Glossary of ACH Terms

Transcription

1 ABA NUMBER See Routing/Transit Number definition ACH - The Automated Clearing House network ACCESS DEVICE - A card, code, or other means of access to a consumer s account that may be used to initiate electronic funds transfer. This does not include electronic devices, such as telephones or personal computers, typically used in such transfers. ACCOUNTS RECEIVABLE ENTRY (ARC) - A single entry ACH debit to a consumer s account originated from converting a consumer check (source document) delivered to an Originator via the U.S. mail or at a drop box location or (effective March 16, 2012) in person for a payment of a bill at a manned location. ACCREDITED ACH PROFESSIONAL (AAP) - One who demonstrated their knowledge of the ACH system by passing the AAP examination and certification process. ACH PARTICIPANTS DIRECTORY - A directory, produced by NACHA that lists all RDFIs. This file distinguishes between members of clearing houses and those that participate only through the Federal Reserve. ACH NETWORK - The funds transfer system governed by the rules of NACHA which provides for the inter-financial institution clearing of electronic entries for participating financial institutions. ACH OPERATOR - The central clearing facility that receives entries from ODFIs, distributes the entries to RDFIs, and performs settlement functions. It provides services to DFIs on a local regional or national basis. ACH Operators may be private companies or offices of a Federal Reserve Bank. The ACH Operator is responsible for processing electronic entries received from other ACH Operators or ODFIs. ADDENDA RECORD - An ACH record type that carries supplemental data on a particular entry. Used with a type code that identifies the type of entry it supports. ADVICE OF CREDIT - The advice, either paper or electronic, prepared by the ACH operator for both receiving or originating financial institutions, stating the dollar value of all ACH files on a given day. This advice may include a number of files presented that day (Govt., next day exchange, and premium exchange). ANSI X 12 - A communications format for electronic business data interchange established by the American National Standards Institute, supported by the American Bankers Association. AUTHENTICATION A data security technique used to ensure that the professed sender of information or a payment order is actually who they claim to be. AUTHORIZATION - A written agreement signed by an employee or customer, or an authenticated electronic process, that allows the posting of debits or credits arising from ACH transactions to the employee's or customer's account. AUTOMATIC ENROLLMENT (ENR) - A credit or debit enrollment entry initiated by a participating DFI to a Federal Government Agency on behalf of an account holder at the DFI. 1

2 BACK OFFICE CONVERSION (BOC) A single entry debit initiated by an Originator to an account of the Receiver at the point-of-purchase or at a manned bill payment location to affect a transfer to funds from an account of the Receiver through subsequent conversion to an ACH debit during back office processing. BANKING DAY - Any day on which the DFI is open to the public for carrying on substantially all its banking functions. BATCH - A group of records considered a single unit for the purpose of data processing. BUSINESS DAY - A calendar day other than a Saturday, Sunday, or Federal holiday. CENTRAL INFORMATION FILE (CIF) - A master file maintained by the ACH or other interested party containing processing and routing information on financial institutions that have chosen to participate in the ACH system. CHARACTER - A letter, digit, or other symbol that is used as part of the organization, control, and/or representation of data. COMMERCIALLY REASONABLE SECURITY PROCEDURE A security procedure for the transmission of payment orders which meets the relevant tests under UCC4A. COMPANY BATCH HEADER RECORD - The record(s) contained within an ACH file that describes the originator(s) of an ACH transaction(s). COMPANY/BUSINESS - An individual, sole proprietorship, partnership, or corporation engaged in a commercial enterprise or venture. COMPANY IDENTIFICATION NUMBER - The number in the company/batch header and control records, which identify the originating company. The number is usually the company's tax I.D. proceeded by a one. COMPOSITE RECEIVER FILE (CRF) - The directory of all receiving financial institutions served by an automated clearing house. The ACH processor usually maintains this file. CONSUMER ACCOUNT - Means an account held by a DFI and established by a natural person primarily for personal, family or household and not for commercial purposes. CONTESTED DISHONORED RETURN - A disputed dishonored return by the RDFI back to the ODFI CORPORATE CREDIT OR DEBIT (CCD) - An automated corporate payments application that transfers funds between corporate accounts for collection purposes (concentration) or for disbursement purposes. In most cases it is used as an intra-company application and used as a cash management technique by the corporate community. This type of payment can carry one addenda record of information formatted based on basic ANSI X-12 syntax. When this is done it is referred to as a CCD+. CORPORATE TRADE PAYMENTS (CTX) - This format was developed to make it possible for businesses to pay each other electronically, through the ACH system, and at the same time, pass needed information with the payment. This format is capable of carrying up to 9,999 addenda records with payment related information. 2

