Circle of Life

I had been thinking of what to write for my next post, where to direct you and had been debating about bringing "The Lifecycle of an ACH Transaction" into the mix. I remember, from years of answering the same question over and over again, having something akin to a recording in my head. When someone asked the question, I could press 'play' and run through the spiel explaining the lifecycle all the while surfing the Internet, checking and responding to e-mails or simply working on something else – as long as the recording was going, I was good to go. When the recording stopped, so did my multi-tasking. 

 

The decision was cemented when I was trying to think about where I had put the graphic I created for this very purpose and lo and behold at that very moment, on the radio, was Elton John singing Circle of Life from The Lion King soundtrack. It was a sign; as the song talks about the cycle of life, I am supposed to be talking about a Lifecycle, The Lifecycle of an ACH Transaction that is. By the way, if you have not seen the original movie, The Lion King, I very highly recommend it. 

 

That being said, let's get started. You already know who the main players are in every ACH transaction. The purpose of this post is simply to show the direction of the transaction at different stages and should be easy enough to follow. I don't get into details such as timeframes or what's required to effect a return, we'll get into that soon enough – in future posts.

 

 

Original Presentment:  This is the first presentment of an ACH Transaction. These travel from the ODFI to the RDFI. Credits, like Direct Deposit, rarely, if ever get past this point: afterall who's going to refuse a credit? 

 

Return: This happens for any number of reasons, such as NSF (Non-Sufficient Funds) or Account Closed or No Account or Unable to Locate. Returns travel from the RDFI to the ODFI.

 

Dishonored Return: There are a limited number of reasons for which you can initiate a Dishonored Return – 5 reasons to be exact. Dishonored Returns travel from the ODFI to the RDFI.

 

Contested Dishonored Return: There are a limited number of reasons for which you can initiate a Contested Dishonored Return too – 6 reasons to be exact. Contested Dishonored Returns travel from the RDFI to the ODFI.

 

R.I.P.: At this point, once received as a Contested Dishonored Return, the ACH Transaction is effectively dead and cannot be sent through the ACH Network again. However, that does not mean an RDFI can just return every transaction using one of the Contested Dishonored Return Reason Codes claiming it's dead.    Every ACH transaction must be allowed to move through its lifecycle naturally and in the specific order mentioned…no skipping around.

 

I know it sounds like a lot, but know that there are very few ACH transactions that actually make it to the end of their life cycle. The lion's share of ACH transactions post without any problems, a few are returned and only those few remaining transactions (generally less than 1%) are lucky enough to have an opportunity to see the end. Whether they hear Elton John singing to them or not is another issue.