Explore our FAQs to get answers to common payment questions. Subsection(s) referenced in the FAQs can be found in the ACH Rules.
ACH Originator Authorizations
Do Originators need to obtain an authorization from a Receiver to originate transactions into the ACH Network?
Generally, an Originator must obtain authorization from the Receiver to originate one or more entries to a Receiver’s account, except for credit entries for which the Originator and Receiver are both natural Persons. (Subsection 2.3.1)
Do authorizations need to be in writing for ACH transactions?
The Originator of a credit entry to a consumer account of the Receiver may obtain the Receiver’s authorization in any manner permitted by applicable legal requirements. (Subsection 220.127.116.11)
The Originator of a debit entry to a consumer account of the Receiver must obtain a written authorization that is signed or similarly authenticated by the Receiver. (Subsection 18.104.22.168)
Can authorizations be obtained electronically?
The writing and signature requirements for consumer debit entries may be satisfied by complying with the Electronic Signatures in Global and National Commerce Act (E-sign Act). An electronic authorization must be visually displayed in a manner that enables the consumer to read the communication. (Subsection 22.214.171.124)
At a minimum, what must an authorization for a debit entry to a consumer account of the Receiver include?
- Language regarding whether the authorization is for a single entry, multiple entries or recurring entries.
- Amount of entry/entries or a reference to the method of determining the amount.
- Timing (including start date), number and/or frequency of entries.
- Receiver’s name or identity.
- Account to be debited.
- Date of the Receiver’s authorization; and
- Language that instructs the Receiver how to revoke the authorization directly with the Originator (including time and way Receiver communication with Originator must occur).
- For a single-entry scheduled in advance, the right of the Receiver to revoke the authorization must afford the Originator a reasonable opportunity to act on the revocation prior to initiating the entry.
What are the authorization requirements for an oral authorization?
For a single-entry authorized by a Receiver, Originator must make an audio recording of the oral authorization or provide the Receiver with written notice confirming the oral authorization prior to settlement of entry and retain the original or a copy of the written notice confirming oral authorization for two (2) years from date of authorization. For a recurring entry authorized by the Receiver, Originator must comply with the requirements of Regulation E for the authorization of preauthorized transfers, including the requirement to send a copy of the authorization to the Receiver and retain for two (2) years from the termination or revocation of the oral authorization, the original or duplicate audio recording of oral authorization and evidence that a copy of the authorization was provided to the Receiver in compliance with Regulation E. For a standing oral authorization, Originator must make audio recording of oral authorization or provide Receiver with written notice confirming oral authorization prior to settlement of the first subsequent entry and retain the original or duplicate audio recording of oral authorization or the original/copy of the written notice confirming the oral authorization for two (2) years from termination or revocation of standing authorization. (Subsection 126.96.36.199)
Do Originators need to retain copies of authorizations?
Yes, an Originator must retain the original or a copy of each written authorization of a Receiver, or a readily and accurately reproducible record evidencing any other form of authorization. (Subsection 188.8.131.52 (a))
How long must an Originator retain authorizations?
An Originator must retain the original or a copy of each written authorization of a Receiver, or a readily and accurately reproducible record evidencing any other form of authorization, for two (2) years from the termination or revocation of the authorization.
With respect to a standing authorization, Originator must retain original or a copy of each standing authorization for two (2) years following the termination or revocation of the authorization, as well as proof that the Receiver affirmatively initiated each payment in accordance with the terms of the standing authorization for two (2) years following the settlement date of the entry. (Subsection 184.108.40.206)
Do Originators have to supply a copy of an authorization to an ODFI?
Upon the request of an ODFI (Originating Depository Financial Institution), an Originator must provide the original, copy or other accurate record of the Receiver’s authorization, including, with regard to a standing authorization, evidence of the Receivers affirmative action to initiate a subsequent entry in accordance with the terms of the standing authorization. Originator must provide in such time and manner as to enable the ODFI to deliver the authorization to a requesting RDFI (Receiving Depository Financial Institution) within ten (10) banking days. (Subsection 220.127.116.11 2(c)
How does an Originator satisfy the authorization requirement for an ARC (Accounts Receivable Entry) or POP (Point-of-Purchase) entry?
