Your company may have been originating ACH entries for many years or maybe you are just now considering ACH Origination. On this page, we will explain some of the basics of getting started with ACH Origination.

Relationship with an Originating Depository Financial Institution - ODFI

Not all financial institutions in the United States participate in the ACH Network. Many financial institutions participate as a Receiving Depository Financial Institution only. This means they receive both debit and credit ACH entries and post those entries to their customer/member accounts, process unpostable, unauthorized, and stop payment entries back to the ODFI, as well as initiate Notification of Change Entries to correct the banking information within the ACH entry.

The Nacha Operating Rules for ACH origination begins with a business that desires to use the ACH Network to initiate business-to-business payments (B2B) credit and debit entries (i.e., vendor payments, corporate cash concentration, invoice collection) and business-to-consumer payments (B2C) (i.e., payroll deposits, expense reimbursement, bill collections, tuition payments, utility payments). The business Originator must first inquire of its financial institution to see if the institution offers ACH Origination services. If not the business customer must search for a financial institution that operates as an ODFI and offers ACH Origination services. Each institution will have its own ACH Originator application, due diligence, and approval process. Most institutions will have a process in place to qualify business customers for ACH origination services.

Article Two of the Nacha Operating Rules requires an ODFI to perform the following before permitting a business customer to originate ACH entries:

• Use a commercially reasonable method to verify the identity of the ACH Originator

• Enter into an Origination Agreement with the ACH Originator that at a minimum includes the following:

  • The Originator must authorize the ODFI to originate entries on behalf of the Originator to Receivers’ accounts;

  • The Originator must agree to be bound by the Nacha Operating Rules;

  • The Originator must agree not to originate entries that violate the laws of the United States;

  • Define any restrictions on the types of entries that may be originated;

  • The right of the ODFI to terminate or suspend the ACH Originator Agreement for breach of the Rules in a manner that permits the ODFI to comply with the Nacha Operating Rules;

  • The right of the ODFI to audit the Originator’s compliance with the ACH Origination Agreement and the Nacha Operating Rules.

• The ODFI must perform due diligence with respect to the ACH Originator sufficient to form a reasonable belief that the Originator has the capacity to perform its obligations in conformance with the Nacha Operating Rules. The ODFI must also:

  • Assess the ACH Originator’s intended ACH activity and the risk it presents;

  • Establish, implement, and periodically review an exposure limit (dollar amount allowed to be originated in a specific time period);

  • Establish and implement procedures to:

  • Monitor the Originator’s ACH origination and return activity over multiple settlement dates (typically 3 - 5 days for credit entries and 60 days for consumer debit entries);

  • Enforce the types of entries that may be originated (typically by SEC code, CCD, PPD, WEB, TEL, etc., and debit or credit or both);

  • Enforce the exposure limit.

In addition to the above minimum requirement, the ODFI will have additional requirements for business customers/members that apply for ACH Origination services.