Uniform Commercial Code 4A

Question 1

Identify the types of ACH Entries by SEC codes that are subject to Article 4A

Answer 1

Wholesale credit entries
Corporate to corporate ACH credit transfers including CCD & CTX

Question 2

When does acceptance occur for the ODFI?

Answer 2

When the ODFI executes or transmits the File or entry to the ACH Operator

Question 3

What obligations are triggered when the ODFI accepts an entry subject to UCC 4A? Which of them may be varied by agreement?

Answer 3

• Selection of ACH Operator *varied by agreement
• Choice of Law *varied by agreement
• Timely transmittal of entry
• Liability for late Transmittal or failure to Transmit
• Notice to Receiver and Provisional Payment

Question 4

Which obligations under UCC4A are superseded by the NACHA Operating Rules?

Answer 4

• Notice to Receiver
• Provisional Payment

Question 5

How does Article 4A define a ‘commercially reasonable’ security procedure?

Answer 5

A procedure established by agreement for: verifying source of request and detecting errors.

• correct source :Verifying that an entry or a communication canceling or amending an entry is coming from the customer
• Detecting error in the transmission or the content of an entry or communication

Question 6

What factors are used to determine ‘commercially reasonable’ security procedures?

Answer 6

• Security procedures in general use by similarly situated Originators and ODFIs
• The wishes, circumstances, & alternatives offered - Originator expressed to the ODFI

(circumstances of the Originator known to the ODFI, including the size, type and frequency of Entries normally issued by the Originator)
(Alternative security procedures offered by the Originator)

Question 7

How does UCC 4A define acceptance by the RDFI?

Answer 7

Acceptance occurs at the earliest of when the RDFI:
- Makes funds available to the Receiver
- Provides ‘unqualified’ notice to the Receiver
- Receives final settlement