Your obligations under NACHA Rules are determined by services that you provide in processing of ACH transactions. 1. Choose participant names to view each definition. 2. Then use bottom matrix to view rights and responsibilities.
A Third-Party Sender is an organization that is not an Originator that authorized an ODFI or a Third-Party Service Provider to transmit, for its account or the account of another Third-Party Sender a credit entry, debit entry, or non-monetary entry to the Receiver’s account at the RDFI. An organization acting as a Third-Party Sender is also a Third-Party Service Provider. Third-Party Senders are a subset of Third-Party Service Providers. A Third-Party Sender is always a Third-Party Service Provider that acts on behalf of an Originator, but a Third-Party Service Provider does not always act as a Third-Party Sender.
A Third-Party Service Provider is considered to be a Third-Party Sender when it acts as an intermediary between the ODFI and the Originator and there is no contractual agreement between the Originator and the ODFI. In this instance, the Third-Party Sender acts like the ODFI to the Originator.
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.
A Third-Party Service Provider is an organization other than an Originator, Originating Depository Financial Institution (ODFI), or Receiving Financial Institution (RDFI) that performs a function of ACH processing on behalf of the Originator, ODFI or the RDFI. A function of the ACH Processing could be the act of creating an ACH file on behalf of an Originator or ODFI or acting as a Sending Point or Receiving Point on behalf of an ODFI or RDFI, respectively. A Third-Party Service Provider could also take on the role of a Third-Party Sender.
An Originating Depository Financial Institution (ODFI) is required for transmission of entries into the ACH Network. An ODFI with respect to Entries (a) it Transmits directly or indirectly to an ACH Operator for Transmitall 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 an OFI solely by reason of its initiation of Acknowledgment Entries, Returns Entries, Extended Return Entries, or Notifications of Change. (NACHA Operating Rules, Section 8.57, Page OR 58)
An Originator is the entity that agrees to initiate ACH entries into the payment system according to an arrangement with the Receiver. An Originator is usually a company directing a transfer of funds to or from a customer’s or another company’s (organization, government, etc) account. In the case of a customer initiated entry the originator may be an individual initiating funds transfer activity to or from their own account.
An 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. (NACHA Operating Rules, Section 8.59, Page OR58)
Rights & Responsibilities
Responsibilities and Obligations of the Third-Party Sender
The Rules do not relieve the ODFI of any of its obligations when they are performed by a Third-Party Sender.
Additional obligations of 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.
- 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.
Responsibilities and Obligations of the 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.