ACH Updates, Fraud Prevention, and New Payment Rules: What Your Business Needs to Know
Stay informed and prepared — from understanding NOC and return codes to upcoming NACHA rule changes, fraud monitoring best practices, and the federal shift to electronic payments. BSB is here to help your business stay compliant, secure, and ready for what’s ahead.
NOC and Return codes
NOC and return codes are used in the Automated Clearing House (ACH) network to communicate errors in a transaction. NOC (Notification of Change) codes inform the sender to correct outdated information, while return codes indicate the transaction failed and was rejected. Common return codes (R) include R01 for insufficient funds and R02 for an account being closed, whereas common NOC codes (C) like C01 indicate an incorrect account number and C02 indicate an incorrect routing number.
Notification of Change (NOC) codes
Used when information in an ACH entry is incorrect but must be corrected for future transactions.
- C01: Incorrect account number
- C02: Incorrect routing number
- C03: Incorrect account and routing numbers
- C04: Incorrect account name
- C05: Incorrect transaction code
NOC Rules for the Originator
Update the account information in your records immediately to ensure future transactions are successful.
- Six banking days:
The company receiving the NOC has six banking days from the date of receipt to update their customer’s records. - Urgent action:
If you are about to send another ACH entry to the account, you must update the information before that transaction is processed. - Importance:
Failing to act in time can lead to future transaction failures, increased processing costs, and potential penalties for non-compliance.
Return codes
Used when an ACH transaction fails to be processed and is rejected.
- R01: Insufficient funds
- R02: Account closed
- R03: No account/Unable to locate account
- R04: Invalid account number
- R05: Unauthorized debit to consumer account
- R08: Payment stopped
- R10: Customer advises not authorized
Investigate the reason for the failure. You may need to contact the customer to get updated information, stop future payments, or delete the transaction entirely.
Risk-based processes and procedures
Fraud – Tips for monitoring your accounts for fraud
1. Review Bank Statements and Credit Card Statements for:
a) unfamiliar charges
b) unexpected amounts
c) locations you haven’t visited
d) changes to your contact information
2. Use Bank and credit card alerts to monitor your accounts:
a) set up notifications or eAlerts for transactions exceeding a certain amount, or low balances
b) understand your typical spending patterns and regular expenses
3. Monitor your credit report to identify fraudulent accounts opened in your name
Download your annual credit report at annualcreditreport.com – includes all reporting agencies
4. Be wary of unsolicited emails, texts, and phone calls requesting personal or financial information
Verify the authenticity by contacting the institution directly using a trusted phone number or method. Don’t trust caller ID.
5. Positive Pay
To monitor bank accounts for fraud, businesses should regularly review their accounts, enable online banking alerts, and use fraud detection tools like Positive Pay. Establishing strong internal controls, educating employees, and implementing robust online security measures are also crucial.
BSB will continue to research and implement tools to protect you
Internal Controls and Employee Training
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- Establish internal controls:
- Create procedures to safeguard assets, such as requiring dual control or dual approval for moving money.
- Limit access:
- Restrict access to sensitive financial information and online accounts to only those employees who need it.
- Educate employees:
- Train staff to identify common scams and to know what to do if they suspect fraud.
- Separate duties:
- Segregate financial tasks so no single person has complete control over a transaction.
- Establish internal controls:
Online and Physical Security
- Use strong passwords and multi-factor authentication:
- Implement strong, unique passwords for all accounts and enable two-factor authentication to prevent unauthorized logins.
- Secure your systems:
- Keep all software, operating systems, and antivirus programs updated regularly.
- Avoid public Wi-Fi:
- Access bank accounts only on secure, private networks.
- Protect physical documents:
- Keep checks and other financial documents in a locked, secure location and immediately report any missing checks.
- Collaboration and Reporting
- Report suspicious activity immediately:
- If you notice any suspicious activity, contact your bank right away. The sooner you report it, the more likely you are to recover lost funds.
