Large ACH originators could be hit with unintended fees once same-day ACH starts September 23—and banks have done little to educate treasurers about them, one expert noted.

“Large originators that are not paying attention to their EEDs [effective entry dates] could be charged thousands of dollars for same-day credits that weren’t intended to be same-day,” said Chuck Phipps, product and operations manager for NetSpend. “I wonder if banks are explaining this to their corporate originators?”

As noted during last month’s Treasury Advisory Group (TAG) meeting, some treasurers are frustrated with the lack of answers they’re getting from their banking partners about same-day ACH. That’s a problem because, according to Phipps, there is a major lack of awareness among corporate originators about how same-day ACH credits will be tagged and charged. EEDs are a case in point.

Why treasurers face inadvertent same-day ACH charges

Once September 23 hits, Phipps predicts many originators will be hit with inadvertent charges due to sloppy habits in the ACH origination process, which have never mattered up until this point. “There’s a field in every ACH batch-header called the effective entry date, which essentially means ‘I request this to be the date of settlement for the following transactions,’” he explained. “Under current rules, all ACH transactions settle the next day at the earliest and the ACH operator inserts the true settlement date into the batch. If the EED is stated as the next day, the two dates match. If the EED is wrong—stale-dated, same-dated, or too-far-future-dated—it’s ignored and the ACH operator imposes the next banking date for settlement.”

Incorrect EEDs have been incredibly common for decades, and it has never been an issue, Phipps noted. In fact, many originators have hard-coded their ACH software to make the EED be the same day as their file creation, because it has always resulted in next day settlement. “Here’s the looming problem with that: Same-day ACH credits will be tagged by looking at the EED. If credits are initiated in the morning containing the current date in the EED field, those items will be transmitted to the network as same-day ACH—and each one charged the same-day fee of $5 each or more,” he said.

Come September 23, large originators that are not paying attention to their EEDs could be charged for thousands of same-day credits that weren’t intended to be same-day. “I wonder if banks are explaining this to their corporate originators,” Phipps said.

Worst-case scenario: $57,500 in surprise ACH fees

Phipps provided a hypothetical case study about a national restaurant chain with 5,000 employees that uses a payroll processor to handle its wage payments. Friday is payday, so the restaurant’s treasury manager makes sure that hours and payroll changes are uploaded to the vendor on Wednesday, so that direct deposits can be originated through the bank on Thursday and received in employees’ bank accounts early Friday morning. The treasury manager, no expert on ACH, trusts that her payroll processor is compliant with all the rules.

The employee at the payroll processor who uploads the restaurant’s weekly ACH files to the bank, also not an expert on ACH, is accustomed to entering Thursday’s date in the bank’s ACH software’s EED field. He assumes that date is correct, since every ACH transaction originated that way was settled the next day—just like the treasury manager wanted.

While the treasury manager has heard a bit about same-day ACH and believes it may eventually come in handy for last-minute payroll corrections, there have been no formal decisions on whether the company plans to use it.

Fast-forward to October 2016. An analyst comes racing into the treasury manager’s office, waving the bank’s monthly analysis statement. She’s pointing to a new line they’ve never seen before called Same Day ACH Credits. She’s shocked to see almost 10,000 items at $5.75 each. Since the EED was set as the same day as the file submission, the direct deposits were all marked as same-day ACH, triggering a charge for each one.

To avoid this scenario, treasurers must be aware of the dates entered into the EED field. And if they use a third-party service for ACH origination, whether for payroll, disbursements or payables, they need to make sure that service is entering the correct date. If not—they could be out thousands of dollars come September.

Phipps provided a quick checklist for treasurers to consider as same-day ACH draws near:

• Is your bank offering same day ACH?
• Do you, or an outsourced processor, create ACH files and upload to an ODFI (originating bank)?
• Do you or your processor typically upload your ACH files in the morning?
• Do you originate a lot of direct deposits that are less than $25,000?
• Do you accurately specify the effective entry date for your transactions?