Standard Entry Class (SEC) Codes: PPD

August 21, 2009

PPD – Prearranged Payment and Deposit

PPD Transactions should only be used for Business to Consumer transactions and can be either Debits or Credits. PPD transactions can be used for either a single one-time transaction or recurring transactions.

 Examples of uses:

          Direct Deposit – Employer to Employee

          Direct Payment – Vendor to Customer (i.e. Insurance company debiting my account for monthly insurance payment)      

Authorization: The authorization for PPD transactions must be in writing and then signed or similarly authenticated*. The authorization must be readily identifiable as an authorization, clearly and conspicuously state its terms and should include information such as;

    Name and identifying information of the Originator

    Name and identifying information of the Receiver

    Routing Number

    Account Number

    Account Type (checking or savings/business or personal)

    Amount*

    Date on or after which the transaction will post to the account*

    Revocation/Termination language (does not apply to Single Entry authorizations)*

* Notes:

Similarly Authenticated refers to alternative methods of signature such as digital signatures and security codes. Check out the E-Sign Act for details and a natural sleep-aid substitute.

 The amount can be expressed in various ways. For instance;

    Refer to a separate contract (properly executed, of course),

    A fixed amount ($9.95),

    A range (such as $24.95 to $39.95 – if the amount varies from month to month) or

    A ceiling (up to $47.50).

The phrase “on or after”, when referring to a date is a wonderful addition to any authorization because you cannot always know for certain when a transaction will post. For instance, if you say the 15th, what happens when the 15th falls on a weekend or Federal Holiday? Using the “on or after” phrase offers enough flexibility – a couple of days – to get around that.

I cannot express the importance of having an easy, workable revocation or termination policy/procedure. With few exceptions, the Receiver always maintains the right to revoke or terminate their authorization with you – the K.I.S.S. approach is definitely the way to go. The most common methods are a phone call, written notice and written notice sent by traceable mail (Certified Mail, Fed Ex, UPS, etc.). Whichever works best for you is the way to go, but personally, in writing is always good.

Because I know someone will ask: Consumer to Consumer transactions could use PPD too. However, CIE could also be used. And, with the development of Mobile Payments, there may be another option soon.

There are all kinds of sample authorizations out there, you can check out the 2009 ACH Rules book (page OG36), talk to your Financial Institution, Third Party Service Provider, Regional Payments Association or NACHA. Some samples are free. Some are not.

And finally, when you have designed the authorization to suit your needs, please, please, please, be sure to pass it by your compliance person or preferably, your legal counsel before you roll it out for general use and after any future changes.

Stay tuned next week for CCD. It promises to be just as exciting.

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Posted by achguy

What’s in an SEC Code?

August 17, 2009

A lot.  Really.  Standard Entry Class or SEC Codes are a cornerstone to the everyday ACH transaction and work hand in hand with authorization requirements.

Remember in Originators Originate that we talked about how Originators are required to ensure that all information contained in a transaction is accurate?  That includes the SEC Code.  The SEC Code tells us how the transaction was authorized and what type of account the Receiver has – Consumer or Business.

When it comes to using SEC Codes, I cannot stress the importance of using the proper code – every time.

Here is a brief list of some of the more popular SEC Codes;

PPD

CCD

WEB

TEL

BOC

ARC

RCK

There are a bunch of other SEC Codes, and if you want to see a full list, you can always visit pages OR 103 through OR 106 of the 2009 ACH Operating Rules book or just stay tuned here and we’ll talk about them in upcoming posts.

I figure the easiest thing to do would be to review them one at a time.  We’ll talk about what they mean, what the authorization requirements are, how to properly use them and anything else that comes to mind.

I will try to do one a week and we’ll start with PPD.

Ooh, something to look forward to.

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Posted by achguy

WTAW – Welcome to Acronym World

August 7, 2009

by Jay Alsup – Marketing Manager

As a marketer, taking a job in a new industry can be a challenging task – adjusting to the new work flow, managing multiple business silos, following up with inherited deadlines, and oh yeah, actually learning about the intricacies of the new product offerings you are in charge of promoting.

Learning the nuances of my new digs along with multiple product lines was business as usual, but as I shifted my marketing career into the payments industry, I quickly noticed I had taken a step in to what I like to call Acronym World.  

Our trip to Acronym World can be somewhat of a refresher course for all of us…kind of like cramming for that 100 word vocabulary test the night before the exam while watching TV back in high school – yes Mom, I can watch this show and study at the same time…geez!

It was obvious I would be entering a new domain even with our company name itself – ACH Direct.  Hmmm…what is this ACH stuff, I’ve seen it on my bank statement before, but what exactly do those letters stand for?

ACH – Automated Clearing House:  The electronic payment Network which exchanges funds via EFT.

Great, even the definitions in this world have acronyms – EFT.

EFT – Electronic Funds Transfer; the transfer of funds from one bank account to another bank account utilizing the ACH Network.

Where there is money, there’s sure to be banks, and yes, the banks in this business are allotted specific terms as well.

ODFI – Originating Depository Financial Institution; the bank that initiates an Electronic funds transfer through the ACH Network on behalf of the Originator.

RDFI – Receiving Depository financial Institution; The financial institution that receives an ACH transaction for a holder of an account.  

So we’ve got all these terms, money going back and forth involving banking institutions, individual bank accounts involved, and complex payment processes all around us.  How is everything regulated?

Within this industry there are 19 regional ACH associations that provide rules and guidelines for the efficient operation of the ACH Network.  Naturally, the governing body for these organizations introduces us to another inhabitant of Acronym World – NACHA (this is “NACHA” ordinary organization…sorry, I couldn’t help myself).

NACHA – National Automated Clearing House Association forms the governing foundation for the regional associations and is also the chief rules making and interpretation body of the ACH.

The complexity of the terms in this industry can seem quite overwhelming at times, but the beauty of the resources we provide at ACH Direct not only benefit our team internally, but also provide top notch support and training to merchants of all sizes. 

ACH Direct hosts a series of free educational webinars which are developed and delivered by an accredited ACH professional from UMACHA (Upper Midwest Automated Clearinghouse Association), a highly respected and prominent regional payments association.  Click here for details.

Feel free to pop in for a few sessions and invite along anyone you think might benefit from taking advantage of the demand for electronic payment methods in today’s marketplace.

Thanks for spending some time with me today.  I’m looking forward to our next cram session…I’ll bring the popcorn.

 

 - Thanks to Jay for a great post today.  I hope you all enjoyed it and if we’re nice, I’m sure he’ll come visit us again. – ACHGuy

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Posted by achguy

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