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New ACH Rule Amendments May Affect How Businesses Handle Returned Electronic Checks

Payment Processing

Electronic checks hold a lot of appeal for businesses. They often come with lower processing fees, faster settlement rates and greater security than credit cards and paper checks. It's no wonder that more than 4.5 billion Automated Clearing House transactions were processed in the second quarter of 2015, up 5 percent from the previous year.

But if your business accepts electronic checks, it's time to start monitoring your return levels and processing procedures. Thanks to ACH rule amendments that went into effect September 18, 2015, businesses with return rates deemed too high by NACHA, the nonprofit group that oversees the Automated Clearing House (ACH) Network, may face serious consequences.

The rules were developed in response to companies that have extraordinarily high rates of returns—which can be a sign of problematic business practices. They reduce the previous return rate threshold for unauthorized transactions from 1 percent to 0.5 percent. If you don't know what your unauthorized return rate is, you'll want to find out so you can ensure you're staying within the allowable amount.

NACHA is also hoping to curb the amount of ACH returns that result from business processing mistakes. The new rules allow NACHA to dig into an originator's ACH activity during an "inquiry process." If your administrative return rate exceeds 3 percent, or if your overall return rate exceeds 15 percent, NACHA may launch an inquiry of your ACH business practices. If it finds that your high return rate is the result of administrative errors or poor origination practices, your business may be at risk of being fined or, in a worst-case scenario, even disallowed from using the ACH.

"Excessive levels of returned transactions impose costs, both financial and reputational, on the ACH Network and its participants," Janet O. Estep, president and CEO of NACHA, said in a press release. "The new rule will help reduce these costs, and ultimately increase customer satisfaction with the ACH Network by reducing the volume of transactions subject to customer disputes."

The bottom line: It's time to start keeping a close eye on your ACH return rates to ensure you are complying with the new rules. To help you in that endeavor, Paychex offers a variety of all-in-one ACH and eCheck packages to help you process and track electronic checks.


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