Each year, the National Automated Clearing House Association (NACHA) publishes its Operating Rules for ACH Originators. To purchase a copy of the latest Operating Rules and Guidelines, or for more information, visit the
NEACH OR
NACHA website.
Please remember that these rules are subject to change, and North Shore Bank would strongly encourage you to register and sign up for updates as they become available. NACHA recently published their latest changes —
click here to access them.
In the meantime, the following quick reference guide provides general information concerning ACH, as well as your responsibilities as an originator. Please note that this is not intended as a substitute or replacement for the NACHA Rules and Guidelines referenced above.
ACH Facts
- An ACH Originator is any entity that creates an ACH transaction.
- ACH entries are categorized as “consumer" or ''corporate."
- ACH is capable of crediting or debiting checking or savings accounts.
- ACH entries are received by most financial institutions.
- ACH is a batch system (not real time).
- ACH entries are irrevocable once they have been sent for processing.
- ACH stop payments for consumers do not have an expiration date. Non-consumer written stop payment orders expire six (6) months from the date of the stop payment order unless it is renewed in writing, the item is returned, or the customer withdraws the stop. The bank may extend the effective period of a stop payment order beyond the minimum period described above.
Your Responsibilities as an Originator
- Obtain proper authorizations, dependent upon the transaction type, and retain authorizations for two years past revocation (See "Consumer Debit Authorizations").
- If requested by the Bank, you must provide a copy of the authorization. North Shore Bank may request to see your authorizations from time-to-time as part of an annual audit.
- Send entries on the proper date.
- Give appropriate notice to debtor if changing amount or date.
- Cease subsequent entries when notified.
- Make necessary changes to payee account information within six (6) banking days upon receipt of a Notification of Change or before another entry is sent.
- When creating an ACH file, the Originator must populate the Company Name Field with the name by which it is known and readily recognized by the Receiver of the entry.
- Agree not to originate entries that violate the laws of the United States.
- Protect the banking information received to originate transactions.
- Ensure your computer and you are protected as outlined in your North Shore Bank Agreement.
Direct Deposit Payroll Authorizations (Consumer)
- Use a direct deposit authorization form that collects employee account information. This form should allow the company to make credit and debit entries in the event a payroll adjustment is necessary.
- Obtain a voided check from the employee (if possible).
- The most common SEC code for direct deposits is PPD.
Consumer Debit Authorizations
- For consumers, an authorization to debit an account must be in writing or "similarly authenticated."
- The most common SEC code for consumer debits is PPD.
Corporate Authorizations
- For companies, there must be an agreement between the two parties. While the NACHA Rules do not define an "agreement," North Shore Bank recommends you have the company complete an authorization form.
- Originator must be able to provide proof of authorization or originator contact information for entries to non-consumer accounts (commercial) if requested.
- The most common SEC code for corporate transactions is CCD. It is used for debits or credits.
Changing Date or Amounts of Debits
- ACH Rules require you to notify your debitors of any changes in date or amounts debited under the following circumstances:
- seven (7) calendar days’ notice for a change of date.
- Ten (10) calendar days’ notice for a change in an amount.
- Sending the notice via U.S. Mail is acceptable.
Pre-Notification (Prenotes)
- Prenotes are zero-dollar entries that precede the first live entry. The purpose of a prenote is to verify account information.
- Prenotes are optional for you to send. However, if sent, prenote rules must be followed and a prenote must precede the first live entry by at least three (3) banking days.
- The Receiving Bank is required to verify the account number on the prenote, but they are not required to validate the name of the payee on the prenote.
Notice of Change
- When ACH information is incorrect, a Notification of Change (NOC) is sent by the Receiving Bank requesting that the future entries contain correct information. ACH Rules require you to make the change within six (6) banking days of receiving the information from North Shore Bank or before another entry is sent.
- The Receiving Bank warrants that the information they provided to you is correct.
- North Shore Bank will notify you of any NOCs received on your behalf.
- North Shore Bank may pass along any fines received based on your non-compliance.
Returns
- Returns must be processed by the Receiving Bank within 24 hours of settlement. As an originator, North Shore Bank recommends you view your account activity daily.
- An exception to the 24-hour rule is consumer unauthorized returns, which may be returned within sixty (60) calendar days of posting.
- The use of consumer (PPD) or corporate (CCD) entry codes determines the applicable ACH return rules.
- If the Receiving Bank receives a dispute claiming a debit was unauthorized, the Receiving Bank must obtain a signed Written Statement of Unauthorized Debit from the account holder. You may obtain a copy of that statement by requesting it through North Shore Bank.
- The ACH Rules require that Originators must cease the origination of any ACH debit transactions when a previous ACH debit is returned as unauthorized, or authorization revoked by the Receiver. The Originator must obtain a new Authorization prior to re-originating any future transactions.
- Returns for "NSF or Uncollected Funds" gives the Originator a total of three (3) attempts at debiting an account. Re-initiated entries must contain identical content in the Company Name, Company ID, and Amount fields. Modifications can only be made to the extent necessary to correct an error or facilitate processing of entry. Re-initiated entries must contain "RETRY PYMT" in the Company Entry Description field.
- A "Stop Payment" return may be re-initiated only if you receive approval from the payee to resend the item.
- It is a violation of NACHA Rules to re-initiate the debit entry if a return is received for any other reason.
Reversals
| 1. |
A duplicate of an Entry previously initiated by the Originator or ODFI |
| 2. |
Payment to or from a Receiver is different than the Receiver intended to be credited or debited by the Originator |
| 3. |
Payment is in a dollar amount different than was intended by the Originator |
| 4. |
Payment of a debit Entry is on a date earlier than the Receiver was intended to be debited by the Originator, or payment of a credit Entry on a date later than the Receiver was intended to be credited by the Originator |
| 5. |
A credit PPD Entry satisfying each of the following criteria: |
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a. |
The credit PPD Entry is for funds related to a Receiver’s employment; |
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b. |
The value of the credit PPD Entry is fully included in the amount of a Check delivered to the same Receiver at or prior to the Receiver’s separation from employment; and |
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c. |
The credit PPD Entry was Transmitted by the Originator prior to the delivery of the Check to the Receiver. |
OFAC (Office of Foreign Asset Control)
- You are required to check payees against OFAC compliance checklists.
- OFAC lists contain countries, groups, and individuals with which U.S. Companies are not permitted to send or receive funds.
- The Bank must protect itself by informing every customer that it is against the law to send debit or credit entries to OFAC blocked entities. This is also noted in your agreement with North Shore Bank.