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What is Nacha?

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The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless. The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each. The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. See full bio

Last editedMar 20232 min read

The ability to accept ACH payments is important for any online or offline business. Furthermore, there are a broad range of regulations that accompany ACH payments, and businesses that breach them can experience very severe consequences. That’s why it’s vital for organizations of all sizes to understand more about Nacha and the Nacha compliance rules. But what does Nacha mean? Learn more about Nacha with our comprehensive guide.

What does Nacha mean?

Nacha (previously NACHA, or National Automated Clearing House Association) manages the administration, development, and governance of the ACH network, which is the electronic system that facilitates the movement of money in the United States. So, while you may not be familiar with the term “Nacha”, you’ll almost certainly have encountered the types of payments that it oversees.

What is an ACH payment?

Before we discuss the Nacha operating rules in greater depth, it may be a good idea to provide you with a quick summary of ACH payments. Put simply, an ACH payment is a kind of electronic bank-to-bank transfer made via the ACH network, rather than card networks like Mastercard or American Express. There are two main types of ACH payment: Direct Deposits (deposit payments from businesses or governments to employees or consumers) and Direct Payments (the use of funds for making payments either by organizations or individuals).

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What’s the difference between Nacha and ACH?

Lots of people get hung up on the differences between ACH and Nacha, but it’s very simple. The ACH network is the actual technology that moves payments from bank account to bank account. That technology is overseen by Nacha, an organization that sets and enforces the rules which the ACH network needs to abide by. However, Nacha does not operate or run the network itself – that’s the job of the ACH operators (the Federal Reserve and the Electronic Payments Network).

Understanding the Nacha operating rules

Nacha has a broad range of rules and regulations that your business needs to follow if it wants to accept ACH payments. These rules are enforced by a system of warnings and fines which can reach up to $500,000 a month in the most severe cases. Ultimately, persistent rulebreakers may be suspended from the platform entirely. Because the Nacha guidelines are being amended and updated continually, it’s a good idea to keep an eye on the Nacha website. So, what do these Nacha operating rules consist of? Well, if you’re accepting ACH payments, you should ensure you:

Obtain authorization from a customer when they’re making a one-time/recurring ACH debit.
Indicate very clearly to the customer that they’re authorizing a one-time/recurring ACH debit.
Provide appropriate notice if you’re changing the amount or date of a debit.
Properly secure the bank information you received to initiate a transfer.
Cancel a subscription promptly and stop making debits if a customer asks to cancel.

Why is Nacha compliance important?

As the ACH network takes on an increasingly large role within the overall payments landscape, the importance of Nacha compliance is only likely to get more and more vital. Not only will businesses/third-party senders need to stay abreast of Nacha compliance rules, but the guidelines themselves will need to be constantly updated to stay relevant for new developments in payment processing.

Are the Nacha guidelines something I need to worry about?

As important as Nacha compliance is, it’s unlikely that the nitty-gritty of the Nacha operating rules is going to be something you’ll need to get too deeply involved in. If you’re using a third-party payment processor to handle card payments, Nacha compliance will be baked in already. So, while it’s something that you should understand and study, you probably won’t need to concern yourself with Nacha on a day to day basis.

We can help

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