Same Day ACH: Moving Payments Faster

Same Day ACH: Moving Payments Faster

NACHA has adopted a Rule to provide a new, ubiquitous capability for moving ACH payments faster. The Rule will enable the same-day processing of virtually any ACH payment.

Currently, most ACH payments are settled on the next business day. There are many uses of ACH payments, however, for which businesses and consumers could benefit from same-day processing. This NACHA rule change will enable ACH Originators that desire same-day processing the option to send same-day ACH transactions to accounts at any receiving financial institution (RDFI). The Rule includes a “Same Day Fee” on each Same Day ACH transaction so that RDFIs would recover, on average, their costs for enabling and supporting Same Day ACH.

The Rule will enable the option for same-day ACH payments through new ACH Network functionality, without affecting existing ACH schedules and capabilities:

Originating financial institutions (ODFIs) will be able to submit files of same-day ACH payments through two new clearing windows provided by the ACH Operators (Note: The actual ACH Operator schedules are not determined by the NACHA Operating Rules.):

  • A morning submission deadline at 10:30 AM ET, with settlement occurring at 1:00 PM.
  • An afternoon submission deadline at 2:45 PM ET, with settlement occurring at 5:00 PM.

Virtually all types of ACH payments, including both credits and debits, will be eligible for same-day processing. Only international transactions (IATs) and high-value transactions above $25,000 will not be eligible. Eligible transactions account for approximately 99 percent of current ACH Network volume.

All RDFIs will be required to receive same-day ACH payments, thereby giving ODFIs and Originators the certainty of being able to send same-day ACH payments to accounts at all RDFIs.

RDFIs will be mandated to make funds available from same day ACH credits (such as payroll Direct Deposits) to their depositors by 5:00 PM at the RDFI’s local time.

To allow financial institutions and businesses to acclimate to a faster processing environment, as well as to ease the implementation effort, these new capabilities will become effective over three phases beginning in September 2016.

For more information on Same Day ACH please contact us or

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Details

The Rule is based on a solid foundation of economic research on the use cases for Same Day ACH.

All consumers, businesses, government entities and financial institutions that use the ACH Network to move money between bank accounts will benefit from the option to move ACH payments faster.

NACHA projects that ACH Originators would generate approximately 1.4 billion same-day ACH payments annually as of ten years after full implementation and rollout, primarily for transactions that can be initiated before 2:45 PM ET on business days (not on weekends or holidays), and that do not require real-time functionality.

Using an expert, third-party economist, NACHA assessed 10 primary use cases for Same Day ACH. Significant use cases for Same Day ACH include:

  1. Same-day payrolls, supporting business’ needs to pay hourly workers, and providing flexibility for late and emergency payrolls and missed deadlines; and enabling employees to have faster access to their pay in these cases;
  2. Business to-Business payments, enabling faster settlement of invoice payments between trading partners, and including remittance information with the payments;
  3. Expedited bill payments using both ACH credits and debits, enabling consumers to make on-time bill payments on due dates, and providing faster crediting for late payments; and,
  4. Account-to-account transfers, providing faster crediting for consumers who move money among various accounts they own.

Technical

The following changes to the NACHA Operating Rules became effective on September 23, 2016.

SECTION 8.99 “Same Day Entry”

An Entry, other than a debit Entry, in which the Effective Entry Date is the same Banking Day as the date on which the Entry is Transmitted by the ODFI to its ACH Operator, and that is Transmitted by the ACH Operator’s deadline for same-day processing and settlement. A Same Day Entry must be for an amount of $25,000 or less. An IAT or ENR Entry cannot be a Same Day Entry. For purposes of fulfilling its obligations under these Rules, an RDFI may rely on the Settlement Date of an Entry, regardless of the Effective Entry Date. An Entry with a stale or invalid Effective Entry Date will also be a Same Day Entry if it is Transmitted by the ODFI to its ACH Operator by the ACH Operator’s deadline for same-day processing and settlement, and is otherwise eligible for same-day processing and settlement.

SUBSECTION  2.5.7 General Rule for ENR Entries (Automated Enrollment Entry)

An ENR Entry is a Non-Monetary Entry that enrolls a Person with an agency of the United States Government that will enable Entries to such Person’s account at a Participating DFI.  An ENR Entry may be originated by a Participating DFI at the request of an account holder at the Participating DFI to an agency of the United States Government that has agreed to receive the ENR Entry. An ENR Entry cannot be a Same Day Entry.

