ACH Originator Obligations & Update(s)
Please review the following below:
Compliance with Rules and Instructions
The Customer, the Bank, and any other Originator for whom the Customer initiates ACH transactions shall comply and shall cause their respective officials, employees, Authorized Representative(s) and Administrator(s), to comply, with (i) the NACHA Rules as from time to time amended by NACHA (The NACHA Rules may be obtained at the NACHA's website at NACHA.org or by contacting NACHA directly at 703.561.1100.); and (ii) specifications, advisories, and instructions issued, from time to time, by the Bank, NACHA, and any federal or state regulatory authorities related to ACH transactions. ACH transactions are subject to all the Regulations governing electronic transactions, including but not limited to Article 4A of the Uniform Commercial Code. The bank reserves the right to audit the compliance of the Customer and any other Originator for whom the Customer originates ACH transactions, with this Agreement and the NACHA Rules.
The Customer and any other Originator for whom the Customer initiates ACH transactions shall obtain authorizations for all entries in accordance with NACHA Rules and all applicable state and federal law. The origination of ACH transactions by the Customer must comply with state and federal law. This includes, but is not limited to sanctions enforced by the Office of Foreign Assets Control ("OFAC"); and any laws, regulations and orders administered by FinCEN. The Bank may take recourse against any party involved in the process of transmission who fails to obtain proper authorization. In accordance with the NACHA rules the Customer shall retain the original authorization, and any change(s) to, for a period or no less than 2 years from termination or revocation of such authorization. The Customer shall be responsible for providing the Bank with a copy of such authorization upon request. Failure to provide such copy shall indicate that the authorization never existed, thus allowing the reversal of disputed transactions.
The Customer warrants to Bank all warranties the Customer is deemed by NACHA Rules to make with respect to ACH entries originated by the Customer for itself or on behalf of any other Originator for whom the Customer initiates ACH transactions. Without limiting the foregoing, the Customer, for itself or as an Originator for whom the Customer initiates ACH transactions warrants and agrees that:
- Each entry shall be accurate, timely, authorized by the party whose account will be affected, and that such entry complies with NACHA Rules
- The Customer will retain the original or copy of the customer authorization as required by NACHA Rules and any ACH Related Documents and will promptly provide to Bank any information necessary for Bank to comply with any NACHA reporting requirements
- The Customer will comply with all pre-notification requirements of NACHA Rules
- The Customer will comply with the terms of the Electronic Funds Transfer Act, Uniform Commercial Code Article 4A and other applicable law
- The Customer employs commercially reasonable security technology that at a minimum is equivalent to 128-bit encryption technology
- The Customer conducts annual audits as to its security practices and procedures
- Customer will provide timely and accurate notification to ACH Origination Customer Service; Phone Number 1-888-875-2265 of any Data Breaches when known or reasonably suspected by Customer, including but not limited to, Data Breaches to Consumer-Level ACH Data
Provisional Until Final
The Customer acknowledges that NACHA Rules make provisional any credit given for any entry until final settlement. If the RDFI does not receive final settlement, it is entitled to a refund from the Receiver and the Customer shall not be deemed to have paid the party
Third Party Service Providers
- Customer is a Third Party Service Provider if the Customer Is acting as a Third Party Service Provider between the Bank and the Originator (as defined in the NACHA Rules), the Third Party Service Provider must have a written contractual arrangement between themselves and the Originator, binding Originators to the NACHA rules and the provisions as outlined in the ACH Appendix of your CM Agreement. The Bank shall take directions from the Customer with the understanding that the Customer has obtained appropriate authorizations from the Originator and in no event shall Customer act on behalf of an Originator without proper authorizations. Third Party Service Provider must execute and deliver to Bank any agreements or documents required by Bank including but not limited to Bank's Third Party Service provider Agreement. Further, the Bank may take recourse against any party involved in the processing of the transaction, should it deem appropriate to do so.
- Customer retains Third Party Service Provider. Subject to Bank's approval, Customer may select a Third Party Service Provider to act as Customer's agent for purposes of the Services outlined in the ACH Appendix of your CM Agreement. Customer and Third Party Service Provider must execute all documents required by Bank, including but not limited to Bank's Third Party Service Provider Agreement before Bank provides this Service. Bank must receive written notices of termination ninety (90) Business Days before such termination is effective.
NACHA Rules Change Updates
September 2019 – Providing Faster Funds Availability for Same Day and Next Day ACH Credits
Effective September 20, 2019, this new rule increases the speed of funds availability for certain Same Day ACH and next-day ACH credits. There are two changes with this rule, first, funds from Same Day ACH credits processed in the existing, first processing window will be made available to receivers by 1:30 p.m. RDFI local time. Secondly, funds from non-Same Day ACH credits will be available by 9:00 a.m. RDFI local time on the settlement day, if the RDFI had them by 5:00 p.m. on the previous day. This applies the existing “PPD rule” to all ACH credits.
March – Same Day ACH per Transaction Increases to $100,000
Effective on March 20, 2020, the per-transaction dollar limit for Same Day ACH transactions will increase from $25,000 to $100,000. Both Same Day ACH credits and Same Day ACH debits will be eligible for same day processing up to $100,000 per transaction.
April – New R11 Will Differentiate Unauthorized Return Reasons
Effective on April 1, 2020, the Rule to better differentiate unauthorized return reasons goes into effect. Up until this time, return reason R10 with the description of “Unauthorized” has been a catch-all for various types of ACH debit returns including those when the originator has made an error. R11, a re-purposed reason will going forward have the description of “Customer Advises Entry Not In Accordance with the Terms of the Authorization”. R11 will be used to return an ACH entry when a receiving financial institution receives a claim from their account holder that the ACH entry has an error such as the wrong date or the incorrect amount. R11 will have the same 60-day extended return time frame and requirement for a Written Statement as with R10 and the sender of the ACH debit will not be required to obtain a new authorization if the error is corrected. R11 returns will be covered by the Unauthorized Entry Return Rate reporting requirement as with R10 returns. The Unauthorized Entry Fee for R11 returns will take effect on April 1, 2021.
March - Supplementing Fraud Detection Standards for WEB Debits
Effective on March 19, 2021, the rule change is intended to enhance quality and improve risk management within the ACH Network by supplementing the fraud detection standard for Internet-initiated (WEB) debits. ACH originators of WEB debit entries have always been required to use a “commercially reasonable fraudulent transaction detection system” to screen WEB debits for fraud. The existing screening requirement is supplemented by this change to make it explicit that “account validation” is part of a “commercially reasonable fraudulent detection system”. The supplement requirement would apply to the first use of an account number or changes to the existing account.
March – Expanding Same Day ACH to Later Deadline
The effective date of a new, third Same Day ACH processing window is March 19, 2021. RDFIs must make funds available for SDA credits in this new SDA processing window no later than the end of its processing day. The effective date of this rule is contingent upon approval by the Federal Reserve Board of Governors of the changes to the Federal Reserve services.
Republic Bank will comply with the new NACHA rule change and make funds available for any Same Day ACH transactions received within the approved processing timeframes.
If you have any questions about the Same Day ACH NACHA rule change or any other ACH origination topic, please contact your Cash Management Sales Officer at 888.875.2265.
Republic Bank recommends that all ACH Originators obtain a copy of the ACH Rules. The annual update of ACH Rules for Corporate Originators may be ordered in print or electronic versions at NACHA.org.