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NCFS F. A. Q.
What is the risk for a bank regarding ACH?
When a merchant takes a check that is returned NSF, the amount of the returned item is debited from the merchant's account. With ACH, the same applies.
The risk lies in the stability of the merchant and amount of money that is likely to be on deposit at the time that an ACH item returns and a charge-back is required. If the merchant has enough money on deposit and the bank believes that funds will be available should a charge-back be required, the risk would be assessed as low.
If the bank feels the merchant would be likely to not have adequate funds in the account, the risk would be high. This is the reason banks require a deposit to secure, or collateralize, the transactions.
The riskier the transactions, the greater the amount of the deposit required.
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Why is a merchant's business stability a factor in determining risk?
If a bank should have to charge-back to a merchant any returned ACH transactions, the bank wants the business to be "in business" so they can be assured of collecting any amounts due.
That is why small, new businesses cannot find a bank that will originate ACH transactions for them without large amounts of money on deposit. Most new businesses do not have large amounts of money to leave on deposit to collateralize ACH transactions.
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Are banks more likely to offer ACH services to big companies only?
As a rule of thumb, because of stability and security, banks are more likely to offer ACH services to big companies rather than small to medium sized companies. But, that is not the only consideration.
Banks are interested in customer deposits and loans. Customer deposits means money that the bank can lend overnight--literally for one night--to other banks. It is a safe investment, and when a merchant is large enough to be attractive to a bank for its deposits, the bank is likely to price ACH services very inexpensively to keep or attract a merchant's business.
However, the bank will typically have rigid policies such as scheduled days when a merchant can transmit a data file to the bank and make the merchant do all the preparatory work associated with the data file.
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Is there an average price that banks charge for ACH services?
Basically, the risk associated with originating ACH transactions for a merchant will be the primary element that determines the price a bank will charge. Since every merchant is different and each bank's risk tolerance is different, ACH prices vary broadly.
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How is the transaction information transferred from the merchant to the processing center?
The merchant will submit a comma delimited (*.CSV) format outline of the transaction information directly to our processing center.
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Whom do I contact for assistance with ACH questions?
For ACH assistance please contact admin@ncfsystems.com. For application processing assistance, please contact our office at info@ncfsystems.com or call 888.942.7401.
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Is there a minimum number of ACH transactions required?
NCFS does not have minimum volume requirements.
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What will happen with a NSF transaction?
ACH transactions can be returned just as a paper draft can, the processing center will automatically resubmit items, and even collect a return fee with a separate ACH transaction, at no additional cost to the merchant. This service is included at no extra charge to the merchant.
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Can NCFS give me an early indication of whether an ACH merchant applicant will qualify for ACH services without having putting the merchant through the complete Application process?
Approval or denial of an ACH Service Application for a merchant is a comprehensive process. A merchant operating in a typically unstable industry might be approved given the financial strength and creditworthiness of the company and its principals. Conversely, a large and apparently stable business may also be denied because of financial information obtained or a lack of creditworthiness. NCFS and its underwriters will not make a pre-judgment on a business without an Application and the proper supporting documents.
Traditionally, one indicator of problems is when an applicant is in a hurry for an answer. This is usually because the applicant has been denied credit many times before and they want a less-than-thorough review in hopes of "slipping by." That fact is well known among lenders. Whether the desire for an early indication about approval or denial likelihood is for your own benefit or the merchant's, haste does not help your merchant applicant's case.
The merchant should thoroughly review the Merchant Agreement and its requirements based upon the type of business it is (Corporation, Partnership, Sole Proprietorship, etc.) They should be sure to provide all required documents and allow the process to work. We cannot know how to respond until we have information. NCFS wants to work with you and we do want to approve as many merchants as possible.
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What is the average time frame for an ACH Application to be approved?
The underwriting process usually takes between two to three days from the completed Merchant Application is received by us. If more information or additional documents are requested, it usually takes up to a week.