By providing the Receiver with a conspicuous notice including the following or substantially similar language prior to the receipt of an Eligible Source Document (i.e. check):
“When you provide a check as payment, you authorize us either to use information from your check to make a one-time electronic fund transfer from your account or to process the payment as a check transaction.” Copy of notice must be provided to Receiver at the time of transaction. (Subsections 18.104.22.168 and 22.214.171.124)
How does an Originator satisfy the authorization requirement for a BOC (Back Office Conversion Entry) entry?
By providing the Receiver with a conspicuous notice including the following or substantially similar language prior to the receipt of an Eligible Source Document (i.e. check):
“When you provide a check as payment, you authorize us either to use information from your check to make a one-time electronic fund transfer from your account or to process the payment as a check transaction. For inquiries, please call (retailer phone number.)” Copy of notice must be provided to Receiver at the time of transaction. (Subsection 126.96.36.199)
As an Originator, am I required to send a prenotification for an ACH entry prior to initiating the first live entry?
No, according to the ACH Rules you may originate a prenotification entry to a Receiver’s RDFI prior to the first transaction you send. (Subsection 2.6.1)
If an Originator decides to send prenotifications, what is the timeframe they have before they can send subsequent entries?
An Originator that has originated a prenotification entry may initiate subsequent entries as soon as the third banking day following the settlement date of the prenotification entry, provided the ODFI has not received a return or notification of change related to the prenotification. (Subsection 2.6.2)
Notification of Change
How long does an ODFI have to notify an Originator that a Notification of Change (NOC) was received from the RDFI?
An ODFI must provide the Originator with the NOC information within 2 banking days of settlement date of the NOC or corrected NOC. (Subsection 2.11.1)
Are Originators required to make NOC changes when received from the ODFI?
Yes, an Originator must make the changes specified in the NOC or corrected NOC within 6 banking days of notification receipt or prior to initiating another entry, whichever is later.
An Originator may choose, at its discretion, to make changes specified in any NOC or corrected NOC received with respect to any ARC, BOC, POP, RCK and Single-Entry TEL or WEB.
For an NOC received in response to a prenotification, the Originator must make the changes prior to originating a subsequent entry if the NOC is received by the ODFI by the opening of business on the 2nd banking day following the settlement date of the prenotification. (Subsection 2.11.1)
How long does a business have to return an ACH transaction that is unauthorized?
It is important for businesses to watch their accounts closely as the RDFI has only 2 banking days from settlement date to return CCD and CTX transactions that post to a non-consumer account. The RDFI may request a copy of the authorization for the transaction and ask the ODFI to accept a late return but the ODFI is not required to take a late return. This would only be an attempt to the recover the money. The Originator and Receiver may also deal directly with one another to resolve the issue.
An Originator is notified that an ACH transaction they originated has been returned R10. What does this mean for the Originator?
This means the Receiver did not know the identity of the Originator, had no relationship with the Originator or did not authorize the Originator to debit their account. For an ARC or BOC entry it means the signature on the source document (check) is not authentic, valid or authorized. For a POP entry it means the signature on the written authorization is not authentic, valid or authorized.
An Originator is notified that an ACH transaction they originated has been returned R11. What does this mean for the Originator?
This means the Receiver has a relationship and authorization for debit with the Originator, however; an error in the payment exists such that the entry does not conform to the terms of the authorization you obtained from the Receiver. For example, the entry is for a different amount than authorized, the entry was initiated for settlement earlier that authorized, the entry is part of an incomplete transaction, the debit entry was improperly reinitiated and for an ARC, BOC or POP entry, the source document was ineligible, notice was not provided or the amount was not accurately obtained from the source document. It could also mean that the reversing entry was improperly initiated or the Receiver did not affirmatively initiate a subsequent entry in accordance with the terms of a standing authorization.
Is an Originator allowed to reinitiate an ACH transaction that has been returned R10 or R11?