- Partner with BSB:
- Talk to your Treasury Team about all available fraud prevention services to understand your responsibilities.
- Consider insurance:
- Explore options like cyber insurance or fidelity bonds for additional protection.
Same Day ACH
Same Day ACH is an expedited electronic payment service through the Automated Clearing House (ACH) network that allows funds to be processed and settled on the same business day they are initiated. This is a faster alternative to traditional ACH transfers, which typically take one to four business days, and is used for various transactions like payroll, bill payments, and account-to-account transfers.
BSB offers this service for an additional $10 per month with your ACH contract.
Uses of Same Day ACH
Businesses, government entities, and consumers use Same Day ACH for a multitude of purposes, including:
Urgent Bill Pay
Life gets busy, and stuff happens. Sometimes that stuff is forgetting to pay a bill, until your business realizes it has missed a payment that’s due now. That’s where Same Day ACH comes in.
With Same Day ACH, you can have that bill marked “paid” in as little as a few hours. Same Day ACH payments settle three times daily, and each payment can be up to $1 million. And just like standard ACH, Same Day ACH can reach every bank and credit union in the U.S.
And if you’re running a business that likes to hold on to its cash as long as possible, you can plan to use Same Day ACH to pay bills when they’re due. That’s a major plus for forecasting your firm’s cash flow and managing liquidity.
Payroll
When payday rolls around, folks expect to get paid. But sometimes there are payroll errors. Someone didn’t get the right amount, or maybe didn’t get anything at all. Quickly turn that wrong into a right with Same Day ACH.
The days of having accounting write a last-minute check are over. With Same Day ACH, an employee can still get their money on payday, without taking an emergency check to the bank, depositing it, and waiting for it to clear. Instead, within a matter of hours, the money they’re due is in their bank account by Direct Deposit.
And Same Day ACH is also great for gig and hourly workers, as well as freelancers, all of whom really need their money when they earn it, rather than waiting for a regular payday. They can have a Direct Deposit in hours.
Insurance Claims and Disaster Relief
No one wants to have an insurance claim. No one. Whether it’s a banged-up or stolen car, a burst water pipe that saturated that house, or a hurricane or tornado that blew through and did massive damage, people need their insurance money ASAP to get back on their feet.
Same Day ACH is a tremendous help with insurance claim payments and disaster relief. In a matter of hours, the money they need is safely direct deposited into their bank account. That means they can immediately use it to deal with their urgent needs, be it a hotel, a new set of wheels, whatever.
When someone files an insurance claim, it’s almost certainly because something bad has happened. Waiting endlessly for a claim payment only makes matters worse. With Same Day ACH, insurers can help their customers at a time they need help most.
Refund and Reimbursements
Sometimes you owe your customers a refund. Whether they’re consumers or fellow businesses, you’ll find they’re both pleasantly surprised- and very satisfied- when you make that refund via Same Day ACH.
If your customers pay you by ACH, you may already have the information you need to make a refund the same way. And if your organization is still printing and mailing refund checks, it’s really time to get with the times. Same Day ACH gets customers their money in hours. It’s fast and it’s easy (not to mention less expensive than the paper check route). It’s also something they’ll appreciate- and might just remember the next time they need a product or service you provide.
Tax Payments
Taxes are a fact of life, especially for businesses, which have many different types of taxes they’re required to pay, often to several different governments. There’s a fair bit of money involved, and it can really make a dent in cash flow. Same Day ACH can help with that.
Rather than sending a standard ACH tax payment ahead of time, or mailing a check (something no one should be doing), organizations today can use Same Day ACH. Tax payments get where they’re going safely and reliably, and they can arrive on the due date. That means no late fees or penalties, while your business holds on to its money as long as possible.
Ask Bennington State Bank about the ways Same Day ACH can help your business.
