ACH Rules Update

As of September 17, 2021, there are new ACH rules that have been implemented in the processes and procedures. The terms of a debit authorization must be clear and easy to understand. A debit authorization for a consumer account must include, at a minimum:

• Authorization for a single entry, recurring entries, or multiple entries
• The amount of the debit
• The timing (start date and frequency)
• The name of the recipient
• The account to be debited
• The date of authorization
• Revocation language

An originator must obtain authorization from the receiver to originate one or more entries to the receiver's account, except for credit entries for which the originator and receiver are both natural persons.

An authorization must comply with applicable legal requirements, be readily identifiable, and have clear and reality understandable terms. A purported authorization for an entry that is not clear and readily understandable as to its terms, or that is otherwise invalid under applicable Legal Requirements, does not satisfy the requirements of this.

Consumer Debit Authorization: Must be in writing and signed or similarly authenticated by the receiver, except as expressly provided in the authorization sections of these rules.

Single Entry: A credit or debit entry initiated by an originator in accordance with the receiver’s authorization for a one-time transfer of funds to or from the receiver’s account. The authorization is good for one transaction only unless there is a new authorization given. A single entry is a one-time payment, and authorization must be obtained from the consumer before initiating the payment. It has become a common practice for Originators to use a hybrid model for ongoing commerce known as a standing authorization.

Recurring Entry: Recurring payments occur at regular intervals, with no additional action required by the consumer to initiate the payment, and are typically for the same amount (e.g., monthly mortgage payment, utility payment). An entry to a consumer account that reoccurs at substantially regular intervals, without further affirmative action by the receiver to authorize those future entries. Authorization must be given one time and one time only.

Subsequent Entry: An entry to a consumer account that is initiated by a receiver’s affirmative action in accordance with the terms of a standing authorization. Instruction must be required as to when the account can be debited.

Standing Authorization: An advance authorization by a receiver of future entries to the receiver’s consumer account that requires more requires affirmative action by the receiver to initiate those future entries. Must have authorization for the debit to be processed each time.

A standing authorization is an advance authorization by a consumer of future debits at various intervals. With a standing authorization, future debits (a.k.a. subsequent entries) are initiated by a consumer through further action.

Go more in-depth with Shelly Sipple's recent webinar, 2022 ACH Rules Update, Including Faster Payments, available on-demand.