3 CORRESPONDENT FINANCIAL INSTITUTION - A financial institution that provides payment services to other depository institutions for a fee. This includes ACH processing and posting as well as checks clearing, DDA and savings posting, etc. CREDIT ENTRIES - An entry to the record of an account to represent the transfer or placement of funds into the account. CREDIT RISK - The risk that a party to a transaction cannot provide the necessary good funds, as previously committed by files originated, in order for settlement to take place. CUSTOMER INITIATED ENTRY (CIE) - A transaction originated by a financial institution at the request of a consumer that is its customer. Typically used for home banking services and telephone bill payment. DATA TRANSMISSION - A media by which ACH entries can be delivered to and from the ACH. Data transmission may be over regular phone lines, a dedicated line with numerous line speeds available, or through the Internet (through a secure server). This is the fastest and most efficient method of receiving and originating transactions. DEATH NOTIFICATION ENTRY (DNE) - An automated notice of death sent by a Federal Government Agency to a financial institution to notify it that a recipient of a benefit payment has passed away. DESTROYED CHECK ENTRY (XCK) - An ACH debit entry initiated in the event an eligible item (s) is lost or destroyed, or is otherwise unavailable and cannot be obtained by an ODFI. DEBIT ENTRY - An entry to the record of an account to represent the transfer or removal of funds from the account. DESCRIPTIVE STATEMENTS Regulation E requires that a financial institution receiving ACH transactions make available a monthly statement with descriptive information included. See Regulation E for details on the requirements. The ACH Rules mirror this requirement. See Appendix Four in the Rules. DIRECT ACCCESS - A situation in which an Originator, Third-Party Sender, or a Third-Party Service Provider transmits credit or debit entries directly to an ACH Operator using the ODFI s routing number and settlement account. DIRECT ACCESS DEBIT PARTICIPANT - An Originator, Third-Party Sender, or Third Party Service Provider with Direct Access for the origination of debit entries except (i) a Third Party Service Provider that transmits ACH files solely on behalf of an ODFI where that Third Party Service Provider does not have a direct agreement with an Originator (and is not itself an Originator), or (ii) an ODFI that transmits files using another Participating DFI s routing number and settlement account. DIRECT DEPOSIT - A deposit made to a consumer's account at a receiving depository institution through the ACH. Typically refers to payroll deposits, social security payments and pension payments. DIRECT PAYMENTS - A charge to a receiver's account at the receiving depository financial institution through the ACH. Examples of direct payments include insurance, utility, mortgage, and car payments. 3

