IBA Compliance Connection

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Can we place a hold on ACH deposits if we suspect there is fraud?

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We believe that you may be able to place a hold on deposited funds made by ACH debit transfers, subject to the terms of your agreement with the other financial institution, while your ability to place a hold on deposited funds made by ACH credit transfers would be limited to one day. However, we also recommend reviewing the operations of your ACH deposits — we are aware that at least at some institutions, deposits made by ACH transfers are made by an internal entry in the bank’s accounting system to credit the customer’s account after the ACH transfer is complete.

ACH Debit Transfers

Yes, you may be able to place a hold on ACH deposits that are made by debit transfers, provided that your agreement with the bank from which you debit the ACH transfer does not prohibit the hold. Debit transfers are not “electronic payments” for purposes of Regulation CC’s next-day availability requirements. Under Regulation CC, “electronic payments” include ACH credit transfers, but not debit transfers. The commentary to Regulation CC describes debit transfers as being “more like checks,” since the receiver of an ACH debit transfer has the right to return the transfer.

Consequently, we believe you may place a hold on an ACH deposit made by debit transfer, since the length of time before you make the funds available would be based on your agreement with the bank from which you are debiting the ACH transfer.

ACH Credit Transfers

We do not believe you would be able to hold ACH deposits that are made by credit transfers beyond Regulation CC’s next-day availability requirements. However, you may be exempt from Nacha’s more stringent same-day funds availability requirements if you reasonably suspect that a credit entry is unauthorized.

Under Regulation CC, electronic payments such as ACH credit transfers must be “available for withdrawal not later than the business day after the banking day on which the bank received the electronic payment.” A “banking day” is a day on which your bank is open for business, and a “business day” is a weekday other than a federal banking holiday. A payment is “received” when your bank receives “actually and finally collected funds” from the other bank and they are posted to your bank’s account.

Nacha’s Operating Rules generally provide that same day entries must be made available by the receiver for withdrawal no later than 1:30 p.m. (for credit same day entries received in the first same-day processing window) and 5:00 p.m. (for credit same day entries received in the second same-day processing window). Same day entries are entries for which the effective entry date is the same banking day as the date on which the originating depository financial institution (ODFI) transfers the entry to its ACH operator.

Nacha’s Operating Rules also provide that if a receiving depository financial institution (RDFI) reasonably suspects that a credit entry is unauthorized, it is exempt from Nacha’s funds availability requirements; however, an RDFI must promptly notify an ODFI when invoking such an exemption. Consequently, we believe that you would be able to impose a one-day hold before making same day credit entries available for withdrawal — provided the customer receives the funds on the next business day after you receive the transferred funds, in compliance with Regulation CC.

For resources related to our guidance, please see:

