Are Your Origination Agreements Acceptable?

Amy Donaghue

By: Emily Hays, AAP, NCP, Manager, Audit Services

The ACH Rules require an ODFI to enter into an Origination Agreement with each Originator and Third-Party Sender for which the ODFI originates entries. The Rules also require each Third-Party Sender to enter into an Agreement with each Originator it sends entries into the ACH Network on behalf of through the ODFI. The minimum requirements to be included in each Agreement are addressed within Subsection 2.2.2, ODFI Agreement with Originator, Third-Party Sender or Sending Point and additional recommendations are addressed within Appendix C, Issues to be Addressed in the Agreement Between the ODFI and the Originator or Third-Party Sender, of the ACH Rules. There have not been changes to the ACH Rules regarding Origination Agreements in a few years; however, as a best practice, it is still important to review, revise and repaper the current Origination Agreement and previously executed agreements periodically.

As a best practice, executed agreements three years old or older should be reviewed for adequate coverage of the ACH Rules, applicable recommendations within Appendix C, current security procedures and relevant Originator and Third-Party Sender responsibilities. Staff should also have a process in place to ensure an executed Origination Agreement has been completed for each Originator and Third-Party Sender, and that all fields and signatures are complete. In some situations, adding an addendum or additional schedules to the Origination Agreement is sufficient, but legal advice should be obtained prior to making any amendments or changes to the agreement.

Also, executed agreements five years old or older should be reviewed and repapered. This provides an opportunity to revisit each Originator and Third-Party Sender’s responsibilities with the ODFI and Third-Party Sender, and ensure that authorized Standard Entry Class (SEC) codes and current Exposure Limits are disclosed, amongst other updated disclosures. A strong ACH Risk Management program including Originator and Third-Party Sender education, as well as processes to track and monitor all ACH activity, assists in mitigating the need to legally enforce an executed Origination Agreement. However, if the need arises, a fully executed Originator Agreement with current language and disclosures is essential.

Having an extra set of eyes look over agreements is often helpful as they can pick up on inconsistencies or missing pieces. Our payments experts can offer guidance by reviewing what you currently have or help you develop new policies or agreements. Simply reach out to us at advisory@epcor.org to book an Advisory Service today! Or, if your 2021 ACH audit is on your mind, email audit@epcor.org. And, if your advisory or audit service is conducted in the first quarter of the year you can save up to 20%!