How Nacha Enforces its Rules

Nacha Rules Enforcement Promotes Higher ACH Network Quality

Consumers and businesses have come to trust the ACH Network as a secure way to receive their pay with Direct Deposit, pay bills through Direct Payment, donate to favorite causes and more. One factor that helps keep the ACH Network high quality is Nacha’s Rules enforcement.

For most of the approximately 10,000 financial institutions in the U.S., Rules enforcement is something they’ll never deal with—which is perfect, because Nacha hopes it never comes to that.

“It’s important that all ACH participants are on the same playing field when it comes to complying with the Nacha Operating Rules,” said Lorie Nash, Nacha Senior Director of Compliance. “But when someone isn’t complying, it’s important to have a resource like Nacha’s enforcement team that will evaluate the situation, remain impartial and provide the necessary assistance to get the issue resolved.”

So, how does enforcement work? Nash said a case typically begins with one bank or credit union contacting her department to report an allegation that another bank violated the Nacha Operating Rules.

“Our department works with the banks to get these problems resolved,” said Nash, stressing that all violations are “alleged” until proven, with each party having the opportunity to explain its side of the issue. In fact, she said, oftentimes it’s something as simple and unintentional as a typo in an account number. And many times, the bank that is notified of an ongoing issue will fix it immediately upon being notified by Nacha.

Whenever possible, Nacha tries to get the banks to settle the issue amongst themselves, but “we’re here when they can’t work it out,” said Nash. For example, when a receiving bank returns a payment “as account closed,” and then the same account receives another payment from the same entity two weeks later—and again two weeks after that.

“At that point, someone’s not reacting to the returns, which are there to communicate to the originating bank and its Originator that there is a problem. That’s when they can come to Nacha to get the assistance they need to get the problem resolved.”

Even then, Nash said, it’s generally not a situation that results in a penalty, because once Nacha is involved, that’s usually enough to get the other bank to pay attention and resolve the issue. But sometimes things need to be escalated.

“In most cases, the first time there’s a violation against a financial institution, they get a warning letter. When the same violation continues to happen—which we call ‘recurrences’—that’s when the issue ramps up and will go before the ACH Rules Enforcement Panel,” Nash explained.

The Panel consists of seven primary and seven alternate members from large-, medium- and small-asset banks and credit unions, as well as ACH Operators and Payments Associations. Nacha acts as a facilitator for the Panel, presenting all current and historical information related to the violations. The Panel makes the final decision on whether a violation has occurred, and if so, whether a fine is assessed. A fine amount is based on several factors including the violation level, the egregiousness of the violation, and the bank’s response.

In the 18 months from January 2019 through June 2020, Nacha’s Rules Enforcement Department processed almost 1,400 cases that were submitted. Of those, 257 required escalation to the ACH Rules Enforcement Panel.

While the substantial majority of the cases don’t get that far, just knowing that the system is in place is a confidence builder for all ACH Network participants.

“The goal of our department is to do all that we can to maintain the quality of the ACH Network and to be there to assist ACH Network participants with whatever issues they encounter," said Nash. “The more issues that we can help resolve, the better the ACH Network.”

Concerned about a possible violation of the Nacha Operating Rules? Financial institutions can use our online form to file a report. Additionally, you can reach Nacha’s Rules Enforcement Department by email at Nacha-Ntwrk-Compliance@nacha.org, by phone at 703-561-1100, or by fax at 703-561-0819.