Abracadabra!

September 26, 2008

With the artful, Harry Potteresque flourish of a magician’s wand (though honestly, more likely the flick of a pen), WaMu has become Chase Bank. 

 

The recent failure of one of our largest financial institutions has raised a large number of questions such as; is my money safe, what about my credit cards, what’s the deal, what really happened, etc., etc., etc.  To put this into perspective, another recent failure (Indy Bank) that sent people reeling and caused ripples across the country was large.  WaMu was 16 times larger than Indy Bank.

 

While I am an expert in the ACH world and I know a great deal about banking in general, I don’t pretend to know the full story nor do I have all the answers.  However, I have had a few friends call or e-mail me with some questions of their own today, relating to their personal WaMu accounts.

 

With their permission, I have put together a few of their questions with answers and a link to a great article that appeared today on the CBS4 website that provides a bunch of other questions and answers.

 

Q1:  My payroll is deposited here, will it be safe?  Do I need to change my authorization?

 

A1:  By all accounts, yes, your Direct Deposit will be safe.  With JP Morgan Chase (Chase) buying the bulk of WaMu’s accounts, you should have no problems.  There is no need at this point to do anything – and you may not have to do anything, period. 

 

What happens when one financial institution buys another (regardless of the parties or the situation) is that the Fed (ACH Operator) can automatically redirect any incoming ACH transactions heading to one Financial Institution (FI) – identified by Routing Number(RT#) – and send onto another FI with no delay.

 

Then, the purchasing FI will send a Notification of Change to your employer notifying them of a change in Routing Number.  Your employer will (should) change the RT# before your next payday.  Going forward, all should be good again.

 

Q2:  My mortgage, insurance, gym membership, etc., payments come out of my WaMu account (Direct Payment), do I need to tell everyone to change it to Chase?

 

A2:  No.  Again, there is no need to do anything at this point – and you may not have to do anything, period. 

 

Same as above, Chase will send a Notification of Change through the ACH Network notifying your mortgage company, insurance company and anyone else you pay via your WaMu account that there has been a change to your RT#.  That company will (should) change the RT# before the next transaction is sent.  Going forward, all should be good again.

 

Q3:  I still have WaMu checks, will they still be good?

 

A3:  Whether the check is presented through the Check Collection process or converted and presented as an ACH transaction, you should be fine.  Very much like the ACH Network, the Check Collection process will allow for automatic re-routing of checks – this should happen with no delay.

 

As I mentioned, here is the link to the article:

 

http://cbs4.com/consumer/washington.mutual.failure.2.826013.html

 

At this point, you can rest assured that any money you had in a WaMu account should be perfectly safe within the coffers at Chase and that there will be few if any changes to your banking practices.   And, don’t forget, you have the additional protection of FDIC, insuring accounts up to $100,000.00, but that’s another post.

 

 

 

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Posted by achguy

Party, Party, Party

September 15, 2008

Party, Party, Party.

 

We just talked about the 5 main parties (Originator, ODFI, ACH Operator, RDFI and Receiver), now let’s talk about the 3rd party.

 

The Third Parties, to be exact.  There are three of them and they each have a very different and distinct function.

 

Third Party Sender

Third Party Receiver

Third Party Service Provider

 

First:  The Third Party Sender (TPS) exists between the ODFI and the ACH Operator .  Their primary function is to simply take transactions from the ODFI and send them on to the ACH Operator.  An example of a TPS is ADP.  This is not a shameless plug.

 

Second:  The Third Party Receiver (TPR) exists between the ACH Operator and the RDFI.  Their primary function is to simply take transactions from the ACH Operator and send them to the RDFI.  The TPR also generally provides additional support as well, such as posting transactions to the RDFI’s accounts, handling returns (which we’ll talk about in another post), etc.  Their responsibilities will vary depending on the needs of the RDFI.  An example of a TPR is The Independent Banker’s Bank or FiServ.  This is not a shameless plug.

 

Third:  The Third Party Service Provider (TPSP) exists between the Originator and the ODFI.  Their primary function is to collect transactions from an (or multiple) Originator(s) and forward to the ACH Operator.  Just like the TPR, the TPSP can provide a number of additional services.  THIS is a shameless plug.   Check out www.achdirect.com for all your ACH (and Credit Card and Debit Card) processing needs.

 

Now that’s a party.  Hope you had fun.  Tell your friends.

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Posted by achguy

Who’s on First

September 8, 2008

Hands up if you remember Abbott & Costello.

 

There certainly are a bunch of us.  I am a huge fan myself.  And nothing illustrates my next point like the classic Who’s On First? skit… here’s a little snippet.

 

Costello: Well then who’s on first?

Abbott: Yes.

Costello: I mean the fellow’s name.

Abbott: Who.

Costello: The guy on first.

Abbott: Who.

Costello: The first baseman.

Abbott: Who.

Costello: The guy playing…

Abbott: Who is on first!

Costello: I’m asking YOU who’s on first.

Abbott: That’s the man’s name.

Costello: That’s who’s name?

Abbott: Yes.

Costello: Well go ahead and tell me.

Abbott: That’s it.

Costello: That’s who?

Abbott: Yes.

 

It goes on and on…a classic, repeated over a 1,000 times on the radio and numerous times on TV.

 

It’s clear to those of us ‘in the know’ that Who is in fact on first base, but poor Lou, he was lost from the get-go. 

 

It can be just as confusing trying to figure out who’s-who in an ACH transaction.  I don’t know enough about baseball to make the analogy, but I can at least break it down for you and show you, well, Who’s on first.

 

There are 5 main parties to every ACH transaction; Originator, Originating Depository Financial Institution (ODFI), ACH Operator, Receiving Depository Financial Institution (RDFI) and Receiver.

 

To best illustrate what I’m talking about here, check this out.

 

 

 

 

 

 

 

 

I am going to use Direct Deposit for my example, mostly because I just really enjoy getting paid, but also because I think we are all familiar with it.

 

The Employee/Receiver signs an authorization (agreement), providing their banking information to their Employer.  The Employer/Originator uses this information to create an ACH transaction to pay the Employee/Receiver.

 

The Originator/Employer sends the transaction to their Financial Institution (Bank, Credit Union or Savings & Loan Association) a.k.a. the Originating Depository Financial Institution (ODFI) who in turn sends it to the ACH Operator.

 

There are 2 ACH Operators in the U.S.; The Federal Reserve Bank and Electronic Payments Network (EPN).  The ACH Operator forwards the transaction to the Receiver’s Financial Institution a.k.a. the Receiving Depository Financial Institution (RDFI) who in turn, posts the transaction to the Receiver’s account.

 

In this Credit example, the parties are as follows:

 

Originator = Employer

ODFI = Employer’s Financial Institution

ACH Operator = The Federal Reserve Bank or EPN

RDFI = Employee’s Financial Institution

Receiver = Employee

 

If this were a debit transaction, for instance a consumer paying their mortgage, the parties would be the same, but the money would flow in reverse.

 

Originator = Mortgage Company

ODFI = Mortgage Company’s Financial Institution

ACH Operator = The Federal Reserve Bank or EPN

RDFI = Homeowner’s Financial Institution

Receiver = Homeowner

 

Those are the biggies.  There are a few other optional parties, which we’ll talk about next time in Party, Party, Party. 

 

Only because I know there are some fans out there like me, here is a link to the entire Who’s on First script.

 

http://www.baseball-almanac.com/humor4.shtml

 

And if you want to watch it…

 

http://www.metacafe.com/watch/yt-VcOKk1-SqSg/abbott_costello_whos_on_first_whats_on_second/

 

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Posted by achguy

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