Standby Letter of Credit Definition, Issuance, Notification and uses
NARCA 2013 COMPLYING WITH ELECTRONIC BANKING POWERPOINT
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2. NARCA 2013 SPRING COLLECTION CONFERENCE
EFT/ACH/NACHA/FTC – Complying with Electronic Banking Standards
Panelists:
Brenda A. Majewski, Director of Operations, Kohn Law Firm S.C.
Attorney Jerry Myers, Managing Partner, Smith Debnam Narron Drake
Saintsing & Myers, LLP
T B D – banking, payment servicer representative
3. NARCA 2013 SPRING COLLECTION CONFERENCE
Let’s begin with the most common acronyms in electronic banking:
ACH – Automated Clearing House, the backbone of electronic payments
EFT – Electronic Funds Transfer, requires signed, written authorization, disclosures
required
PADD – Pre-Authorized Demand Draft (physical paper check, excluded from
definition of an EFT)
NACHA – National Automated Clearing House Association, The Electronic Payments
Association, a trade association at nacha.org
FTC – Federal Trade Commission
EFTA – Electronic Funds Transfer Act
FRB – Federal Reserve Board which implements EFTA via Regulation E
ECK – Electronic Check Conversions
E-SIGN Act – Act covering electronic records with an intent to sign
4. NARCA 2013 SPRING COLLECTION CONFERENCE
Operationally, as law firms, we need to comply with our state’s trust account rules, as
well as all state and federal banking requirements.
Failure to comply with the intricate definitions and provisions of the various acts,
rules, and general guidelines open law firms up to contractual issues with our client
compliance departments, as well as potential consumer attorney litigation.
Civil and criminal penalties are also provided for non-compliance.
It is imperative those in charge of writing and implementing procedures are familiar
with these rules and regulations.
5. NARCA 2013 SPRING COLLECTION CONFERENCE
Regulation E - Electronic Fund Transfers
NOTE: Under the provisions of the Dodd-Frank Act, this regulation was republished by the Consumer Financial Protection
Bureau effective 12/30/2011 at 12 CFR Part 1005.
Regulation E governs checks. Debit cards are processed out of checking accounts.
Credit cards are not governed under Regulation E. Have a procedure that forces
identification of credit versus debit transactions taken over the phone.
A card BIN number and software or subscriptions can also identify the type of cards
used (The first four identify the bank, the next two the type of card).
Checks by phone (PADD) authorization may be established by an audio recording.
PADD transactions are excluded from the definition of an EFT, however if converted
(ECK), the transaction is covered by Regulation E.
6. NARCA 2013 SPRING COLLECTION CONFERENCE
Best practices --
What should be in place?
Written policies and procedures
Notices
Tracking where a chance to slip up can occur
Why is that important?
EFTA Penalty Provision –
Civil Liability (15 U.S.C. s 1693m)
Criminal Liability (15 U.S.C. s 1693n)
Trust Account issues per state, client requirements
New battleground for consumer attorneys – legal headaches of check by phone
7. NARCA 2013 SPRING COLLECTION CONFERENCE
Best practices – How to comply - Check by telephone authorization:
PADD – Law firm can create physical check. PADD transactions are
excluded from the definition of an EFT. Rules for ECK do not apply to a telephone
transaction or one via your payment website.
Law Firm must be able to prove it received authorization from the
consumer. Recorded call can establish proof. Best practice should be advising
the consumer the call is being recorded (use state specific requirements).
Traps to be wary of: Are you converting – EFT, ECK. Is your bank? Is
there a difference? If you deposit a check via Image Direct Deposit (IDD) and the
bank processes the transaction as an ACH or EFT, is that a converted check?
Electronic Conversion Transactions (ECK) are covered under Regulation E when
converted as a one time EFT.
8. NARCA 2013 SPRING COLLECTION CONFERENCE
Best Practices – How to comply - Recurring payments
Credit card transactions
Check transactions
Debit transactions
Series of EFTs
Post dates of any of those transactions and the FDCPA
Script timeline of notice requirements. Follow them.
9. NARCA 2013 SPRING COLLECTION CONFERENCE
Best practices – You and the card member, card holder, consumer, guest against
the debt: balancing collection and liquidation models, client requirements, and
consumer preferences
Process to interrupt automatic payment posting – test it
Policies and procedures on voids, returns, overdrafts, NSFs, hold requests
10. NARCA 2013 SPRING COLLECTION CONFERENCE
Best practices – audience
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11. NARCA 2013 SPRING COLLECTION CONFERENCE
Jerry:
1. Segregation of Client funds
a. American Bar Association Rule 1.15 Safekeeping Property
i. Separate
a. From other clients’ funds
b. From the attorney’s funds
ii. Accountable
iii. Identifiable
b. General trust account vs single client trust account
c. Lawyer’s responsibility is non-delegable
d. Rule addresses not only actual loss but risk of loss
12. NARCA 2013 SPRING COLLECTION CONFERENCE
2. Bank policies regarding funds availability
a. Funds which have cleared
i. Wired or ACH funds
ii. Items which have been honored by the payor bank
b. Available funds
i. Defined by terms of agreement with bank
ii. Available funds not guaranteed
iii. Funds never available prior to the next business day
c. “Hold” on items
i. Bank may decide to withhold availability on a particular
item
ii. Holds on bank checks and certified checks increasing
because of forgeries
13. NARCA 2013 SPRING COLLECTION CONFERENCE
3. Rules regarding Remittance of Funds from Trust Accounts
a. New York
b. Illinois
c. North Carolina
i. General rule: Lawyer may not disburse against a check until
the check is collected unless the lawyer’s depositary bank
grants provisional credit for deposited funds and the
requirements of RPC 191 are met.
14. NARCA 2013 SPRING COLLECTION CONFERENCE
Payment processor vendor
Internal and third party services available
Compliance measures taken
Notices to payers
Funding requirements
Failsafe processes
