Often referred to as “direct payments,” ACH payments transfer money from one bank account to another bank account electronically, without having to utilize intermediary mechanisms like paper checks, credit cards, or wire transfers. The process takes place over a financial network known as the Automated Clearing House (ACH), which connects banks across the United States to one another. In 2019 alone, there were nearly 25 billion ACH payments for a total value of $55.8 trillion – cementing ACH payment processing as a mainstay of today’s modern businesses. These payments are regulated by a nonpartisan organization known as Nacha (National Automated Clearing House Association), which recently reviewed and updated ACH network rules. Prepare your businesses for changes coming in 2021!
What is NACHA?
The National Automated Clearing House Association, or Nacha (previously known as NACHA), is a 501(c)(6) not-for-profit association that regulates the development, administration, and governance of the ACH payment processing network, which is essentially the backbone of any electric movement of money in the U.S. Any ACH payments are governed by Nacha rules on processing to guide risk management. Upcoming changes for the year are announced on their website; in total, there are six upcoming changes to ACH rules to 2021.
Six ACH Network Rules Changes Coming in 2021
According to the NACHA, there will be six changes coming in 2021 to ACH payment processing regulations.
Supplementing Fraud Detection Standards for WEB Debits
Will Take Effect: March 19, 2021 This update will feature an extra security supplement to the already required “commercially reasonable fraudulent transaction detection system” to screen WEB debits for fraud. This additional screening requirement will require account validation to a part of the already in-place security system for the first use of an account number or any changes to an account number. Nacha will not enforce this updated rule for an additional period of one year from the effective date to ensure all entities will be working towards compliance.
Expanding Same Day ACH
Will Take Effect: March 19, 2021 This new update extends Same Day ACH transactions to be submitted to the ACH network for an additional two hours every business day. Currently, the deadline to submit Same Day ACH payments and transaction is 2:45 p.m. ET (11:45 a.m. PT). This new rule will extend the availability to submit transactions to 4:45 p.m. ET (1:45 p.m. PT), so there will be greater access for users. The greater access of this new processing window is intended to minimize the impact on financial institutions’ end-of-day operations and expand access for customers.
Supplementing Data Security Requirements
Will Take Effect: June 30, 2021 The ACH network rules for data protection requirements will be undergoing two security updates that will be implemented over a period of two years. In order to extend security, the ACH network’s data protection requirements will be including non-FI Originators, Third-Party Service Providers (TPSPs) and Third-Party Senders (TPSs) in order to provide further protection for deposit account information. The first updates to these new data security requirements will be implemented in June 2021, with the second updates coming in June 2022.
Limitation on Warranty Claims
Will Take Effect: June 30, 2021 This update will limit the length of time in which a receiving depository financial institution (RDFI) will be permitted to make a claim against the ODFI’s authorization warranty. For an entry to a non-consumer account, the time limit will be one year from the settlement date of the entry. For an entry to a consumer account, the limit will cover two time periods.
Reversals and Enforcement
Will Take Effect: June 30, 2021 & January 1, 2021. These two Nacha rules are being implemented with the purpose to deter and prevent the improper use of reversals and any ensuing harm from them. The updated rule on ACH reversals will address improper uses of reversals, including expanding permissible reasons for a reversal to include wrong date errors:
- The reversal of a debit entry that was for a date earlier than intended by the originator;
- A credit entry that was for a date later than intended by the originator.
This new updated rule will also establish formatting requirements for reversals. For updates to enforcement rules, violations will be updates and definitions as an “Egregious Violation” will include:
- A willful or reckless action, and,
- Involves at least 500 Entries, or involves multiple entries in the aggregate amount of at least $500K.
The updated reversals rule will become effective June 30, 2021, while the enforcement rule will be effective January 1, 2021.
Meaningful Modernization
Will Take Effect: September 17, 2021 As Nacha attempts to improve and simply the ACH payment processing user-experience, these updates will include:
- Facilitating the adoption of new technologies and channels for the authorization and initiation of ACH payments
- Reducing barriers to use of ACH payment processing
- Providing clarity and increasing consistency around certain ACH authorization processes; and
- Reducing certain administrative burdens related to ACH authorizations.
Will the Changes Impact Your ACH Fees or ACH Payment Processing?
There’s always change happening to ACH network rules every year, so it’s important that your ACH payment processing is compliant with these changes so as not to incur violations or hinder transaction processing. Many of these new Nacha rules offer a time period were they will not enforced so businesses and entities can start making the adjustments to become compliant. Many of these new ACH network rules are to provide an easier and modernized user experience, whether for increased data protection, extended windows for ACH transactions, or reducing barriers to ACH payment processing. However, it’s still essential for your business to implement these changes to be in compliance with Nacha requirements.
Stay Ahead of NACHA Rules Changes with Transcend Pay
Whether you’re using direct transactions to pay your employees or collect payments from your customers, ACH payments can streamline your business and cut down on billing-related paperwork. However, having the right payment processing solution can help your business facilitate ACH payments and ensure you’re in compliance with ACH network rules. Transcend Pay’s all-in-one easy-to-use merchant gateway can help you get started whether you’re a low-risk or high-risk business. Our no-reserve, no hidden fees payment processing system leverages our diverse banking network, so you can grow your business and take advantage of the ACH payment network.
