I know that Reg CC states that an ACH isn't considered received until it is "fully and actually collected funds" and that we cannot place a hold on the account in which the ACH file will be processed against before the settlement date. I also understand that the funds must be made available to the customer on the settlement date. My question is - can we within our online banking agreement require that commercial customers to have the funds (amount of the file)in their account on the day of transmission? Management is wanting to make sure that the files are not processed against an account without funds available causing an overdraft of the account. I am a little confused with their requirement of funds in the account since we can't place a hold on the funds - nothing is safeguarding the funds on the settlement date. For example, funds/amount of file could be in the account on date of transmission but not on settlement date. Any information you may have or guidance is greatly appreciated.

Regulation CC doesn't prevent you from holding funds pending the posting of an ACH debit (for example, putting a hold on a business's account to ensure the funds are there when the ACH debit comes in to transfer funds to the payroll processor or employee direct deposits). It's very common, for instance, for the debit to an employer's account to post the business day before the direct deposits to employees are credited -- the day before payday.

If we placed a hold on the commercial customer's account for the amount of their ACH file (e.g., payroll), is this considered prefunding? I have heard of others talk about prefunding, but just not completely sure of what it is. Also am I right in assuming if we were to place a hold on the amount, it must be clearly stated within our internet banking agreements and can only hold the funds until the date of settlement? Thanks for all your help.

There would be no reason to hold the funds after you've charged them for the payroll.

My concept of prefunding involves actually charging the business for the payroll (getting good funds) before releasing the payroll to the ACH operator.

Thank you very much.

We view pre-funding as having good funds as of transmittal date also. We reserve this right (with notice) in our Originator Agreements. We only invoke it if we have a customer that we suspect will not have funds available on settlement date. A very rare situation for us.