February 06, 2007

Effective Jan. 1, NACHA, the electronic payments organization, announced it would impose per-transaction fees and fees for the use of the ACH network. The goal, according to the organization, is to use the monies to further fund enhancements to the ACH network.

NACHA is assessing financial institutions a fee of $0.0001 on all ACH transactions except "on-us" transactions. The group is also assessing every financial institution using the ACH network an annual fee of $42, including those that choose not to be members of regional payments associations.

With the transaction fees, all financial institutions will contribute to risk management, rules enforcement, quality and other ACH network administration programs in direct proportion to their use of the network. The annual fee will be put toward the maintenance of the NACHA Operating Rules.

Network administration fees should not have much of an overall impact on banks, says Michael Herd, a NACHA spokesman. "For many banks with low-to-modest ACH volume, the fees will likely be less than $1,000 per year. For many community banks the fees will likely amount to even less than that."

Network administration fees will support NACHA's ACH network administration services, which will be provided "at cost" to the industry. These services include: 1. Maintenance and enforcement of the NACHA Operating Rules; 2. ACH network risk management programs and alert services; 3. ACH network quality improvements; 4. Development of rules for new ACH applications; 5. ACH network communications, research and statistics; and, 6. Administration of the National ACH Marketing Campaign.

"The intention of these fees is to provide a predictable resource to conduct rulemaking, risk management, quality improvement, and other network administration and infrastructure programs that are of value to financial institutions and their customers," explains Herd. "So they should greatly aid the industry in maintaining a reliable, cost-effective payments system."

Transaction fees will be assessed on all originated and received ACH credits and debits, including non-dollar transactions. All commercial inter-bank and Federal government ACH transactions are subject to the fee, but not "on-us" transactions that stay within a single financial institution. The annual fee will be assessed on a monthly basis at $3.50 per month. While the fee levels are set for 2007, the amount of the ACH network administration fees will be approved annually by NACHA's Board of Directors and published in the Schedule of Fees section of the annual ACH rulebook, according to the association. The ACH operators — the Federal Reserve and the Electronic Payments Network — will bill and collect the fees on behalf of NACHA via their monthly billing statements to financial institutions. The fees are also separate and distinct from membership dues in NACHA or a regional payments association.

ACH has often been touted as a very cost-efficient means of transmitting payments electronically. According to Herd, banks should not be very concerned about these new fees undermining that fact in any way. "Generally, the reaction from financial institutions has been very supportive," he comments. "This rule worked its way through the NACHA rule making process for some time, and most of the banks involved have supported the concept in principle, even as we worked out the details."

Patrick Moore, SVP and director, treasury product management with Cincinnati-based Fifth Third Bank, thinks the newly instated fees are a positive in terms of maintaining the ACH system. "Fifth Third is supportive of the transaction fee to ensure that the network creates sufficient value to sustain itself and delivers risk tools to improve the overall effectiveness and efficiency of the ACH network," Moore says."

"With the network administration fees, the ACH community now has a mechanism to equitably fund network administration services in proportion to each financial institution's use of the ACH network," states NACHA's Herd. "I think that's the key for the banks — that the funding for important network programs is being shared equitably."

ABOUT THE AUTHOR