ACH: A Year in Review

By Virginia Wright, AAP
AVP, Relationship Manager

The year of 2016 marked many changes to the ACH Network. By far, one of the biggest occurred in September with the implementation of Phase 1 of Same Day ACH, referred to as “SDA”.

As all financial institutions rolled out the red carpet to this major rule change, early data suggests strong use of this new tool to move payments faster. This available data so far has supported NACHA’s predictions on the effects of SDA in the financial industry. With the extensive education opportunities that were available to all financial institutions, as well as the many resources, everyone was well prepared for the September start date which may have added to the success of Phase 1.

The entire transition to SDA has been spread out over a three year period. While we have experienced great success in the first phase, it is also noteworthy to mention that only ACH credits have been subjected to the SDA rules. Thus, most believe we have experienced the easiest phase so far. As we travel forward with Phase 2 in September of 2017, ACH debits will be added into the SDA rules. The addition of these debits will spark new concerns and risks for the handling of this phase. Finally, the last phase that is scheduled for March 2018 includes rules that govern the availability of these SDA funds.
Another recent rule change that occurred in 2016 is the addition of the Unauthorized Entry Fee that became effective in October. Very simple, the goal of this rule is to improve the ACH Network by enforcing Originating Depository Financial Institutions (ODFIs) to pay a fee for every ACH debit that is returned with any code that is considered “unauthorized”. This would include the return codes R05, R07, R10, R29 and R51.

So at this point, what else is in store for 2017? Not only will we be keeping a watchful eye on Phase 2 SDA which starts September 15, 2017, but we must also contend with the Third Party Sender Registration rule that is effective September 29, 2017. With this rule, ODFIs will have to register their Third Party Sender customers. Keep in mind, as an ODFI, even if your institution does not have any Third Party Sender customers, you will still need to submit a statement of such facts.

As we review these upcoming changes, we need to consider the role of NACHA in this process. NACHA is the entity that governs the ACH network. As the administrator of this large network that oversees more than five billion entries per year, NACHA is also tasked with governing the rulemaking process. What is unique about this network is that input is gathered from all ACH participants. New rules and amendments are created through a submission process that involves members of NACHA and other key parties.

Ultimately, the ACH network is evolving at a fast pace that can be frightening to some community banks. It is important to keep up with the changes to the network or risk being left behind. Regional Payment Associations (RPAs) are the community banks’ advocates and “hand holders” so that the community banks feel confident in offering ACH products to their customers. These associations do an excellent job of assisting a bank with rules compliance. Consider looking into joining your local RPA and see what they can do for your bank.

For more information please contact Virginia Wright at (717) 441-4506 or via email This email address is being protected from spambots. You need JavaScript enabled to view it. .