FEATURE

Effective entry date is important for same day ACH debits

Shelly Simpson, AAP, Director, ACH Rules Education & Certification at EPCOR

Many financial institutions are wondering if it really is that im- portant to focus on the Effective Entry Date of ACH Entries in the upcoming Same Day ACH debits environment. After all, they know how to do Same Day ACH and implementing and initiating Same Day debits won’t be that big a deal, will it? It will! Te po- tential impact to the Originator and Receiver of an unintentional Same Day debit will be quite different from a Same Day credit. With Same Day ACH, Originators defaulting the Effective

Entry Date to the current day’s date, or using a stale date (i.e., a date prior to the current processing day’s date), can result in the initiation of an unintended Same Day entry. In the current Same Day ACH credit environment, if an

employer creates and submits its Friday payroll file on Wednesday, before the Same Day deposit deadline, and uses Wednesday’s date in the Effective Entry Date Field, the payroll credits will post on Wednesday. Tere undoubtedly will be very happy employees, since they received their pay early. Te only problem will be for the employer as they must pay for the file on Wednesday instead of Friday, potentially creating a cash management issue. Te ramifications of a Same Day ACH debit unintentionally

settling prior to the intended debit date are different – and for some Originators, much worse – than an early ACH credit. Te impact to the Receiver of an unintended Same Day ACH debit will not be as positive as an early credit, it could be exactly the op- posite, potentially causing NSF returns or other account issues. A debit settling prior to the date the Receiver authorized,

or agreed to, could result in that item being returned NSF since the Receiver was not expecting the payment until the next day. Additionally, the Receiver could dispute a debit which posted early as unauthorized. In either of these situations the Origina- tor’s relationship with the Receiver could be affected. Aside from the company’s reputation being at risk, an Originator may see an increase in its Unauthorized Return Rates and Overall Return Rates, which include both unauthorized and NSF returns. Ex- ceeding either of these, particularly the Unauthorized Return Rate (0.5%), could result in a possible ACH Rules violation and fine. Also, an ODFI may pass the $4.50 charge they will be assessed for each unauthorized Entry back to the Originator. Te ODFI could also charge their Originator fees for not only the Same Day ACH entries that were initiated, but also could have fees in place to reinitiate returned payments. Originators could even be held accountable to refund their customer (the Receiver of the ACH Entry) for any NSF charges they may have incurred. Tere was much work done in preparation for the implemen-

tation of Same Day ACH credits to ensure Originators would not initiate unintended payments. Te Federal Reserve Bank provided reports to financial institutions regarding Originators who were

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using stale dates; many software providers updated their products to no longer default to the current day; and of course, there was a lot of education provided on the importance of the Effective Entry Date.

However, even with all that’s been done, the proper use of the

Effective Entry Date will continue to be an issue as we implement Same Day debits, so the Federal Reserve is again reviewing debit files to determine the scope of invalid or stale Effective Entry dates. Te most recent results of their debit file analyses revealed that nearly 28% of debits initiated within the analysis period contained stale or invalid Effective Entry dates. Tat’s a very large percentage and an indicator that there is still work to be done to ensure Originators use the Effective Entry Date field appropri- ately. If you are a Fed ACH Services user, the Federal Reserve

Bank has developed reports you can receive now that will provide information on both potential Same Day ACH debits and current Same Day ACH credits. So, begin preparing your Originators now to ensure their

debit payments are processed on the date they and the Receiver have agreed upon.

The potential impact to the Originator and Receiver of an unintentional Same Day debit will be quite different from a Same Day credit.