  • Regulation CC, 12 CFR 229.10(b)(1) (“A bank shall make funds received for deposit in an account by an electronic payment available for withdrawal not later than the business day after the banking day on which the bank received the electronic payment.”)
  • Regulation CC, 12 CFR 229.2(p) (“Electronic payment means a wire transfer or an ACH credit transfer.”)
  • Regulation CC, 12 CFR 229.2(b) (“Automated clearinghouse or ACH means a facility that processes debit and credit transfers under rules established by a Federal Reserve Bank operating circular on automated clearinghouse items or under rules of an automated clearinghouse association.”)
  • Regulation CC, Official Interpretations, Paragraph 229.2(p), Comment 2 (“ACH debit transfers, even though they may be transmitted electronically, are not defined as electronic payments because the receiver of an ACH debit transfer has the right to return the transfer, which would reverse the credit given to the originator. Thus, ACH debit transfers are more like checks than wire transfers. Further, bank customers that receive funds by originating ACH debit transfers are primarily large corporations, which generally would be able to negotiate with their banks for prompt availability.”)
  • Regulation CC, Official Interpretations, Paragraph 229.2(b), Comment 2 (“The reference to ‘debit and credit transfers’ does not refer to the corresponding debit and credit entries that are part of the same transaction, but to different kinds of ACH payments. In an ACH credit transfer, the originator orders that its account be debited and another account credited. In an ACH debit transfer, the originator, with prior authorization, orders another account to be debited and the originator’s account to be credited.”)
  • Final Rule, Availability of Funds and Collection of Checks, 82 Fed. Reg. 27552, 27554 (June 15, 2017) (“In its proposal, the Board proposed to retain, without substantive change, Regulation CC's current same-day settlement rule because the Board believed that the terms of electronic presentment should be determined by agreement between banks. Most commenters agreed with Board’s proposal, stating that the terms of electronic presentment are already effectively governed by agreements between banks such that an electronic same-day-settlement rule would be unnecessary or even burdensome. Some commenters also believed that the Board should eliminate the paper same-day-settlement rule entirely, as the original rationale for its implementation is no longer relevant given today’s almost all-electronic check-presentment environment. Although the Board agrees that the terms of electronic presentment should be appropriately determined by agreement between banks, the Board believes that the existence of the paper same-day-settlement rule can be a valuable incentive for banks to negotiate electronic same-day settlement agreements.”)
  • Regulation CC, Official Interpretations, Paragraph 229.10(b), Comment 4 (“The availability requirements of this regulation do not preempt or invalidate other rules, regulations, or agreements which require funds to be made available on a more prompt basis. For example, the next-day availability requirement for ACH credits in this section does not preempt ACH association rules and Treasury regulations (31 CFR part 210), which provide that the proceeds of these credit payments be available to the recipient for withdrawal on the day the bank receives the funds.”)
  • Regulation CC, 12 CFR 229.2(g) (“Business day means a calendar day other than a Saturday or a Sunday, January 1, the third Monday in January, the third Monday in February, the last Monday in May, July 4, the first Monday in September, the second Monday in October, November 11, the fourth Thursday in November, or December 25. If January 1, July 4, November 11, or December 25 fall on a Sunday, the next Monday is not a business day.”)
  • Regulation CC, 12 CFR 229.2(f) (“Banking day means that part of any business day on which an office of a bank is open to the public for carrying on substantially all of its banking functions.”)
  • Regulation CC, 12 CFR 229.10(b)(2) (“When an electronic payment is received.  An electronic payment is received when the bank receiving the payment has received both (i) Payment in actually and finally collected funds; and (ii) Information on the account and amount to be credited. A bank receives an electronic payment only to the extent that the bank has received payment in actually and finally collected funds.”)
  • Regulation CC, Official Interpretations, Paragraph 229.10(b), Comment 2 (“Finally collected funds generally are received for an ACH credit transfer when they are posted to the receiving bank's account on the settlement day. In certain cases, the bank receiving ACH credit payments will not receive the specific payment instructions indicating which accounts to credit until after settlement day. In these cases, the payments are not considered received until the information on the account and amount to be credited is received.”)
  • 2023 Nacha Operating Rules, Subsection 3.3.1.2 Availability of Credits That Are Same Day Entries (“For a credit Same Day Entry received in the first same-day processing window, an RDFI must make the amount of the credit Entry available to the Receiver for withdrawal no later than 1:30 p.m. (RDFI’s local time) on the Settlement Date of the Entry. For a credit Same Day Entry received in the second same-day processing window, an RDFI must make the amount of the credit Entry available to the Receiver for withdrawal no later than 5:00 p.m. (RDFI’s local time) on the Settlement Date of the Entry. An RDFI whose local time is Atlantic Time may use Eastern Time to satisfy these requirements. For a credit Same Day Entry received in the third same-day processing window, an RDFI must make the amount of the credit Entry available in the Receiver’s account no later than the completion of the RDFI’s processing for that Settlement Date, subject to its right to return the Entry under these Rules. An RDFI is not required to make such funds available for withdrawal on the Settlement Date.”)
  • 2023 Nacha Operating Rules, Section 8.103 “Same Day Entry” (“An Entry for which the Effective Entry Date is the same Banking Day as the date on which the Entry is Transmitted by the ODFI to its ACH Operator, and is Transmitted by the ACH Operator’s deadline for same-day processing and settlement. A Same Day Entry must be for an amount of $1,000,000 or less. An IAT or ENR Entry cannot be a Same Day Entry. For purposes of fulfilling its obligations under these Rules, an RDFI may rely on the Settlement Date of an Entry, regardless of the Effective Entry Date. An Entry with a stale or invalid Effective Entry Date will also be a Same Day Entry if it is Transmitted by the ODFI to its ACH Operator by the ACH Operator’s deadline for same-day processing and settlement, and is otherwise eligible for same-day processing and settlement.”)
  • 2023 Nacha Operating Rules, Subsection 3.3.1 General Rules for Availability of Credit Entries to Receivers (“An RDFI’s obligation to make funds available under this Subsection 3.3.1 is subject to its right to return the Entry under these Rules. An RDFI that reasonably suspects that a credit Entry is unauthorized is exempt from the funds availability requirements of this Subsection 3.3.1. An RDFI invoking such an exemption must promptly notify the ODFI.”)
  • Nacha.org, Early Funds Availability: Sound Practices to Prevent Fraud (“The Rules exempt an RDFI from the funds availability requirements if it reasonably suspects an ACH credit entry is unauthorized. When that's the case, the RDFI must promptly notify the ODFI. Offering early funds availability can reduce the time an RDFI has to identify the validity of the payment.”)