Funds Availability on ACH Deposit

We are looking to allow online acocunt opening where the funds to open the account would be an ACH from another bank account from an outside bank, for the micro deposits and funding deposit.

Concern is what would we allow the opening deposit to be, and if the ACH comes in and the sending bank then claws it back after we have already made it available to our 'new' customer.

Currently our funds availability gives ach deposits immediate availability. Can we modify the policy to state that for new accounts opened online that opening ach deposit will not be available to them for 2 days? Or do we have to make ach deposits available when we recieve them regardless?

If you are the RDFI and the customer is sending money to your institution, then you have no wriggle room. NACHA rules require that an ACH credit be available by opening of your main office the day of the transaction. The liability for a transaction in this case is on the originator.

If your are the ODFI and are originating a debit to the customer's account at another bank, the credit to their account with you is simply an internal entry. You can choose to delay this credit until the timeframe for an RDFI to return the item NSF or stop payment has past. (However, the RDFI bank can still return an item 60 up to days later if their customer states that a transaction is unauthorized.)

This is the risk on online account opening. You have not identified your customer face to face, and you cannot be 10% sure that the account they are drawing on is actually theirs. A common ID theft scheme is to establish a bogus account online at your instiution and then fund the account using stolen account numbers from other institutions. The money is laundered through your bank and wired out before you realize there is an issue. If you implement this process, make sure it is addressed in your BSA risk assessment, IT risk assessment, etc.

While your Regulation CC disclosure may mention availability of funds from electronic deposits, the reference in the model forms is completely gratuitous and outside the scope of Regulation CC. Brian's right, the availability of these funds is governed by NACHA rules and you cannot alter it.

We absolutely understand the risk, hense our desire to mitigate it as much as possible. Internal discussion is how much we allow a new never seen before customer to fund the account. $100 doesn't seem practical, but with some internal people thinking 5-10k is reasonable (eek!) there has to be something in place to prevent that exact scenario.

So, in this case, since they new customer would authorize the funding via our website, we would be acting as the ODFI in this case, correct? (for give me, I'm not the AAP of the bank). And thus, we could state that the opening funding deposit once recieved will be available for withdrawl 2 days after reciept (giving the other bank time for nsf, stops, etc, realizing they still ahve 60 days to come back at us).

Do I sound correct?

You mentioned the "micro deposits" so based on this setup - you would be the ODFI. (You originate the small transactions and don't permit the large ones until the customer verifies the small amounts with their bank.) Consequently, since you are originating an ACH debit to the other account and providing an internal credit to the account at your own institution, you can delay that credit until the 2 days have passed per your account agreement.

For the operational guru's
Is there any way via disclosed policies, to limit outgoing wire transfers for new accounts for XX days to those deposits that the bank fees comfortable with, e.g. other than ACH?

There is no "claw back" provision within ACH. If the funds previously deposited were made available and the customer used some of the funds, any debit attempt via ACH to the account greater than the available balance would simply be returned as NSF.

This would be an internal bank policy and disclosure would need to be made when the account is opened, and you would need to definse procedures to make this happen. I'm not aware of any wire system - working in conjunction with your core - that would restrict this in an automated fashion. It would be manual, which means your opportunity to get this wrong increases.

Old topic but here goes:
Related question from a bank customer. I initiated a transfer to my checking account (ACH) at my bank to debit my checking account at a local credit union. A couple of days later (Friday morning) the funds arrive in my bank but are not available until Wednesday. My bank's policy is to hold those funds for 3 full business days. If I deposited a check Friday it would have been available Tuesday. My account has been opened 10+ years with no negative history and the transfer amount is less than $1200. Shouldn't the funds have been available Tuesday morning? (No holidays involved.)

I'm removed from deposit accounts for a while, but. . . .

229.10(b) Electronic payments--

(1) In general. 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.

(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.

That is a FRB regulation, and I'm not sure if Credit Unions have to comply with FRB. However, I believe that NACHA operating rules require a credit entry be made no later than the settlement date of the entry.