SUBSECTION 2.5.8.1 General Rule for IAT Entries

An IAT Entry is an Inbound or Outbound debit or credit Entry that is part of a payment transaction involving a Financial Agency’s office that is not located in the territorial jurisdiction of the United States. An IAT Entry cannot be a Same Day Entry.

SUBSECTION 3.1.9 RDFI May Rely on Settlement Date (new subsection)

For purposes of fulfilling its obligations under these Rules, an RDFI may rely on the Settlement Date of an Entry, regardless of the Effective Entry Date.

SUBSECTION 3.3.1.1 General Rule for Availability of Credits

For a credit Entry that is not a Same Day Entry, an RDFI must make the amount of the credit Entry received from its ACH Operator available to the Receiver for withdrawal no later than the end of the Settlement Date of the Entry, subject to its right to return the Entry under these Rules.

For a credit Same Day Entry, an RDFI must make the amount of the credit Entry available in the Receiver’s account no later than the completion of the RDFI’s processing for that Settlement Date, subject to its right to return the Entry under these Rules. An RDFI is not required to make such funds available for withdrawal on the Settlement Date.

An RDFI that reasonably suspects that a credit Entry is unauthorized is exempt from these requirements, subject to applicable Legal Requirements. An RDFI invoking such an exemption must promptly notify the ODFI.

SECTION 8.12 “Automated Enrollment Entry” or “ENR Entry” or “ENR”

A Non-Monetary Entry initiated by a Participating DFI to an agency of the Federal Government of the United States on behalf, and at the request, of an account holder at the Participating DFI to enroll in a service that will enable Entries to such Person’s account at the Participating DFI. An Automated Enrollment Entry cannot be a Same Day Entry.

SECTION 8.54 “International ACH Transaction” or “IAT Entry” or “IAT”

An Entry that is part of a payment transaction involving a Financial Agency’s office that is not located in the territorial jurisdiction of the United States. An office of a Financial Agency is involved in the payment transaction if it (a) holds an account that is credited or debited as part of the payment transaction, (b) receives payment directly from a Person or makes payment directly to a Person as part of the payment transaction, or (c) serves as an intermediary in the settlement of any part of the payment transaction. An International ACH Transaction cannot be a Same Day Entry.
SUBPART 3.2.2 Glossary of Data Elements

Company Descriptive Date: 6 Positions – Company/Batch Header Record – Optional

Same Day Entries:  At its discretion, an ODFI may require an Originator to use this field to further demonstrate intent for same-day processing and settlement. ODFIs that choose to do so should use the convention “SDHHMM”, where the “SD” in positions 64-65 denotes the intent for same-day settlement, and the hours and minutes in positions 66-69 denote the desired settlement time using a 24-hour clock. When electing to use this convention, the ODFI would validate that the field contains either “SD1300” for settlement desired at 1:00 p.m. ET, or “SD1700” for settlement desired at 5:00 p.m. ET, in accordance with the settlement times offered by the ACH Operators.  ACH Operators and RDFIs are not required to take any action with respect to the presence or absence of these optional same-day indicators.

Effective Entry Date:  6 Positions – Company/Batch Header Record – Required (all batches)

The Effective Entry Date is the Banking Day specified by the Originator on which it intends a batch of Entries to be settled.

For credit Entries, the Effective Entry Date must be either the same Banking Day as the Banking Day of processing by the Originating ACH Operator (the processing date) for Same Day Entries, or one or two Banking Days following the Originating ACH Operator’s processing date for other Entries.

For debit Entries, the Effective Entry Date must one Banking Day following the processing date.

A batch of Entries containing an Effective Entry Date beyond the designated number of days allowed is Rejected by the ACH Operator and returned to the ODFI.

A batch of Entries containing an Effective Entry Date that is stale (i.e., is a Banking Day that is in the past, or is the current Banking Day but is not submitted timely to an ACH Operator for same-day processing and settlement) is settled at the next available settlement opportunity.

A batch of Entries containing invalid Effective Entry Date information (for example, if the field is blank or zero, partially blank or partially non-numeric, contains an incomplete date, contains day numbers higher than 31, or contains month numbers higher than 12) is settled at the next available settlement opportunity. The Originating ACH Operator inserts the Banking Day of processing or the next Banking Day as the Effective Entry Date, whichever corresponds to the next available settlement opportunity.

ENR: For Automated Enrollment Entries, this field must be space filled. Automated Enrollment Entries cannot be Same Day Entries.

Return Entries and Notifications of Change: The ACH Operator does not edit this field.

The scheduled Settlement Date is inserted by the Receiving ACH Operator. See the definition of “Settlement Date” in this Appendix Three.

