Automated Clearing House

(Automated Clearing House) A system of the U.S. Federal Reserve Bank that provides electronic funds transfer (EFT) between banks. It is used for all kinds of fund transfer transactions, including direct deposit of paychecks and monthly debits for routine payments to vendors. The ACH is separate and distinct from the various bank card networks that process credit card transactions. ACH operations are done in a batch mode, which can take up to 72 hours before the money is actually transmitted. A return notification is sent if there are insufficient funds in the account.

Download Computer Desktop Encyclopedia to your iPhone/iTouch

An electronic funds-transfer system run by the National Automated Clearing House Association. This payment system deals with payroll, direct deposit, tax refunds, consumer bills, tax payment, and many more payment services.

Investopedia Says:
The use of electronic clearing houses to facilitate electronic transfers of money has increased efficiency and timeliness of government and business transactions.

Related Links:
Learn about the systems that run the market. Topics include market makers, specialists, SuperDOT, ECNs, SOES, Level I, II, and III Access, and more. Electronic Trading Tutorial
It's a part of everyone's life, and we all want it, but do you know how it gains value and how it is created? What Is Money?

Computer-based clearing and settlement facility for interchange of electronic debits and credits among financial institutions. ACH entries can be substituted for checks in recurring payments such as mortgages, or in Direct Deposit distribution of federal and corporate benefits payments, including Social Security payments. Since the mid-1970s, the ACH has functioned as a unified payment clearing system consisting of regional clearing house associations owned by financial institutions. The ACH, while used extensively in the early years as a payment system for fixed amount, recurring payments, is being used increasingly as a payments processor for business-to-business trade payments. See also Cash Concentration & Disbursement; Corporate Trade Exchange; Corporate Trade Payment; Electronic Data Interchange; Net Settlement.

Click here to submit an acronym.

This article may be too technical for most readers to understand. Please expand it to make it accessible to non-experts, without removing the technical details.

Automated Clearing House (ACH) is an electronic network for financial transactions in the United States. ACH processes large volumes of both credit and debit transactions, which are originated in batches. Rules and regulations governing the ACH network are established by NACHA-The Electronic Payments Association (formerly the National Automated Clearing House Association) and the Federal Reserve (Fed). In 2002, this network processed an estimated 8.05 billion ACH transactions with a total value of $21.7 trillion.^[1] (Credit card payments are handled by separate networks.)

Contents 1 Common Issues 2 See also 3 References 4 External links

Common Issues

ACH payments have been around for some time now, but people are just getting used to them, especially with the ARC, POP, and RCK, where the original instrument was a physical check. One problem occurs when the account holder issues a stop payment on a physical check not knowing that the check was presented as an ACH entry.

A time frame problem can cause potential loss towards an RDFI due to irregular time frames provided for the return of ACH entries that are subject to Electronic Funds Transfer Act (Regulation E). An example is a POP and ARC entry, where an RDFI has only 60 days from the date of settlement to return an unauthorized debit, and the consumer has 60 days upon notification to dispute a transaction in his statement under Regulation E. With these time frames, it is possible that the 60-day period allowed for ACH return would expire even before the consumer's 60-day protection (under Regulation E) would expire.

Another problem deals with compliance where the merchant causes an ODFI to issue an ARC or POP entry (for check presentment) and then fails to comply with the handling of the physical check and presents the physical check for payment as well. This causes a double-debit against a consumer account.

See also

• Pan-European Automated Clearing House
• Electronic Check Processing
• ODFI (Originating Depository Financial Institution)

References

1. ^ What is Automated Clearing House? - a definition from Whatis.com - see also: ACH

External links

• J.P. Morgan Ranked First in ACH Originations for 2008
• List of U.S. banks that offer free ACH transfers to personal account holders (outdated, needs to be updated)
• Federal Reserve Payment Systems
• What is ACH?
• ACH: The Paperless Payment Solution for Today - article
• ACH Rules Online
• Federal Reserve's ACH Number Lookup
• Regional Payment Associations
• Regulation E
• Great blog dedicated to understanding the Automated Clearing House

This entry is from Wikipedia, the leading user-contributed encyclopedia. It may not have been reviewed by professional editors (see full disclaimer)