4 DISHONORED RETURN ENTRY - A return entry dishonored by the ODFI if the entry was untimely or if the information in the return entry was incomplete or incorrect. EFFECTIVE ENTRY DATE - The date the originating business or individual has requested that the entry posts to the receiver's account. ELECTRONIC AUTHORIZATION - An alternative means of authorization for ACH transactions. Electronic authorizations must be displayed in such a manner that the consumer can read the authorization, create a record or hard copy of the authorization (so the consumer can refer back to it) and must be authenticated in a similar manner to that in which a signature authenticates a written authorization (i.e., by a digital signature, PIN, or other code which uniquely identifies that consumer). ELECTRONIC DATA INTERCHANGE (EDI) - The movement of data relating to a transaction, or transactions, between two corporate trading partners. From an ACH standpoint, a financial EDI transaction would include a payment, and the data relating to the payment, within an ACH entry. ELECTRONIC FUNDS TRANSFER - Any transfer of funds initiated through a terminal, telephone, computer or magnetic tape for the purpose of instructing or authorizing a financial institution to debit or credit an account. ELECTRONIC RECORD - An agreement, authorization, written statement of unauthorized debit, or other record created, generated, sent, communicated, received, or stored by electronic means. ELECTRONIC SIGNATURE - An electronic sound, symbol or process attached to or logically associated with an agreement, authorization or other record and executed or adopted by a person with the intent to sign the record. Entry - A pre-authorized paperless credit or charge. ERROR RESOLUTION - Procedures required for resolving a consumer's allegation that entries were improperly charged to the consumer's account. The ACH Rules and Regulation E outline different minimum error resolution requirements. Each has slightly different liability streams and consequences for the financial institution and its customer. EXCEPTION ENTRY - An entry that requires special attention or processing such as return entries, notifications of change entries, and stop payments. EXISTING RELATIONSHIP - The Originator and Receiver have an existing relationship when there is a written agreement in place between the Originator and the Receiver or when the Receiver has purchased goods or services from the Originator within the past two years. FEDERAL RESERVE SYSTEM - The "central bank" for the U.S. Made up of twelve district banks. All national banks are required to be members. Other institutions can choose to be members. FIELD - One or more consecutive character positions within an ACH entry mapped to contain specific information. FILE - A group of ACH entries with specific control totals. A file may contain many batches of entries. A file is the smallest unit of information that may be sent to an ACH from an originator or delivered to a receiver. All the information necessary to post transactions is contained within a file. 4

5 FILE HEADER RECORD - The first record of an ACH file containing information necessary to route, validate, and track the ACH entries contained in the file. FINANCIAL AGENCY - An entity that is authorized by applicable law to accept deposits or is in the business of issuing money orders or transferring funds. FINANCIAL MANAGEMENT SERVICE (FMS) - The disbursing division for the U.S. Treasury. FRAUD RISK - The risk that a payment transaction will be initiated or altered in an attempt to misdirect or misappropriate funds. FUNDS AVAILABILITY - The time at which the funds, for specific ACH entries, are made available to the customer according to Regulation CC. GATEWAY OPERATOR - Entry point to or exit point from the United States for IAT entries. The Gateway Operator can be a financial institution or ACH Operator. GREEN BOOK - A publication of the U.S. Treasury that specifies procedures for ACH transactions originated on behalf of the Federal Government. The Green Book implements the requirements of Title 31, Code of Federal Regulation, Part 210 concerning government use of the ACH system. HASH - A mathematical calculation (which creates a single number from critical fields in each transaction entry) as a check against inadvertent alteration of data contents due to hardware failure or program error. INDIVIDUAL IDENTIFICATION NUMBER - The number used by the originating business to identify the individual being paid (direct deposit) or charged (automatic debits). INTERCEPT AGENCY - For those financial institutions that cannot accept their own work from an ACH Operator, this is the agent that accepts the work for them. INTERNATIONAL ACH TRANSACTION (IAT) - A debit or credit Entry that is part of a payment transaction involving a financial agency s office that is not located in the territorial jurisdiction of the United States. INTERNET INITIATED ENTRY (WEB) - A one-time or recurring debit entry initiated by an Originator pursuant to an authorization obtained from the Receiver via a secure Internet session. JULIAN DATE - A numeric day of the year. For example, January 12 has the Julian date of 012 (i.e. the 12 th day in the new year). LOCKBOX - A financial institution service which facilitates rapid collection and posting of corporate receivables. Customer payments are mailed to the financial institution s lockbox for collection, sorting, totaling and recording by the financial institution rather than the company. MANDATORY FIELD - A mandatory field is necessary to ensure proper routing and/or posting of an ACH entry. Any mandatory field not included in an ACH record will cause that entry, batch or file to be rejected by the ACH Operator before it ever gets sent to the RDFI. 5

