What is Nacha, and what do its rules cover?

What is Nacha?

Nacha governs the ACH Network, the payment system behind direct deposits and direct payments. The network can reach all US bank and credit union accounts. Nacha describes itself as a rule writer that builds consensus among payment industry stakeholders. It develops rules and standards, provides industry solutions, and delivers education, accreditation and advisory services.

Its members shape the rules. Nacha's Direct Members are financial institutions and Payments Associations. Its Board of Directors is made up of executives from large and small banks and credit unions.

Does Nacha process ACH payments?

No. Nacha says it "doesn't actually process the ACH payments." Payments move between banks through two ACH Operators, the Federal Reserve and The Clearing House. Settlement runs through the Federal Reserve's settlement service. Nacha's role is the rulebook those payments are handled under.

What are the Nacha Operating Rules?

The Nacha Operating Rules are the private-sector rules for ACH payments. They define the roles and responsibilities of everyone on the network:

• Originator: the business or person that starts a payment.
• ODFI: the originator's bank. See ODFI.
• ACH Operator: sorts and delivers payment files between banks.
• RDFI: the receiver's bank. See RDFI.
• Receiver: the person or business whose account is credited or debited.

Nacha says all participants in the ACH Network must follow the Nacha Rules. A business that takes ACH payments meets them through its bank or processor even if it never deals with Nacha. Stripe's docs, for example, tell businesses that Nacha rules require them to give each customer a copy of the mandate and to provide evidence of authorization when asked.

What do the rules mean for a business taking ACH payments?

Several rules show up in everyday collections:

• Authorization. Consumer debits need a written authorization, signed or similarly authenticated. See ACH authorization.
• Account validation. Since March 19, 2021, originators must validate first-use consumer account details for debits authorized online. See prenote and micro-deposits.
• Debit timing. By Nacha rule, a debit can't have a settlement date more than one banking day in the future.
• Same Day ACH. Payments up to $1 million can settle the same day, rising to $10 million on September 17, 2027. See Same Day ACH.
• Returns. Payments that can't be completed come back with standard reason codes. See ACH return codes.

How does Nacha enforce its rules?

Nacha has a Rules Enforcement and Arbitration team that promotes compliance, handles claims of non-compliance and resolves disputes. It also runs risk services, including Third-Party Sender registration, the Terminated Originator Database and the ACH Contact Registry.

How does Nacha relate to Regulation E?

They work side by side. Regulation E (12 CFR part 1005) is federal law. It protects consumers on electronic fund transfers, including ACH payments, with rules on authorizations, error resolution and stopping payments. The Nacha Rules are private rules that bind network participants by agreement. Nacha aligned some of its terms with Regulation E, such as its definition of a recurring entry. See EFT payment.