An R10 return generally
requires a new authorization
, however; an Originator may reinitiate a return entry (other than an RCK) if:
- Entry was returned insufficient or uncollected funds
- Entry returned stop payment and reinitiation has been separately authorized by the Receiver
- Originator has taken corrective action to remedy the reason for return
The Originator must reinitiate the entry within 180 days
after the settlement date of the original entry.
An Originator receiving an R11 return may correct, if possible, the error or defect in the original entry and transmit a new entry that conforms to the terms of the original authorization
, without the need for a new authorization. New entry must be transmitted within sixty (60) days
after the settlement of the return entry.
An Originator receives an R10 return, however; they do have a valid authorization on file.
If a consumer Receiver completes a Written Statement of Unauthorized Debit form, the RDFI may return a consumer transaction within 60 calendar days. The Originator must not reinitiate the entry. They can settle the matter with the consumer outside of the ACH Network or gain a new authorization and send another transaction through.
Why is it important for an Originator to utilize the proper SEC (Standard Entry Class Code) code when originating transactions into the ACH Network.
Utilizing the proper SEC code is paramount for several reasons:
- Returns are based on SEC code. For example, a business originates a debit to another business for supplies they have shipped, and they use the PPD code. This transaction should be coded as a CCD. Since the PPD code was utilized, the business Receiver of the transaction now has 60 days to dispute the transaction as unauthorized versus the 2 days for a CCD transaction.
- There are different authorization requirements depending on the SEC code. Utilizing the correct SEC code for a transaction tells the RDFI what type of authorization was received.
- When your company signed an ODFI/Originator agreement you agreed to originate certain SEC codes based on that agreement.
Reversing Entries (Section 2.9)
How must an Originator initiate a proper Reversing Entry?
An Originator may initiate a reversing entry to correct an erroneous entry previously initiated to a Receiver’s account. An authorization is not required for a reversal entry if all the requirements of Section 2.9 of the ACH Rules are followed.
Appropriate Reason to Send a Reversal (Subsection 2.9.1)
Must Not Use Reversal Process (Subsection 2.9.5)
|Duplicate file or entry
||Failed to fund entry*
- Third-Party Sender
|Payment in wrong amount
||Outside of 5 banking days of Settlement Date of erroneous entry
|Payment destined to wrong Receiver
|Employee received both a separation check and a direct deposit
|Error in Effective Entry Date*
For each reversing entry, the content of the following fields must remain unchanged from the original, erroneous entry to which the Reversal relates:
- Standard Entry Class Code
- Company Identification/Originator Identification; and
The description “REVERSAL” must replace the original content of the Company Entry Description field transmitted in the original batch, including content otherwise required by the ACH Rules.
What are real-time payments?
Real-time payments (RTP®) are payments initiated and settled nearly instantaneously. A real-time payments rail is the digital infrastructure that facilitates real-time payments. Real-time payment networks provide 24x7x365 access, which means they are always online to process transfers. This includes weekends and holidays.
In the United States, the most prominent example of a real-time payments network is The Clearing House’s RTP network.
Real-time payments vs. faster payments
The term real-time payments should not be used interchangeably with the term faster payments. While they are similar, there are some key differences. Faster payments solutions, such as Nacha’s Same Day ACH, post and settle payments faster than traditional payment rails, but faster does not mean instantaneously.
Other payment solutions, like Mastercard and Visa’s push payment solutions will message transactions within seconds or minutes. However, because they do not also settle transactions quickly, push payments are considered a faster but not real-time payment.
While all real-time payments can be considered a form of faster payments, not all faster payments are conducted in real time.
What is the value of real-time payments?
The first reason is obvious: they are faster. Payments that settle instantaneously are available just as quickly. For individuals or businesses needing funds ASAP, instant access can be a game changer.
Real-time payment rails also bring end-to-end communication. Historically, communication has flowed in one direction: from the payer to the payee. If the two parties want to exchange information back and forth, they must do so outside of the payments system. Real-time payments connect the payment with payment data together in a single transaction.
