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1.4.4.2 The ACH Payment System

The ACH (“automated clearinghouse system”) is the system through which direct deposits, many bill payments, and other electronic payments are made. The system is run under rules established by NACHA, a private entity, and payments are cleared through one of two clearinghouses, one run by The Clearing House and the other by the Federal Reserve’s Retail Payments Office.82

The merchant or service provider payee may also use a third-party payment processor83 (called a “third-party sender” in NACHA terminology) to gather the authorization and account information and submit the ACH entry through a financial institution the ACH system.84

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