6 MAGNETIC TAPE - An input/output media. A small percentage of ACH entries are still stored and processed on magnetic tape. Most entries are being transferred and handled via data transmission. MEMO POSTING - The process of adding ACH credit or debit totals to the available balance of customer accounts at the opening of business, although the entries themselves do not post until the regular posting cycle in the evening. MACHINE TRANSFER ENTRY (MTE) - The ACH Network supports the clearing of transactions from Automated Teller machines. NATIONAL AUTOMATED CLEARING HOUSE ASSOCIATION (NACHA) - The national ACH association that establishes the standards, rules and procedures that enable financial institutions to exchange ACH payments on a national basis. NOTIFICATION OF CHANGE (NOC) - Information sent by a receiving institution informing an originating institution and the originating business of an error in the information necessary to handle the transaction electronically. The correct information is included along with the incorrect information to assist the originator in making the change. Notifications of change are commonly referred to as NOCs however the standard entry class code for these entries is COR. OFFICE OF FOREIGN ASSET CONTROL (OFAC) - The agency of the United States Government concerned with monitoring and controlling the assets and financial transactions of those entities deemed to be, or acting on behalf of, enemies of the United States. Certain OFAC regulations affect both ACH and wire transfer transactions. ON-US - ACH entries within a file that are destined for posting to accounts at the originating financial institution. OPERATIONAL RISK - The risk that a transaction is altered or delayed due to unintentional error in transmission, receiving or processing. OPTIONAL FIELD - The inclusion or omission of an optional field is at the discretion of the Originator of an ACH transaction. While omission of optional fields will not effect the processing of the item, the Originator must still fill optional fields with blanks or other characters if they do not fill the field with actual information. ORIGINATING DEPOSITORY FINANCIAL INSTITUTION (ODFI) - A participating financial institution that originates ACH entries. The entries may be originated internally or from an external source, such as a company. ORIGINATOR - Any individual, business, or other entity that initiates entries into the ACH. PENDING FILE - The location in the computer where ACH entries received before settlement date are stored. A RDFI may receive entries up to four days before settlement date although entries should not be posted until settlement date. PERIODIC STATEMENT - A summary report produced and mailed or delivered at specific intervals, usually monthly, containing information concerning the posting of credits and debits to a transaction account. 6

7 POINT OF PURCHASE ENTRY (POP) - A single entry debit initiated by merchants for the inperson purchase of goods and services using the consumer s check as a source document. POINT OF SALE (POS) - The direct electronic transfer of funds, or the initiation of the transfer of funds, between the customer's account and the merchant's account at the time and the location where the transaction takes place. When ACH is the payment method, the POS standard entry class code may be used. PRE-ARRANGED PAYMENT OR DEPOSIT (PPD) The Standard Entry Class Code for those consumer transactions made through the ACH that arise from a prior authorization made by a customer and that normally occur on a periodic basis. PPD is the standard entry class code used for many types of ACH entries including direct deposit and insurance premium payments. PRENOTIFICATION ENTRIES - Also known as Prenotes, this is an optional ACH entry with a zero dollar amount and a special transaction code. If you choose to prenote, you must follow the rules. These entries are to be sent by the originating institution at least 6 banking days before the first live transactions are to be sent. Receiving institutions are required to check the transit/routing number and account number fields to ensure the entry is postable. PROCESSING DAY - Any day that a member institution is open to the public to conduct business or that an ACH facility is being operated. RECEIVER - An individual, corporation, or other entity that has authorized a company or an originator to initiate a credit or debit entry to a transaction account held at a receiving financial institution. RECEIVING DEPOSITORY FINANCIAL INSTITUTION (RDFI) - The final destination of a transaction. The RDFI may receive entries directly from an ACH or may have their entries processed through a processing center or service bureau, which is the actual receiving point. RECEIVING POINT - A site where entries are received from an ACH operator for processing in the name of the receiving institution. It may be its data center, another financial institution, or a data processing service authorized to receive entries on behalf of that financial institution. RECESSION RIGHTS - Authority of the consumer to rescind his/her authorization for debit or credit entries posted to his/her account. RECLAMATION - A procedure to recover benefit payments from a financial institution that were paid to that financial institution on behalf of a deceased or legally incapacitated beneficiary. REGULATION E - A regulation maintained by the Federal Reserve relating to Electronic Funds Transfers (EFT) and the Electronic Funds Transfer Act. The regulation was prepared to protect the consumer and to ensure the consumer is informed concerning their rights with regard to any EFT transaction. REJECTED ENTRY - An entry that has been returned by the ACH because it cannot be processed, usually because of a technical error in the entry, batch, or file containing the entry. REPRESENTED CHECK ENTRY (RCK) - An ACH application that allows consumer checks, less than $2,500, returned for insufficient or uncollected funds to be re-presented for collection electronically. 7