Additionally, lag times and a lack of transparency surrounding the arrival of the funds can hinder communication. All in all, a fragmented communication process comes with challenges impacting everything from business flow to liquidity and risk management.
Fortunately, payments made in real time solve these challenges. Bilateral communication through integrated information flows, instant payment confirmation notifications, and settlement finality result in a more efficient payment journey. With real-time payments, financial control, cash positioning, and liquidity management are now in reach.
Beyond communication improvements, The Clearing House (TCH) real-time payments rail has shown that a number of use cases exist for making payments in real time. Real-time payments are also irrefutable, meaning once payments are received, they cannot be taken back or reclaimed by the sender.
Have companies recognized the value of real-time payments?
As merchants, businesses, and banks recognize the value of real-time payments, adoption will continue to increase and use cases will continue to emerge. Organizations of different types and sizes see real-time payments in a positive light and are eager to adopt them.
Real-time Payments (RTP)
What is the RTP® network?
The RTP network, the real-time payments system from The Clearing House, is the first new core payments infrastructure in the U.S. in more than 40 years. It is currently accessible to financial institutions that hold 75% of U.S. demand deposit accounts (DDAs), and the network currently reaches 61% of U.S. DDAs. The RTP network is open to all federally insured U.S. depository institutions.
Real-time payments over the RTP network provide consumers and businesses with the ability to conveniently send payments directly from their accounts at federally insured depository institutions 24/7, as well as to receive and access funds sent to them over the RTP network immediately. Financial institutions using the RTP network to make faster payments on behalf of their customers benefit from the RTP network’s real-time final interbank settlement. The RTP network represents a new phase of evolution within the U.S. payments industry and provides a platform for product innovation. Financial institutions can leverage a variety of features – enhanced speed, security, and messaging capabilities – to create unique offerings for their retail and corporate customers.
What is a real-time payment on the RTP network?
The characteristics of a real-time payment on the RTP network are:
- 24/7 – The RTP network is live and operates 24/7. This allows financial institutions to send or receive payments at any time.
- Immediate Availability – Recipients receive the payment within seconds of the sending bank initiating the transaction. The RTP network receiving financial institutions are required to make funds available immediately, except for risk management or legal compliance purposes.
- Payment Certainty – Sending financial institutions (FI) are not able to revoke or recall a payment once it has been authorized and submitted to the RTP network. However, there is a process to facilitate FI-to-FI communication around return of funds sent in error.
- Ubiquity – All federally insured depository institutions can be RTP network participants, regardless of size.
- Extensibility – Rich, flexible messaging functionality is included to support value-added products. For example, the RTP network provides messaging that enables a request for payment of a bill or an invoice.
- Convenience – Customers of RTP network financial institution participants can initiate payments from their existing accounts.
- Cash Flow Control – The ability to send and receive immediate payments gives customers more control over cash flow, which may be particularly important for cash-constrained small businesses and consumers.
- Adaptability – The RTP network has a flexible architecture to adapt to changing market needs.
Does my business have to be a member of The Clearing House to use the RTP network?
No, but your federally insured depository financial institution must be an RTP network participant.
Is the RTP network only for P2P (person-to-person) payments?
No, the RTP network is designed to address unmet customer needs across all customer segments (B2B, B2C, C2B, P2P, A2A, G2C, etc.). Consumers, businesses, and the government can use the RTP network.
What are some other use cases for The Clearing House’s RTP network?
Today, RTP delivers efficient real-time payments for several use cases, including:
- B2B real-time transactions
- P2P real-time transactions
- Request for payment
What corporate needs does RTP address?
RTP allows for several B2B use cases and has the ability to move rich data (via ISO 20022 adoption) that can provide actionable insights into corporate client needs. Examples are as follows:
- Confirmation of payment
- Improved control over payments timing
- Liquidity management
- Instant bill payment
- Remittance data availability
Will the RTP network permit debits in the future?
No, the RTP network is strictly “credit push,” meaning that the person making the payment instructs its financial institution to make the payment. Credit push transactions reduce certain types of fraud risk.
Why are RTP network payments irrevocable?