Consider ACH filters:
Place ACH blocks or filters on disbursement accounts to only allow pre-approved electronic debits. (This is coming soon)
Rule Changes
Changes are happening to help the entire network combat fraud
The major NACHA rule changes for 2026 focus on fraud prevention, requiring all ACH participants to implement risk-based processes to identify fraudulent or “under false pretenses” credit entries. These changes have a staggered effective date: March 20, 2026, for large originators, and June 22, 2026, for all others, including receiving depository financial institutions (RDFIs). Additionally, new rules mandate the use of “PAYROLL” or “PURCHASE” in the Company Entry Description field for specific transactions starting March 20, 2026.
Fraud monitoring requirements
- What it is:
All participants must establish risk-based processes to identify ACH credit entries that are unauthorized or initiated under false pretenses (e.g., business email compromise, vendor impersonation). - Who it affects:
- Phase 1 (March 20, 2026): Originating Depository Financial Institutions (ODFIs), and non-consumer originators and third-party senders with annual ACH origination volume of 6 million or greater in 2023.
- Phase 2 (June 22, 2026): All other Originators, Third-Party Senders, and Receiving Depository Financial Institutions (RDFIs).
- Methods:
- The rules don’t require any specific method — you can use whatever works best, like checking how fast payments are coming in, spotting unusual activity, or looking for behavior that is out of the ordinary.
New Company Entry Description requirements
- What it is: New standardized descriptions must be used for specific credit transactions.
- Who it affects: Originators.
- Specifics:
- PAYROLL: For all pre-arranged payment and deposit (PPD) credit entries that are payments of wages or salaries.
- PURCHASE: For all e-commerce purchases, which must use the Web (WEB) Standard Entry Class (SEC) code, except as permitted by the rule on Standing Authorization to use PPD or TEL debit SEC codes.
- Effective Date: March 20, 2026.
Other key changes
- RDFI capabilities:
Receiving banks can delay funds availability to examine payments more closely and are empowered to request the return of payments for any reason.
- Definition of “False Pretenses”:
The rules define this to include situations where a person is tricked into authorizing a fraudulent payment, such as through identity misrepresentation or vendor impersonation.
Risk Management Topics- Fraud Monitoring Phase 1
These Rule amendments related to monitoring for fraud become effective on March 20, 2026, and are part of a larger Risk Management package intended to reduce the incidence of successful fraud attempts and improve the recovery of funds after fraud has occurred.
Risk Management Topics- Company Entry Descriptions
These two Rule amendments on Company Entry Descriptions become effective on March 20, 2026, and are part of a larger Risk Management package intended to reduce the incidence of successful fraud attempts and improve the recovery of the funds after fraud has occurred.
ACH use continues to increase. It is imperative that your business knows the NACHA rules and follows them.
Recent Changes to Federal Payments
The government is phasing out paper checks for most federal payments, including Social Security and tax refunds, as part of a move towards electronic payments. This change, mandated by a presidential executive order, aims to increase efficiency and security while reducing fraud and delays. Those who still receive paper checks must switch to direct deposit or a prepaid debit card to avoid payment disruptions.
What’s changing:
- No more paper checks:
As of September 30, 2025, the federal government no longer issues paper checks for most payments.*
*Some exceptions apply
- Electronic payments are the new standard:
Federal benefits and tax refunds will be delivered via direct deposit or a prepaid debit card, such as the Direct Express card.
- Mandate and purpose:
The change is driven by Executive Order 14247, which aims to modernize payments by reducing costs, delays, and the risk of fraud associated with paper checks.
What to do:
- For those already receiving electronic payments: No action is required.
- For those receiving paper checks: You need to switch to an electronic payment method before the deadline to avoid delays.
- Enroll in direct deposit: This is the fastest and safest option. You can sign up through the agency that pays you (like the Social Security Administration) or by visiting Go Direct.
- Sign up for a prepaid debit card: If you are unable to open a bank account, you can get a Direct Express card, which is a prepaid debit card for federal benefit payments.
