I have a couple questions regarding ACH deposit holds. (To clarify: we are initiating a debit entry to our customer's account held at another bank on our customer's behalf and then making an entry to our customer's account)

1. Can we place a hold on the funds for any reason such as a "new account" rule?
2. Do we need to provide notice at the time of transaction or disclose our ach deposit holds in our ach agreement?

Any guidance would be appreciated!

An internal credit to offset a debit ACH origination is not an electronic funds transfer covered by Reg CC or Reg E. The length of time before you make funds available to your customer will be based on the agreement you have in place when the customer contracts for the service.

I'll simply add here that many such credits (the credit tp the account that offsets the outgoing ACH debit to the other bank) are processed similarly to ACH entries, but they are not ACH (they are internal credits). Brian's given you good advice (as he normally does).

Most kind, John. As I reread my post, I see our friendly autocorrect used the word "internet credit" instead of "internal credit." Thanks for providing the clarification.

Have you met our "Preview Reply" button, Brian?

Seriously, I have had many occasions when I have wished I had previewed my post before committing it.

BTW, I tweaked Brian's post to change "internet" to "internal" in May 2021, in case you're wondering why "internet" isn't there. -- JSB

Thanks for the replies

Since it's been discussed in a previous thread updated in 2014 and also more recently here, I would greatly appreciate your comments and confirmation of our understanding in order to comply with online account opening funding for new clients with ACH Debits and the ability to hold funds.

The questions below relate to an online account opening process for new clients. After completing the online application, approved clients have the option to fund their new account with funds from an external source – an account they hold at another FI - via an ACH Debit and we are the ODFI.

1. Can we place a hold on the initial funds received as an ACH Debit? Our understanding is “yes” because:
• an ACH debit does not fall under the definition of an electronic payment under Reg. CC (II.Section229.2 Definitions (p) Electronic Payment, which imposes no availability requirement, and we are free to hold the funds for a period that we determine. Restricting access to those funds would be reasonable to allow for the debit entry to reach the RDFI and be returned to our bank, the ODFI, if there is a problem.
• we are not receiving an ACH credit as we are the ODFI of the ACH Debit, and NACHA has no say in when we credit the new account, so there would be no violation of NACHA rules.

2. Would we be required to provide a hold notice to our online account applicant of the delay in availability or would a notice at the time the external funding option is selected that the funds may not be credited to the account for “2-3 days”, or available for “2-3 days” suffice? Our understanding is:
• a notice that indicates funds may not be available for x days at the time the customer selects the external funding option and submits their authorization should suffice as it becomes part of our agreement when the customer selects that funding option.
• Reg. CC does not impose an availability requirement for ACH Debit transactions, so no Reg. CC hold notice is required.

3. Would our Reg. CC Policy – Funds Availability Notice need to be updated to refer to availability from ACH Debit transactions?
• Model language is silent in this regard, any recommendations or suggestions are welcome.

Thank you for helping me in pulling all of this together for our team.

Without verification that they have control over the account they are debiting, what are you going to do, hold the ACH debit for the time period that it can come back as a unauthorized transfer? A few days is not going to do you any good.

Randy makes a good point, you aren't going to place a hold for 60 days past date of statement...but maybe the account they are debiting, if not theirs, does notice it within a few days and generates the return...hopefully you are also using a product that scans for fraudulent activity and noted bad actors...

however, to answer you question, you would need to disclose to the customer the length of hold and when finds would be available. You could choose to update your funds availability policy, but if this is a hard copy print every single time you decide to alter the availability you are reprinting a bunch. you can place a notice on the page they are using to sign up, and require them to acknowledge and accept the terms of availability prior to letting them get to the next step; this should be something you can easily produce if challenged.

i would not say "X to X days" but instead simply state funds will be available on X day - pick the furthest out you would hold then if it is available sooner no problem.

We are using a third party verification of the account they are debiting using their credentials. If that confirms successfully, they can set up the Debit and we would hold it for the time period it could come back from the RDFI for a problem with the account, which we understand to be 48 hours. This is only for the initial funding.

This hold is not intended to eliminate the unauthorized claim 60 days out, but to manage the risk of the first funding as we typically provide more immediate access to our account holders.

The customer is giving you their on-line credentials at the other bank and then not only you have them but also a third party vendor - all I have to say is WOW.

Ignoring the risk of fraud that Randy Carey is correctly concerned with, the credit to the new account is an internal entry and not an ACH entry. The ACH debit leaves the bank to pull funds from the account at the other bank. The credit to the new account is an offset -- accounting-wise -- to the ACH debit.

As explained back in the early days of this thread, there's no implication of Reg CC for that credit, either. You don't need to include it in your funds availability disclosure. But you should explain it to the new customer lest they try to pull funds right away.

I see most of my clients implement a 2 to 3 day hold of opening deposits to fund a new account opening. This gets them past the Nacha return window for administrative returns (R01 - NSF, R02 - Account Closed, R03 - Account not found, R04 - Invalid Account Structure) as those Return Entries must be received by the ODFI's opening of business on the second Banking Day following the Settlement Date. If commercially reasonable account validation procedures for the account to be debited are in place, there would be a high comfort level of proper funding of the new account. I've seen numerous FI's get hit with fraud losses from making opening deposits to new accounts immediately available.

I am crossing Regs here, but would ACH Debit Transfers initiated by us from an external bank account to our client's account be disputable via Reg E, or would the client have to initiate a Reg E claim at the external bank? If what we're depositing to the client's account is an "Internal Credit", I am assuming we wouldn't have to follow the strict investigation/notification practices of Reg E - though of course we'd still check our own records.
Thoughts? Previoulsy, I thought those transactions should be subject to Reg E claims.

The EFT affected the customer's account at the other institution. That's where the EFT claim should go.