Settlement Date: 3 Positions – Company/Batch Header Record – Inserted by Receiving ACH Operator (all batches)

The Settlement Date (a 3-digit Julian date) for a batch of Entries is inserted by the Receiving ACH Operator. This is the date on which the Participating DFI or its correspondent is scheduled to be debited or credited by the Federal Reserve.

The Settlement Date inserted by the Receiving ACH Operator is the same as the Effective Entry Date, except as noted below.

In the following situations, the Receiving ACH Operator will insert the Banking Day following the Banking Day of processing as the Settlement Date (i.e., the next Banking Day):

  1. The Effective Entry Date and the Originating ACH Operator’s processing date are the same, but the Entry is received by the Receiving ACH Operator after its deadline for same-day settlement.
  2. The Effective Entry Date and the Originating ACH Operator’s processing date are the same, but the Entry is for an amount greater than $25,000.
  3. The Effective Entry Date and the Originating ACH Operator’s processing date are the same, but the Entry bears the IAT Standard Entry Class Code.
  4. The Entry bears the ENR Standard Entry Class Code.
  5. A debit Entry contains an Effective Entry Date that is the Banking Day of processing.

Entries with invalid or stale Effective Entry Dates will be settled at the next available settlement opportunity.

Return Entries, dishonored Return Entries, and contested dishonored Return Entries are settled by the ACH Operator no earlier than the Effective Entry Date contained within the original Entry, as it appears in the Return Entry Company/Batch Header Record. The return of an Entry that contains an invalid or stale Effective Entry Date will be settled by the ACH Operator at the next available settlement opportunity (i.e., the Banking Day of processing or the next Banking Day).

Notifications of Change will be settled at the next available settlement opportunity, (i.e., the Banking Day of processing or the next Banking Day).

Appendix Eight, Part 8.3 Audit Requirements for RDFIs and Third-Party Service Providers

d.    Verify that, subject to the RDFI’s right of return, the amount of each credit Entry received from its ACH Operator is made available to the Receiver as required by Article Three, Subsection 3.3.1 (Availability of Credit Entries to Receivers). Verify that debit entries are not posted prior to the Settlement Date, even if the Effective Date of the Entry is different from the Settlement Date of the Entry.  (Article Three, Subsections 3.3.1)

SUBPART 10.4.6.2 Responsibilities of Enforcement Panel

The ACH Rules Enforcement Panel, in accordance with these rules, is the final authority regarding each of these issues:

  • the imposition of any fines or penalties recommended by the National Association;
  • instances in which the National Association believes the time frames and Resolution Dates asserted by the respondent Participating DFI as necessary to resolve the problem causing a rules violation are excessive;
  • instances in which the National Association believes an ODFI, Originator or, Third-Party Sender has originated Entries without proper authorization in accordance with these Rules;
  • instances in which the National Association believes an ODFI, Originator, or Third-Party Sender has attempted to evade the limitations on Reinitiation;
  • instances in which the National Association recommends, after the inquiry process, that an ODFI be required to reduce an Originator’s or Third-Party Sender’s applicable return rate below the Administrative Return Rate Level and/or the Overall Return Rate Level;
  • instances in which the National Association believes an ODFI, Originator, or Third-Party Sender has attempted to evade the $25,000 per-Entry limitation on Same Day Entries.

SECTION 1.12 Same Day Entry Fee (new section)

An ODFI agrees to pay a Same Day Entry fee to the respective RDFI for each Same Day Entry originated by or through the ODFI. The staff of the National Association will determine the amount of the Same Day Entry fee in accordance with the procedures set forth in Appendix Eleven (Determination and Review of Same Day Entry Fee). The National Association will arrange for a system for the collection and distribution of Same Day Entry fees.

APPENDIX ELEVEN – DETERMINATION AND REVIEW OF SAME DAY ENTRY FEE
(new section) (Note: If the effective dates of the Rule are delayed as discussed in the ballot material, all dates shown in this Appendix would be modified accordingly.)

