ACH Direct Debit lets you “pull” funds from a customer’s bank account—ideal for recurring billing, invoice collections, and platform funding—using the Automated Clearing House network. Unlike real-time methods, ACH debits settle in batch windows and carry return and dispute risks.

Prerequisites

Your business must be a U.S.-registered entity with an enabled ACH origination relationship.
ACH debits carry return risk (NSF) and consumer disputes up to 2 years post-settlement.
Not recommended for one-off high-value transactions; best for established, trust-based recurring payments.
No real-time authorization—final success/failure can take 4–5 business days to confirm.

Compliance / Regulation Mandates

NACHA Operating Rules

Must follow SEC code requirements, batching formats, settlement windows, and return handling timelines.

Reg E (EFTA)

Provide required disclosures and consumer error-resolution procedures for consumer debits.

OFAC & KYC/AML

Screen transactions against sanctions lists and perform risk-based customer due diligence.

Reg CC Funds Availability

Adhere to cutoff and settlement timing for same-day vs. next-day ACH.

GDPR & Data Privacy

Securely handle personal and bank account data in compliance with GDPR and local privacy laws.

Core Characteristics

Pull-Based Mechanism
Originators “pull” funds from a customer’s account via debit instructions—opposite of ACH Credits. Requires a signed mandate specifying account/routing, amount (fixed or variable), frequency, and revocation instructions.
Asynchronous, Batch Processing
ACH operates in fixed batch windows (not real-time). You’ll receive final success or failure acknowledgments up to 4–5 business days after initiation, impacting funds availability and refund timing.
Risk & Dispute Window
- Returns (e.g., NSF) can occur days after settlement.
- Consumer disputes under Reg E allowed up to 2 years post-settlement; business-originated debits up to 1 year.
Best for Recurring, Trust-Based Use Cases
Ideal for subscriptions, B2B invoice collections, wallet funding, and automated bill payments. Not recommended for one-off, high-value goods where instant settlement is critical.

Common Use Cases

Recurring Subscription Billing: Automate monthly SaaS or membership fees.
B2B Payments & Invoice Collection: Pull scheduled or on-demand payments from corporate clients.
Account Funding & Wallet Top-Ups: Allow users to fund internal accounts/wallets from their bank.
Automated Bill Payments: Utilities, insurance, rent, loan repayments.

Key Participants & Flow

Entity	Role
Originator	Your business initiating the debit instruction.
Receiver	Customer whose bank account is debited.
ODFI	Originating Depository Financial Institution (Passport’s partner bank); submits NACHA-formatted batches.
ACH Operator	Central clearing (Fed or EPN) that sorts and routes entries.
RDFI	Receiver’s bank; posts the debit and handles returns.

Flow Steps

Authorization & Initiation: Customer signs mandate; you call Passport API to create an ACH debit.
Batching: ODFI aggregates entries into a NACHA file.
Transmission: File sent to ACH Operator before cutoff.
Sorting & Routing: Operator routes each entry to the correct RDFI.
Processing & Settlement: RDFI debits the account; funds ultimately settle to your Passport account after the good-funds period.

Origination & Cutoff Rules

Cutoff Time: 3:30 pm PT / 6:30 pm ET for same-day and forward-day batches.
Transactions created before cutoff enter the current window; those after schedule for the next.
Missed a cutoff? Your debit simply moves to the next available batch (e.g., next-day settlement).
You may originate ACH debits by using saved contacts.

ACH Debit Types

Next-Day ACH (Default): Standard settlement in next batch.
Same-Day ACH: Accelerated settlement across intraday windows (subject to network fees and limits).

Transaction Status Lifecycle

Status	Description
SCHEDULED	Default upon creation.
PENDING	Waiting processing checks: Source account must be ACTIVE with sufficient funds Destination must be ACTIVE Entities must be OFAC & CIP verified
APPROVED	(Card only) Authorized by issuing bank.
PROCESSING	Picked up for batch processing.
CANCELLED	Cancelled by user before settlement.
COMPLETED	After good-funds period Upon successful refund completion
FAILED	Unable to process within batch interval Returned for reasons like account closure or debit block
IN_DELIVERY	(Check only) Check is in shipment.
DELIVERED	(Check only) Check delivered successfully.
STOPPED	(Check only) Stop-payment request after printing.

Track & Modify Payments

Track Payments: Poll the Transactions API or subscribe to webhooks for status updates.
Modify Before Cutoff: Cancel or update amount/date/addenda on a scheduled debit to prevent origination.
Handle Returns & Reversals: System automatically processes NACHA return codes and reversal flows per NACHA rules.