ACH is an abbreviation for Automated Clearing House. It is an electronic payment system which recieves, processes and clears payments in the form of Direct Credits (DC) and Direct Debits (DD) on behalf of financial institutions especially banks.
ACH payment exist under two broad types, namely;
- Direct Debits also referred to as Direct Pull Payments. They are usually recurring payments such as mortgages, utility bills, insurance premiums, etc.
- Direct Credit also referred to as Credit Push payments. Examples of Direct Credit Payments are salaries, pensions, welfare benefits, commitions, supplier payments etc.
A direct debit is where the Company takes or pulls the exact amount of money owing from your nominated account at your bank on the due date.
A direct credit is where you debit your account and push the amount of money to pay your bill directly into the service provider or company’s bank account.
A direct Debit is an instruction from a customer to their bank or Savings and Loans Company authorising an organisation to collect varying amounts from their account, as long as the customer has been given advance notice of the collection amounts and dates.
Direct Debit Payments include:
- Business-to-business payments
- Insurance Payments
- Utility Payments
- Mortgage Payments
- Loan Payments
- Rent Payments
- Subscriptions Based Payments.
In a Direct Debit transactions, the payer enters into the an agreement with the service provider, (for instance a mortgage, electricity or insurance company) under which he/she signs a mandate authorising his/her bank to accept future payment requests from the service provider, to debit his/her account and transfer funds to the service provider.
- The mandate is completed by the payer for the service provider who lodges copies with his/her banker and through his banker to the payer’s bank.
- The Payer’s bank will, on receipt of the request, debit the nominated account if the account is available and has adequate funds to cover the debit.
- The existence of a valid mandate is the responsibility of the originator’s bank and the payer’s bank may or may not confirm its existence.
- If the receiver (the person whose account is debited) challenges the debit for any reason whatsoever, the receiver’s bank must credit his/her account and seek a refund from the originator’s bank.
- Service Provider shall advise its bankers about the desire to be adopted into the ACH scheme as an ‘Originator’
- The bank will perform due diligence and acquire a unique Originators’ Identification Numbers (OIN) for the Service Provider.
- The Service Provider will then sign an indemnity with the bank.
- All paying clients would be informed about the new means of collection and must be made to sign direct debit mandates between them (payer) and Service Provider (originator).
- These mandates could be variable if there will be changes in agreed amounts to be debited. The mandate indicates a customer’s bank name, bank branch, sort code and account number from which payments will be made.
- Notice of changes to amounts to be paid will be indicated to the payer within ten (10) days to allow disputes to be resolved or agreements reached before deductions are made.
- One of the four copies of the mandate is given to the payer. The originator (Service Provider) — keeps a copy for their records and scans or sends one to their bank which will in turn scan a copy through GhIPSS to the paying bank.
- For collections, the originator will send a file bearing the payers’ bank branch, account number, sort code and amount to be debited to their (Service Provider's) bank. This file will be sent to the paying bank for payments to be made into the Service Provider's nominated account.
- The Service Provider will agree with their bankers when and how they will like their statement of account for reconciliation purposes.
Direct Debit is recommended for the receipt of payments by service providers because it provides so many advantages such as:
- Assurance of payment
- Excellent cash flow benefits from receiving regular payments
- Low cost of administration compared with requesting consumer-initiated payments.
- Precise control over payment timing.
- Reduced time is spent chasing unpaid or delinquent accounts.
- Greater accounting efficiency – identify unpaid items quickly.
- Direct Debit is simple - it eliminates many of the labour-intensive manual process involved in handling cheque payments, improving the accuracy and efficiency of your operations.
- Predictable Cash Flow – The timing of receipts for organizations using direct debit will be more predictable and reliable, allowing for more accurate cash flow forecasting and informed investment decisions.
For individuals, organisations and consumers in general, Direct Debit is the preferred payment method because of the following advantages:
- It spreads the cost of bills across the year, allowing easier budgeting.
- Peace of mind – of knowing bills are being paid automatically and payment dates will not be missed.
- It’s more convenient – many organisations offer a choice of payment dates giving you the convenience of choosing a date that suits you best.
- It’s guaranteed – the reassurance of knowing that every direct debit is protected by three main safeguards: an immediate money back guarantee from the bank or savings and Loans company if an error is made, advance notice from the organisation if the date or the amount of the direct debit changes and ultimately, the right to cancel.
- What’s left is available to spend – paying regular bills by direct debit means it is easy to see what disposable income is left to spend after all other commitments have been met.
- The consumer is protected by rules under the guidelines from wrongful debit to his account
Yes, you can cancel a Direct Debit. The mandate form given to you by the Service Provider / Creditor will specify the number of days’ notice required before you can cancel a Direct Debit. Simply write to your bank or savings and Loans company. It is also a good idea to send a copy to the organisation concerned.
Remember that cancelling the Direct Debit simply stops the payment to the organisation. If you carry on receiving the goods and services then you will have to agree an alternative payment method with the supplier.
Most commonly, you would be required to complete a written Direct Debit, obtained from the organisation you wish to pay and return it to them for onward transmission to your bank.
If any payment is made in error, you should contact your bank or savings and loans company which is responsible for giving you a full and immediate refund within 3 working days – even if the error was made by the organisation collecting the payment.
The first step is to speak to the company collecting payments from your account to explain the change you are requesting and to either amend or complete a new mandate as necessary. It is also a good idea to tell your bank about the changes that you have requested.
Overall, you as the customer are in control of direct debit payments. You authorise them and you can also stop or cancel them at any time. In terms of ensuring that payments are made, the bank or savings and loans company that holds account is responsible for all aspects of the operation of that account. They are therefore answerable to you for all transactions passing through your account, including those made by direct debit.
All organisations must be sponsored into the Direct Debit Scheme by their bank or savings and loans company. They are checked for integrity, sound financial standing and stringent administrative controls before being permitted to offer direct debit to their customers.
The Direct Debit guarantee is offered by all banks and savings and loans companies that take part in the Direct Debit Scheme. The efficiency and security of the Scheme is monitored and protected by your bank or savings and loans company. They guarantee that:
- If an error is made by the organisation or your bank or savings and loans company, you will receive a full and immediate refund from your branch of the amount paid.
- You can cancel a direct debit at any time by writing to your bank or savings and loans company. Also send a copy of your letter to the organisation. You would however have to give a reasonable notice to the company/service provider and make alternative arrangements to pay all outstanding debits.
ACH processing solutions are highly reliable, effective and enhance the efficiency of a wide array of organizations such as:
- Service Providers
- Mortgage Companies
- Financial Institutions
- Insurance Companies
- Utility Companies
- Government Agencies
- Clubs and Associations
- Private Enterprise etc.
The average time for a standard customer to receive funds in their bank account is one (1) day.
No. There is no minimum amount for ACH payments.