives an Originator ACH file with a current day Effective Entry Date. The ODFI could validate the Originator’s intent for same-day settlement by verifying the content of the Company Descriptive Date field. SDHHMM Same-day/Hours/Minutes

18. Same Day ACH Rules © EPCOR 2015. All Rights Reserved. Identifying Same Day ACH Payments  Operators will settle entries with invalid or stale-date in the Effective Entry Date field at the first opportunity, which may be as early as the same-day  These entries would be subject to the Interbank Fee

19. Same Day ACH Rules © EPCOR 2015. All Rights Reserved. Returns  May be initiated and sent the same day – but not required  Debit returns still have a 2 banking day return window  Non same day returns will settle at next available settlement opportunity, which could be same day  Not subject to the eligibility limits as on the forward side  Interbank fee does not apply Non-Monetary Transactions  NOC / Prenote / Remittance Only  Eligible in Phase 1  Interbank fee does not apply

20. Same Day ACH Rules © EPCOR 2015. All Rights Reserved. Balanced Approach for ODFIs/RDFIs  ODFI – opportunity for development of same day products and services  RDFI – Interbank Fee  Paid by ODFIs to RDFIs  Recover costs to implement and support Same Day ACH over a reasonable time period  Estimated at 5.2 Cents

21. What Do You Need to Do? © 2014, EPCOR®. All Rights Reserved. 21 Determine Your Appetite for Same Day ACH  Study the use case scenarios  Weigh benefits and costs  Talk to your financial institution to determine if Same Day ACH will be an option Understand the Impact of Receipt of Same Day ACH Transactions  Credits in 2016  Debits in 2015  Cash Management Later in the Day  Settlement at 1 & 5 pm ET by phase 1

22. ACH Rules Ballots Approved 9/4/2015 September 18, 2015 Implementation  RDFI Obligation to Recredit Receiver - Improperly Reinitiated Entries January 1, 2016 Implementation  Recrediting of Receiver - Removal of the 15 calendar day timeframe  Clarify ODFI Statement Requirements for CIE & WEB Credits  Clarify Commercially Reasonable Encryption Standards  Add Definition of Zero-Dollar Entry  Expand Permissible Criteria for ODFI Requests for Return  Clarify RDFI Warranties for NOC March 18, 2016 Implementation  Disclosure Requirements for POS Entries © 2015 EPCOR. All rights reserved.

23. Request for Comment – Third-Party Registration Proposed Changes to Rules  Require ODFIs to Register Third-Party Senders with NACHA Required Information to be Provided ODFI name and contact information Name and principal business location of TPS RTN and Company ID used for TPS transaction originated 30 day grace period for changed info or adding new TPS Registration Charge to Cover Costs of Registry Comments Due October 9, 2015 © 2015 EPCOR. All rights reserved.

24. MARCY CAUTHON, AAP, NCP DIRECTOR, PAYMENTS EDUCATION MARCYC@EPCOR.ORG Questions?