The National Automated Clearing House Association (Nacha) develops and administers the private sector Nacha Operating Rules for ACH payments, which define the roles and responsibilities of ACH Network participants. The ACH Network moves money and related payment information quickly and securely from any participating financial institution account to another.

An entity that acts as a central facility for the clearing, delivery, and settlement of entries between or among Participating DFIs.

Originating Depository Financial Institution (ODFI) – A Participating Depository Financial Institution with respect to ACH entries (a) it transmits directly or indirectly to an ACH Operator for transmittal to an RDFI, and (b) on which it is designated as the ODFI in accordance with Appendix Three (ACH Record Format Specifications). An RDFI is not considered and ODFI solely by the reason of its initiation of Acknowledgement Entries, Return Entries, Extended Return Entries, or Notifications of Change.

Receiving Depository Financial Institution (RDFI) – A Participating Depository Financial Institution with respect to ACH entries (a) it receives from its ACH Operator to the accounts of Receivers, and (b) on which it is designated as the RDFI in accordance with Appendix Three (ACH Record Format Specifications). An ODFI is not considered an RDFI solely by reason of its receipt of Acknowledgment Entries, Return Entries, Extended Return Entries, or Notifications of change.

An ACH Originator is a person that has authorized an ODFI (directly or through a Third-Party Sender) to transmit, for the account of that person, a credit entry, debit entry, or non-monetary entry to the Receiver’s account at the RDFI.

A person that has authorized an ACH Originator to initiate a credit entry, debit entry, or non-monetary entry to the Receiver’s account at the RDFI. With respect to debit entries, the term “Receiver” means all persons whose signatures are required to withdraw funds from an account for purposes of the warranty provisions of Subsection 2.4.1 (General ODFI Warranties).

A corporation, partnership, association, or other entity, governmental or private, or a natural person, provided that, in case of a natural person, any account of such natural person, any account of such natural person to be debited or credited in respect of an ACH entry is maintained primarily for commercial and not personal, family, or household purposes.

A Third-Party Service Provider is an organization that performs any function on behalf of the Originator, the Third-Party Sender, the ODFI, or the RDFI (not including the Originator, ODFI, or RDFI acting in such capacity for such entries) related to the processing of ACH entries, including the creation of the ACH files or acting as a Sending Point or Receiving Point on behalf of a Participating DFI. An organization acting as a Third-Party Sender is also a Third-Party Service Provider.

Financial Institutions that utilize Third-Party Service Providers must be aware of their responsibilities in ACH processing and ensure that those responsibilities are being met by the Third-Party Service Provider. The Third-Party Service Provider is bound by their agreement with the Financial Institution to comply with all of the RDFI and ODFI responsibilities as defined in the Nacha Operating Rules and Guidelines for the ACH processing services that they provide on behalf of the RDFI and ODFI. A Third-Party Service Provider that performs any functions of ACH Processing on behalf of the RDFI or ODFI must conduct an annual audit of compliance with the provisions of the Nacha Operating Rules and Guidelines no later than December 31 of each year.

A Third-Party Sender is an organization that is a type of Third-Party Service Provider that acts as an intermediary in transmitting ACH entries between an Originator and an ODFI, including through Direct Access, and acts on behalf of an Originator or another Third-Party Sender (Nested Third-Party Sender). A Third-Party Sender must have an ACH Origination Agreement with the ODFI of the entry. A Third-Party Sender is never the Originator for entries it transmits on behalf of another Organization. However, a Third-Party Sender of ACH entries may also be an Originator of other entries in its own right.

In any circumstance in which an Originator utilizes the services of a Third-Party Service Provider but has also executed a contractual agreement directly with the ODFI, The Third-Party Service Provider would not be considered a Third-Party Sender and would not be subject to the rule provisions governing Third-Party Senders.

The Nacha Operating Rules obligate the Third-Party Sender to provide to the ODFI any information that the ODFI considers to be reasonably necessary to identify each Originator within two banking days of the request. A Third-Party Sender must conduct an annual audit of compliance with the provisions of the Nacha Operating Rules and Guidelines no later than December 31 of each year. A Third-Party Sender must conduct an assessment of the risk of its ACH activities and implement a risk management program on the basis of such an assessment. The Third-Party Sender warrants to the ODFI that the Originator has agreed to assume the responsibilities of an Originator, as required by the Nacha Operating Rules. In any case where the Originator fails to perform its obligations as an Originator under the Rules, the Third-Party Sender indemnifies the ODFI against any loss. Third-Party Senders that perform any obligations of an ODFI under the Nacha Operating Rules must also comply with all ODFI requirements under the Nacha Operating Rules, and must warrant that it is legally able to do so. The Nacha Operating Rules do not relieve the ODFI of its obligations when they are performed by a Third-Party Sender. Each Third-Party Sender is obligated to make payment to the ODFI for all credit and debit entries that are returned by the RDFI. In the event that the ODFI does not receive payment from the Third-Party Sender, the Originator of the entry agrees to pay the ODFI. The Third-Party Sender and its Originators are responsible for the retention and delivery of any records, documentation and data related to copies of items, source documents or authorizations in accordance with the requirements of the Nacha Operating Rules.

Third-Party Senders that process through other Third-Party Senders and do not have an ACH Origination Agreement directly with the ODFI, are know as "nested" Third-Party Senders. Nested Third-Party Senders must have an ACH Origination Agreement with the Third-Party Sender that has a ACH Origination Agreement with the ODFI. The contractural agreements link the downstream Third-Party Senders to the ODFI by the string of contracts between parties. A nested Third-Party Sender assumes all of the same responsibilites of a Third-Party Sender with a direct contractural relationship with the ODFI.