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Will there be any additional items or documents requested that are not listed on the ACH Merchant Agreement?
Yes, that is a possibility. Upon our underwriters review of the file, additional items and/or documentation may be requested by our processor before a decision can be made, which may include but is not limited to: Corporate Resolution, Bank Statements, Financial Statements, and/or Tax Returns.
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Would there be a possibility that a merchant would incur any additional fees that are not listed on the ACH Merchant Agreement?
No. Some types of merchants (home based businesses, mail order/telephone order, principals with unsatisfactory credit history, new business etc.) may be required to give our underwriters a small percentage of funds to be held for security. That requirement enables our underwriter to approve their application when most other processors will not.
Each application is reviewed on a case-by-case basis. This is one of our processor's risk management policies.
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What happens if someone commits a fraudulent ACH transaction against an innocent consumer?
If the defrauded consumer reports the fraudulent transaction to the bank, the bank will advise the defrauded consumer that an Affidavit will need to be signed. The Affidavit will indicate that the transaction was not authorized and 100% of the defrauded consumer's money will be restored in the account.
Next, the transaction will be returned as an R10 - "Consumer Advises Not Authorized" - to the merchant's bank or third party processor's bank. The original merchant is charged back the amount of the transaction and would be required to pursue legal recourse against the consumer if the transaction has, in fact, been properly authorized.
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I have a business that is located in a foreign country (outside of the USA), can I sign up for ACH services?
No. We can only accept the transaction as long as the funds are drawn on a US Federal Reserve member bank.
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Why is a personal guarantee required on the ACH Merchant Agreement?
In the event that a merchant causes a loss to the ACH system, if the business itself (in this case a corporation or other entity other than an individual) is no longer around to cover the total amount of the loss, then the next entity in line must cover the remaining loss. The personal guarantee merely asks the principles of the business to "personally" stand good for any losses that their corporation/partnership/etc. causes. This is a perfectly reasonable request. When the principal of a business refuses to sign the personal guarantee, thereby indicating that he or she does not have confidence in the stability of their business, it immediately raises the question, "'If the merchant does not have confidence that they will not cause losses, then why should we take the risk?'"
The Personal Guarantee from a duly authorized corporate Principal, Officer or Executive will be a standard requirement for each merchant. In the same way that the signature authorization language for the electronic collection of an NSF fee often creates hesitancy in an NSF check writer, a personal guarantee serves as a "red flag" when a merchant will not comply. An underwriter would wonder why the merchant - or a principal of a corporation -- would not attest to the financial integrity and stability of the business.
However, the personal guarantee is more frequently an absolute requirement of small, privately held companies than of the larger, publicly held ones. The main objective is proving the financial stability of the applying business.
By government regulations, a publicly held company's financial statements must be made available in an Annual Report, and therefore is easier to determine the company's financial stability. Privately held companies are not required to release financial information, which makes it harder to determine their financial position, and for an underwriter, that determination is critical.
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Can a merchant submit credit transactions along with their debit transactions when sending their ACH file to NCFS?
Currently, you can only submit electronic files for ACH debiting. We anticipate being able to offer this service very soon.
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Will online reporting be available for ACH and iCheck services?
We anticipate being able to offer this service very soon. Online reporting will be the only option.
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If a merchant has Recurring and Non-Recurring ACH customers, how do they differentiate between the two types of ACH transactions?
Only one ACH Agreement will be needed if you state the above situation, along with the two different rates that the merchant will be charged. After the merchant is approved they will receive a Merchant ID#.
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If a merchant is signing up for Automated Payments for their Non-Recurring and Recurring ACH transactions and will also be signing up for iCheck (online electronic check) will they be debited for the setup fee for each service?
No, NCFS has only one Merchant Agreement that has to be completed. The merchant will be debited for their total setup fee one-time only. Additional services that are requested by the Merchant at a later date will require a additional Agreement but no additional setup fee will be required.
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