PART 11.1 Determination of Same Day Entry Fee (new part)

The staff of the National Association will determine in accordance with this Part 11.1, and revise in accordance with Part 11.2 (Revision of Same Day Entry Fee), the amount of the Same Day Entry fee. In determining the amount of the Same Day Entry fee, the staff of the National Association will apply the following principles:

  1. The Same Day Entry fee will be based on a cost study and financial analysis performed by a qualified economist.
  2. For the Same Day ACH Initial Period, the Same Day Entry fee will provide for the full recovery of the projected average RDFI investment costs and operational costs,     plus a commercially reasonable rate of return, as determined by the first such cost study and financial analysis.
  3. For a Same Day ACH Renewal Period, the Same Day Entry fee will provide for the full recovery of the projected average RDFI operational costs, plus a commercially reasonable rate of return, as determined by the most recent such cost study and financial analysis.
  4. The Same Day Entry fee will take into consideration the projections of the aggregate volume of Same Day Entries over the Same Day ACH Initial Period or the Same Day ACH Renewal Period, as applicable, as determined by the cost study and financial analysis.

PART 11.2 Revision of Same Day Entry Fee (new part)

  1. Five Year Volume Review. The staff of the National Association will review the cumulative volume of Same Day Entries for the five-year period commencing on the Same Day ACH Phase Three Effective Date. If the actual cumulative volume exceeds the projected volume used to calculate the Same Day Entry fee by greater than twenty-five percent (25%), the staff of the National Association will publish a reduced Same Day Entry fee based on a table prepared by the qualified economist that will designate the appropriate Same Day Entry fee derived from the actual volume. The table will set forth reduced Same Day Entry fees at volume increments of 5% beginning at twenty-five percent (25%) in excess of the projected volume used to calculate the Same Day Entry Fee. If the cumulative volume of Same Day Entries for this period does not meet or exceed the 25% threshold, the Same Day Entry fee will remain unchanged. In no case will the Same Day Entry fee be increased as a result of this review. NACHA will publish notice of the reduced or unchanged Same Day Entry fee promptly following the completion of this review, and any such reduced Same Day Entry fee will become effective six months following publication.
  2. Eight Year Volume Review. The staff of the National Association will review the cumulative volume of Same Day Entries for the eight-year period commencing on the Same Day ACH Phase Three Effective Date. If the actual cumulative volume exceeds the projected volume used to calculate the Same Day Entry fee by greater than twenty-five percent (25%), the staff of the National Association will publish a reduced Same Day Entry fee based on a table prepared by the qualified economist that will designate the appropriate Same Day Entry fee derived from the actual volume. The table will set forth reduced Same Day Entry fees at volume increments of 5% beginning at twenty-five percent (25%) in excess of the projected volume used to calculate the Same Day Entry fee. If the cumulative volume of Same Day Entries for this period does not meet or exceed the 25% threshold, the Same Day Entry fee will remain unchanged from the amount in effect at that time. In no case will the Same Day Entry fee be increased as a result of this review. NACHA will publish notice of the reduced or unchanged Same Day Entry fee promptly following the completion of this review, and any such reduced Same Day Entry fee will become effective six months following publication.
  3. Ten Year Economic Review. Ten years after the Same Day ACH Phase Three Effective Date or a subsequent Same Day ACH Renewal Period, the staff of the National Association will engage a qualified economist to perform a cost study and financial analysis based on the principles set forth at Part 11.1 to determine: 1) actual average costs incurred by RDFIs during such period; 2) actual volumes of Same Day Entries; 3) the extent to which average RDFI costs, including a commercially reasonable rate of return, were satisfied through the Same Day Entry fee; 4) projected changes in the foregoing over a ten-year period, including each element of RDFI costs; and 5) a recommended Same Day Entry fee derived from such analysis, which in no case shall be higher than the Same Day Entry fee then in effect. Average RDFI implementation costs that have been compensated through the payment of Same Day ACH fees during the preceding period will be excluded from any re-calculation of the Same Day Entry fee. NACHA will publish the revised Same Day Entry fee (if any) no later than eleven years after the Same Day ACH Phase Three Effective Date, and such revised Same Day Entry fee will become effective six months following publication. The staff of the National Association will repeat this process promptly following the tenth anniversary of the effective date of any Same Day Entry fee, including an unchanged fee, published pursuant to this Part 11.2(C).

Part 11.3 Same Day ACH Initial Period (new part)

The period between the September 23, 2016 effective date of Part 11.1 and the September 21, 2029 effective date of the first revision (or notice of no change) of the Same Day Entry fee pursuant to Part 11.2(C).

Part 11.4 Same Day ACH Phase Three Effective Date (new part)

The March 16, 2018 effective date for the third phase of implementation of Same Day ACH.

Part 11.5 Same Day ACH Renewal Period (new part)

The period between the effective date of a revision (or notice of no change) of the Same Day Entry fee pursuant to Part 11.2(C), and the effective date of the next revision (or notice of no change) pursuant to Part 11.2(C).

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