The NOC That Landed Mid-Payroll
Meridian Payroll Services originates weekly CCD payroll credits for 1,400 employees of 60 employer clients through First Coastal Bank (ODFI). On Tuesday, February 4, First Coastal's ACH operations team forwards four Notifications of Change to Meridian: three are C03 (incorrect DFI account number) affecting employees at one client, and one is C02 (incorrect routing number) that moves an employee from First Coastal to a different receiving bank entirely. Meridian's payroll file for the Friday, February 7 settlement was built on Monday and is queued for transmission on Wednesday. Meridian's operations lead says the corrected account numbers cannot clear the client's three-day pre-release validation until Monday, so the plan is to "let this one go out and fix it next cycle."
1. What does the Rules require of First Coastal on receipt of these NOCs, and how does that collide with the "fix it next cycle" plan?
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The NOC is the RDFI's correction of information in an entry the ODFI originated. It is not a return and it is not discretionary.
- Duty: First Coastal must either make the change in its records (and cause its Originator to make it) or delete the entry for the affected receiver, and it must do so within six banking days of receiving the NOC. After that point the ODFI may not transmit further entries containing the old account or routing number.
- The collision: "Next cycle" is not a defense. The February 7 file is still in the queue - transmitting it on February 5 puts entries into the network that the ODFI already knows carry information the RDFI has corrected. That is the ODFI's violation, not Meridian's, and it is measured from the NOC receipt date, not the pay date.
- The practical answer: a C03/C02 notice is the RDFI's own statement of the correct account; the Originator does not need the client's separate validation cycle to act on it. First Coastal should require Meridian to amend the queued file before release and treat the six-day clock as a hard deadline.
2. The C02 moves an employee to a different receiving bank. What additional considerations does that raise?
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A routing-number change is materially different from an account-number change, and it deserves a separate workflow.
- Update both fields together. C02 means the receiver's account now sits at a different RDFI. Pairing a new routing number with an old account number sends money to a stranger's account at the new bank - a misdirected payroll credit that is far harder to unwind than a return.
- The network will not catch it. The ACH Operator validates routing-number format and check digit, not account ownership. Nothing in the network checks that the account belongs to the intended employee.
- Treat a bank change as a fraud signal. Payroll redirection is a classic account-takeover play. A NOC can be entirely genuine and still reflect a change induced by someone who compromised the employee's credentials. Confirm the change with the employee through a channel independent of the one that produced it before the next pay date.
- If you cannot confirm before payday, hold that single payment rather than send to an unverified account; a delayed check is cheaper than a misdirected credit.
3. Meridian proposes to email affected employees for new account numbers instead of acting on the NOCs. Evaluate that approach.
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The Originator may maintain its own records from the receiver, but three consequences follow.
First, the NOCs remain binding on the ODFI. First Coastal still has to correct or delete within six banking days, and if Meridian's email list conflicts with the NOC, the ODFI should document which source it acted on and why.
Second, email-sourced bank-detail changes are a documented fraud vector - a "reply with your new account number" thread is the shape of business email compromise. The Originator bears the loss if a credit goes to an impostor, and the ODFI bears the operational headache of the resulting disputes.
Third, if the employees' actual accounts differ from what the RDFIs reported, expect a second round of NOCs or a run of R03/R04 returns. Those returns count against the Originator's return metrics, and a sudden rise in administrative returns is exactly the pattern that prompts ODFI review of an Originator's origination practices. Using both sources and reconciling them is fine; substituting the email thread for the NOC is not.