It would seem reasonable, "Bank Customer." However, the way in which you originated the transaction -- by arranging for an ACH debit to your credit union account to fund a deposit to your bank account -- doesn't make the bank account deposit an ACH credit. In fact it's a transaction that isn't even addressed directly in the Expedited Funds Availability Act or Regulation CC. It's a credit entry made by the bank on your instruction, offset by the outgoing ACH debit to your CU account. The availability delay for such a transaction at the bank end is whatever the contract for the service that allows you to initiate these transactions says the availability delay is.

I am surprised that it took a couple of days for the entry to show up on the bank's records, but ...

If you are able to have the CU debit your account there and transfer the funds to your bank via ACH, your bank is obliged to make the funds available to you the day the bank receives the ACH credit (no delay).

Thanks John.
The "Bank Customer" wording appeared convoluted (writer did not know terminology or processing) , and I was interpreting it as an ACH debit from the bank to an account credit at the Credit union.

Thanks for the quick reply Rocky and John.

Question for John: My credit union doesn't offer electronic transfers to other financial institutions. Wouldn't the fact that my bank received the funds via ACH make the deposit subject to FRB and ACH rules? My bank does not credit my checking until they receive the ACH.

Reg CC would seem to specifically include this type of transfer by definition:

An “account” for purposes of subparts B and C is a “deposit” as defined in 12 CFR 204.2(a)(1)(i) that is a
“transaction account” as defined in 12 CFR 204.2(e) (12 CFR 204 is the Federal Reserve Board’s Regulation
D). It encompasses consumer and corporate accounts and includes accounts from which the account holder
is permitted to make transfers or withdrawals by:
• Negotiable instrument;
• Payment order of withdrawal;
• Telephone transfer; or
• Electronic payments

How would this transaction not be an ACH deposit?

Thank you

PS: Rocky - it is my understanding that Federal Credit Unions do comply with FRB and funds availability regulation.

But you missed my point. Your bank didn't receive the funds in an ACH credit. If it had (transaction initiated at the CU), they would be available the day your bank received them.

Instead your bank sent an ACH entry out (it was the originating institution, not the receiving institution) -- a debit or charge to the CU.

Credit unions -- both federal and state -- are subject to the Federal Reserve's Regulation CC.

I agree that your account is an account for the purposes of Regulation CC. The problem is the form of the deposit. It was not an ACH credit, nor was it a check. It was a credit entry posted to your account funded by the outbound ACH debit. It simply is not covered by the regulation.

Since the credit union has one business day to decide to return the debit as a stop payment, NSF, etc. and that notification may take another day to reach the bank, it is not going to make funds available to you until this time frame has passed.

I just want to make it clear that if this were an inbound ACH credit transaction, it would be an electronic payment as Rocky described it above. But it was not an inbound ACH credit. The ACH transaction was a debit outbound from the bank to the credit union (to fund the pending credit entry to Bank Customer's account at the bank).

Think of it this way. If I make a deposit comprising 5 checks at the teller window of my bank, my bank is required to provide me access to the funds from the checks within a time limit or time limits imposed by Regulation CC. Note that the availability is based on the checks, not the deposit entry itself. If one of the check is a U.S. Treasury check payable to me, I get access the next business day. If three of the other checks are non-government payroll checks drawn on other banks, I get access the second business day after my deposit. If the fifth check is one I've deposited before and it bounced for NSF, the bank can delay access to that check's funds until the 7th business day following the day I deposited it. Each of those checks goes on its way to its paying bank and is paid or not paid.

Bank Customer's deposit has a deposit credit instead of a deposit ticket and an outbound ACH debit instead of a check on the CU. Because it's not a check, the Regulation says nothing about the availability of the funds to come from the ACH debit. The deposit credit is not an electronic credit of the type described by Rocky P; it's a credit entry, period.

Thank you all:

Yes, I was stuck on the deposit coming into my bank being an ACH! Instead, the incoming deposit must have been a bank-bank transfer via the Fed and/or other intermediary institution. That explains the banks policy being 3 days before making funds available. Interesting that a paper check will clear sooner than the electronic transaction.

I think I'll recommend that my credit union initiate a new service ... transfers to other financial institutions! LOL

Thanks again for your attention and time to an unregistered visitor.

Bank Customer