Glossary of ACH Terms

ACH - The Automated Clearing House network

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.

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.

BANKING DAY - Any day on which the DFI is open to the public for carrying on substantially all its banking functions.

BUSINESS DAY - A calendar day other than a Saturday, Sunday, or Federal holiday.

COMPANY/BUSINESS - An individual, sole proprietorship, partnership, or corporation engaged in a commercial enterprise or venture.

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.

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+.

CREDIT ENTRIES - An entry to the record of an account to represent the transfer or placement of funds into the account.

DEBIT ENTRY - An entry to the record of an account to represent the transfer or removal of funds from the 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.

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 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 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.

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.

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.

INDIVIDUAL IDENTIFICATION NUMBER - The number used by the originating business to identify the individual being paid (direct deposit) or charged (automatic debits).

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.

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.

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 3 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.

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".

REVERSING FILE OR ENTRY/REVERSAL – A credit or debit Entry that reverses an Erroneous Entry, or a file that reverses all Entries in an Erroneous File.

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".

SAME DAY ENTRY– An Entry, other than a debit Entry, in which the Effective Entry Date is the same Banking Day as the date on which the Entry is Transmitted by the ODFI to its ACH Operator by the deadline for same-day processing and settlement. A Same Day Entry must be for an amount of $25,000 or less. An IAT Entry cannot be a Same Day Entry. An Entry with a stale or invalid Effective Entry Date will also be a Same Day Entry if it is Transmitted by the ODFI to its ACH Operator by the deadline, and is otherwise eligible, for same-day processing and settlement.

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.

STOP PAYMENT ORDER - A directive by an account holder to its financial institution not to pay a particular ACH transaction.

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.

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.