The irrevocability of a payment sent over the RTP network enables immediate, final settlement to the payee, which is the key element of real-time payments.
Is the RTP network the same as Same Day ACH?
No, the RTP network is not Same Day ACH. It is a separate and new infrastructure built for the digital age. RTP network payments clear and settle individually in real time with immediate finality. Same Day ACH payments are cleared in batches and settled after the payments clear.
What are my options to connect to the RTP network?
Federally insured U.S. depository institutions have the option to directly connect to the RTP network. Depository institutions can connect also to the RTP network using an electronic connection provided by a third-party service provider (i.e.core processor, banker’s bank or corporate credit union). Contact your financial institution to see if they are connected to the RTP network.
What rules govern use of the RTP network?
The RTP network's Participation and Operating Rules apply to all network messages and are available on The Clearing House website
Are there transaction limits?
Yes, the credit transfer limit on the RTP network is currently $1 million.
How will the FedNow Service work?
The FedNow Service will process and settle individual payments within seconds, 24 hours a day, 7 days a week, 365 days a year. Like other payment and settlement services offered by the Federal Reserve, the service will settle obligations between depository institutions through debit and credit entries to balances in their master accounts at the Reserve Banks. Consistent with the goal of supporting instant payments, use of the FedNow Service will include, as a term of service, a requirement that participants make the funds associated with individual payments available to their end-user customers immediately after receiving notification of settlement from the service.
What features and functionality will be included in the FedNow Service?
The FedNow Service will be released in phases; additional features and service enhancements will be introduced over time. At launch, the FedNow Service will be designed to maintain uninterrupted 24x7x365 processing of credit transfers with security features to support payment integrity and data security. The service will have a 24-hour business day every day of the week, including weekends and holidays.
The first release of the FedNow Service will include optional features: fraud prevention tools, the ability to join initially as a receive-only participant, request for payment capability, and tools to support participants in their handling of payment inquiries.
When will the FedNow Service become available?
The Federal Reserve intends to launch the FedNow Service as soon as practicably possible, with a target release date of 2023. The Federal Reserve intends to announce a more specific time frame for launch once additional work is completed. The build of the FedNow Service is ongoing and includes development of the necessary infrastructure, integration with existing Federal Reserve systems, and continued engagement with industry stakeholders on features and design.
Who will be eligible to participate in the FedNow Service? How will merchants, consumers, or non-bank payment service providers access the service?
As with current Federal Reserve Bank services, the FedNow Service will be available to depository institutions eligible to hold accounts at the Reserve Banks under applicable federal statutes and Federal Reserve rules, policies, and procedures. Participants will be able to designate a service provider or agent to submit or receive payment instructions on their behalf. Participants will be able to also settle payments in the account of a correspondent, if they choose to do so. Merchants, consumers, or non-bank payment service providers can access the service through depository institutions as they do today with other payment systems.
Will cross-border transactions be available in the FedNow Service?
At launch, the FedNow Service will support only domestic payments between U.S. depository institutions.
What are some of the business use case opportunities that will be offered with FedNow?
- Account-to-Account (A2A) - Corporations can consolidate funds into a single account for payroll or other purposes (corporate cash pooling).
- Consumer-to-Business (C2B) - Individuals and businesses can pay bills such as loans, utilities and more and feel confident their payment is posted to the biller’s account immediately. This can help people and companies avoid late fees and better manage cash flow (bill pay).
- Billers can send a request for payment to their customers through the FedNow Service. Customers can respond by initiating a credit transfer through an end-user interface offered by the financial institution. The payment will include the applicable remittance detail from the request which facilitates posting of the transaction (E-invoicing).
- Business-to-Business (B2B) – Businesses can free up working capital by paying suppliers upon receipt of products or services (on-demand payment).
- Businesses can send an e-invoice and a request for payment that includes all the information they will need when their customer remits the requested payment (E-invoicing).
- Business-to-Consumer (B2C) – Non-recurring disbursements such as insurance payouts or rebate claims can be paid instantly (one-time payments).
Payroll instructions for expedited payments can be initiated when needed rather than scheduled in advance (immediate payroll).