Posted by NationalACH on Oct 21, 2015
echecks, Check21, electronic checks

Why You Need an E Check Processor 

The ACH network is reliable & safe.   And remains a good choice for echeck processing for merchants that have low return rates and few revoked transactions.

Yet, new regulations from NACHA  have many companies scrambling for viable alternatives to the ACH network for processing payments.   The problem became especially clear this fall after the new NACHA regulations came into play.

The new rules for ACH processing seriously limit the volume of returns & revoked transactions that can flow through a processing account.    Returns are now required to be less than 15%.  

And revoked transactions must be less than 1/2 of 1%.  Which is even lower than the 1% chargeback rate allowed by the card brands to maintain an card processing account.  

These restrictions have severely impacted merchants across all industries. Companies in high risk industries have been particularly hard hit because their business models often make it challenging (if not completely impossible) to maintain ACH returns and refund ratios.  

Alternative to ACH Payment Processing

Obviously, you want and need to continue to accept echecks as a method of payment.  Echecks are the most popular alternative payment option for US consumers.  

All US merchants are wise to accept both cards & echecks to boost profits.   And to satisfy the needs of your customers who expect to be offered multiple payment options.

For a long time ACH was the only technology used for processing electronic checks.  However, new technology based on Check 21 Law is increasingly popular. Echeck items clear through bank-to-bank funds transfer rather than through the ACH network.

Because the transactions do not clear through the ACH Network, echeck transactions are not subject to the rules and regulations of the ACH network. As a result, there is far greater flexibility in the number of allowed returns and revoked transactions than with an ACH processing account.  

The consumer experience with both ACH and echeck processing is the same. A routing and account number is obtained from the customer.  One time and recurring transactions are acceptable.  

Regardless of  technology, all an echeck really does is debit money from your customers' bank accounts and automatically credits the funds to your business bank account.  

Echecks for Online Lenders, Collections, and High Risk 

High risk merchants that want to receive and send payments are finding it increasingly difficult to obtain processing accounts.  Most high risk merchants find it almost impossible to maintain the low return and revoke threshholds now set by NACHA for ACH payments,.  As a result, high risk merchants need to accept echecks rather than ACH payments.     

Risk in the payment industry is caused by a variety of factors, one of which is conflicting, or increasingly restrictive regulations. The legal aspect will most likely remain problematic for some industries, such as online lenders, where each and every state has its own rules.  

Rules vary by states and include items such as  caps on interest rates or loan amounts.  Some states, such as  Vermont and New York, banned this type of service entirely. Obtaining the appropriate licensing in all states where online lending can be carried out legally is an arduous and expensive process, while unlicensed lenders are heavily targeted by regulatory bodies.

In addition to these legal difficulties, online lenders have an image issue, as illustrated by a recent high-profile case involving a fraud scheme in which people were forced by a bogus online lender to pay debt that they did not even own. Even though these unacceptable practices are not inherent to the lending business, such incidents have a negative impact on the entire online lending industry.

It is precisely this type of situations that the Online Lenders Alliance is seeking to avoid by establishing a set of best practices and by offering resources to individuals who think they are victimized by dishonest online lenders and debt collectors.

Yet, despite all of these challenges, lenders, collections, and money service businesses all will benefit from using echecks.  As will companies in any industry that  wants to have maximum processing limits with flexibility in returns and revokes.


E checks give high risk merchants a proven method to accept checks online without worrying the changes in ACH processing rules.  Electronic checks are the perfect solution for companies that need greater flexibility on chargebacks and returns.  And an echeck account is easier to establish than high risk processing for cards.  

Are you a high risk merchant that wants to increase profits with echeck processing?

Contact info@NationalACH today.