NACHA ACH Compliance

🏦 NACHA ACH Network Compliance

1. NACHA Operating Rules Compliance

Core Rule Adherence:

• Rule 2.1.1: Proper authorization and record retention for ACH transactions
• Rule 2.3: Consumer account verification and validation procedures
• Rule 2.7: Return processing and resolution within required timeframes
• Rule 2.10: Account holder notification requirements for recurring payments
• Rule 3.1: Risk management and monitoring procedures for ACH origination

Transaction Processing Standards:

• Same Day ACH: Compliant with expedited processing requirements
• Transaction Limits: Adherence to per-transaction and daily volume limits
• File Formatting: Standard Entry Class (SEC) code compliance
• Settlement Procedures: Proper timing and sequencing of settlement activities

2. Authorization Requirements

Transaction Type	Authorization Method	Record Retention	Verification Required
One-Time Debit (WEB)	Written or electronic authorization	2 years	Yes - Account validation
Recurring Debit (PPD)	Signed authorization form	2 years after termination	Yes - Pre-notification
Business Payments (CCD)	Corporate authorization agreement	6 years	Yes - Business verification
Point of Sale (POP)	Check conversion authorization	2 years	Yes - Check validation

3. Risk Management Framework

Transaction Monitoring:

• Velocity Monitoring: Real-time tracking of transaction patterns and anomalies
• Return Rate Analysis: Continuous monitoring of return rates by merchant and transaction type
• Fraud Detection: Machine learning algorithms for suspicious transaction identification
• Account Validation: Pre-transaction account verification and micro-deposit validation

Merchant Risk Assessment:

• Underwriting Standards: Comprehensive merchant evaluation and approval process
• Financial Review: Regular assessment of merchant financial stability
• Transaction History: Analysis of processing patterns and return rates
• Industry Risk Evaluation: Enhanced monitoring for high-risk business categories

4. Return Processing & Resolution

Return Code Management:

• R01 - Insufficient Funds: Proper notification and re-presentment procedures
• R02 - Account Closed: Immediate merchant notification and stop-payment procedures
• R03 - No Account: Account validation and correction processes
• R05 - Unauthorized: Dispute resolution and authorization documentation
• R07 - Authorization Revoked: Stop-payment and merchant notification procedures
• R10 - Customer Advises Not Authorized: Investigation and documentation requirements

Resolution Timeframes:

• Return Processing: Same-day processing for all qualified returns
• Merchant Notification: Within 24 hours of return receipt
• Documentation Requests: 48-hour response time for authorization documentation
• Dispute Resolution: 5 business days for initial investigation completion

5. Consumer Protection Measures

Regulation E Compliance:

• Error Resolution: 10-day investigation period for consumer error reports
• Provisional Credit: Temporary credit within 1 business day when required
• Consumer Rights Notice: Proper notification of consumer dispute rights
• Liability Limits: Adherence to federal liability limitations

Authorization Documentation:

• Written Authorization: Clear and conspicuous authorization language
• Electronic Signatures: E-SIGN Act compliant electronic authorization
• Authorization Elements: Complete payment terms, amounts, and frequency
• Revocation Rights: Clear instructions for authorization cancellation

6. Data Security & Fraud Prevention

Information Security:

• Encryption Standards: AES-256 encryption for all ACH transaction data
• Access Controls: Multi-factor authentication for ACH system access
• Data Retention: Secure storage with automated purging per retention schedules
• Breach Prevention: Comprehensive cybersecurity measures and monitoring

Fraud Prevention Tools:

• Account Validation Service (AVS): Real-time account verification
• Micro-Deposit Verification: Account ownership confirmation
• Positive Pay: Pre-approved transaction matching
• Behavioral Analytics: Pattern recognition for suspicious activity

7. Third Party Service Provider Management

TPSP Oversight:

• Due Diligence: Comprehensive evaluation of third-party service providers
• Contract Requirements: NACHA compliance obligations in all service agreements
• Ongoing Monitoring: Regular assessment of TPSP performance and compliance
• Audit Rights: Right to audit TPSP operations and compliance procedures

Service Provider Categories:

• Payment Processors: ACH transaction processing and settlement
• Technology Vendors: Software and system providers for ACH operations
• Risk Management: Fraud detection and monitoring service providers
• Customer Service: Support services for merchant and consumer inquiries

8. Regulatory Reporting & Compliance

Required Reporting:

• Exception Reports: Regular reporting of transactions exceeding normal parameters
• Return Analysis: Monthly analysis and reporting of return trends
• Security Incidents: Immediate reporting of any security breaches or fraud
• Compliance Violations: Self-reporting of any rule violations or exceptions

Record Keeping:

• Transaction Records: Complete documentation of all ACH transactions
• Authorization Documentation: Secure storage of all payment authorizations
• Return Documentation: Complete records of return processing and resolution
• Compliance Documentation: Audit trails and compliance verification records

Effective Date: January 1, 2025
Last Updated: January 20, 2025
NACHA Rules Version: 2025 Operating Rules

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