8 REQUIRED FIELD - The omission of a required field will not cause rejection of the entry at the ACH Operator level, but may cause rejection at the RDFI level. (For instance, the omission of the receiver s account number.) RETURN ENTRY - An entry that has been returned to the ODFI by the RDFI because it cannot be posted. The reason for each return is included with the return in the form of a "return reason code". REVERSAL - Any ACH entries or files sent within the required deadline to correct or reverse duplicate or erroneous entries or files. ROUTING/ TRANSIT NUMBER - A 9-digit number (8 digits and a check digit) that identifies a specific financial institution. These numbers are assigned by the Thomson Financial Publishing Corporation and are listed in its annual publication, "Key to Routing Numbers". SENDING POINT - A processing site from which entries are transmitted through the ACH system for an originating financial institution operated by an originating financial institution on its own behalf, or a financial institution or private data processing organization on behalf of another originating financial institution. SETTLEMENT - The transfer of funds between two parties in cash, or on the books of a mutual depository institution, to complete one or more prior transactions made subject to final accounting. SETTLEMENT DATE - The day on which actual funds settlement occurs. Funds settle in all cases through the Federal Reserve settlement system either directly or indirectly through a correspondent account. SHARED NETWORK TRANSACTION (SHR) - A point of sale transaction generated in a closed system where there are agreements between all parties involved. SINGLE-ENTRY - A one-time ACH entry. SOURCE DOCUMENT - An eligible check which is converted to an ACH entry for ARC, BOC, and POP transactions. STATEMENT OF ACH ACTIVITY - The advice, either paper or electronic, prepared by the ACH Operator for both RDFIs and ODFIs, stating the dollar value of all ACH files on a given day. This advice may include a number of files presented that day (Govt., next day exchange, and premium exchange). STANDARD ENTRY CLASS CODE - A three-character code within the company batch header record used to identify the payment type contained in that batch. These codes include; ACK, ARC, BOC, ATX, CCD, CIE, COR, CTX, DNE, ENR, IAT, MTE, POP, POS, PPD, RCK, SHR, TEL, TRC, TRX, WEB and XCK. STATEMENT - A financial institution account summary that contains descriptive information (required by Regulation E) concerning one or more entries (such as location and owner of an ATM at which the transaction occurred). STOP PAYMENT ORDER - A directive by an account holder to its financial institution not to pay a particular ACH transaction. 8

9 SYSTEMIC RISK - The possibility that one or more financial institutions will face losses because of the inability of other financial institutions to settle their net debit obligations at the time of settlement. TELEPHONE-INITIATED ENTRY (TEL) - A single or recurring entry ACH debit used by the Originator to debit a consumer s account pursuant to an authorization that is obtained from the consumer orally via the telephone. TELE-TRACE Financial Management Service (FMS) has partnered with several Federal agencies to research nonreceipt claims for Federal Government benefit payments via telephone. TEMPORAL RISK - The risk or exposure which an institution has because of the time necessary to complete certain transactions. (For example, an extended period of time is allowed for contested dishonored returns.) THIRD PARTY PROCESSOR An entity that processes ACH files and/or items on behalf of one of the participants in the ACH Network. Examples of third party processors are payroll processing companies, data processing centers, or a correspondent bank. Under ACH rules, Third Party Processors are essentially invisible and the party they are processing for bears virtually all of the liability and risk for their Third Party Processor s actions. THIRD PARTY SENDER - A Third Party Service Provider that is not an Originator and that has authorized an ODFI to transmit ACH entries to effect payment between the Originator and Receiver. A Third Party Sender acts as intermediary between the Originator and the ODFI and there is no contractual agreement between the Originator and the ODFI. Third Party Senders are bound by the NACHA Operating Rules as if they are Originators with respect to the origination agreements. THIRD-PARTY SERVICE PROVIDER - An entity other than an Originator, ODFI, or RDFI that performs any functions on behalf of the Originator, the ODFI, or the RDFI related to ACH processing of entries, including but not limited to the creation of ACH files or acting as a Sending Point or Receiving Point on behalf of a Participating DFI. TRACE NUMBER - A unique number assigned to every ACH entry by an Originating Depository Financial Institution which identifies that entry within a specific ACH file. The first 8 digits of the trace number are the transit/routing number of the ODFI and the last 7 digits are sequence numbers assigned by the originator. TRANSACTION CODE - Also known as a Tran code, this is the two digit code in the ACH record that determines whether an entry is a debit or a credit to a savings, DDA, general ledger, or loan account. TRANSMISSION - The act of sending items electronically from one point to another, computer to computer. TRUNCATION - The conversion of information on a check into an electronic format after the check enters the processing system. If converted to ACH, the SEC codes used are TRC and TRX. UCC 4A The portion of the Uniform Commercial Code which deals with certain funds transfers including ACH credit transactions not subject to the Electronic Funds Transfer Act or Regulation E. This law outlines the protections and responsibilities given to the parties to wholesale credit transactions and sets the standards for commercially reasonable security procedures to be used in conjunction with those transactions. 9

10 UNSECURED ELECTRONIC NETWORK - A network, public or private, that is not located entirely within a single, contiguous, physical facility and any part of which has not implemented security technologies that provide a level of security that, at a minimum, is equivalent to 128-bit RC4 encryption technology. VALUE ADDED NETWORK (VAN) - A third party service provider that facilitates the transmission of data among multiple trading partners. Services provided by a VAN range from simple communication of data to the sophisticated mapping of EDI transaction sets to a company s internal accounting systems. VALUE DATING - The introduction of an entry into the ACH processing cycle prior to the entry's effective entry date. VARIABLE LENGTH FIELD - A data segment within an electronic message whose length is determined through the use of delimiters. WAREHOUSING - The electronic storage of debit or credit transactions by a data processing system until their settlement date. For instance, a financial institution s computer would warehouse SSA benefit payments received on the 25 th of the month until their actual settlement date of the third of the following month. WRITTEN STATEMENT OF UNAUTHORIZED DEBIT (WSUD) -A document required to be signed by the consumer when requesting re-credit for debit entries that the consumer claims the authorization has been revoked, unauthorized, notice not provided, improper source document, amount of entry not accurately obtained, or source document or item presented for payment. This document must be signed prior to the entry being returned by the financial institution. ZERO DOLLAR ENTRY -A non-dollar entry typically generated in context of an ongoing payment relationship between two trading partners where the Originator is letting the Receiver know that no money is owed for that particular billing period. Other uses of this term refer to entries, which send information rather than payments through the ACH system. 10