ACH SEC Codes Glossary

The CCD SEC code is commonly used for business-to-business transactions. It is typically used for payments such as vendor invoices, payroll direct deposits, and business-to-business transfers. CCD transactions are typically accompanied by detailed remittance information, allowing businesses to include additional information along with the payment.

The PPD SEC code is commonly used for consumer transactions, such as direct deposits and bill payments. PPD transactions are initiated by consumers and can be recurring or one-time payments. For example, when employees receive their salaries through direct deposit, the PPD code is used to process the transaction.

How to Initiate a PPD Debit with Offline Customer Acceptance

Starting a PPD debit using offline customer acceptance requires a few critical steps. This process involves setting up a mandate, which allows you to debit the customer’s bank account directly. Here’s how to proceed:

• Create a Mandate: Begin by establishing a mandate using either a PaymentIntent or a SetupIntent. This is where you specify that the customer will accept the payment offline.
• Specify Offline Acceptance: Indicate that the customer’s acceptance method is offline. This involves documenting the exact time when the customer accepts the terms.
• Set Collection Method: When configuring your settings, choose a Collection_method  that matches your offline process. You will need to use “paper” as the option, signifying that a physical agreement has been reached.

In essence, these steps involve confirming the transaction with the necessary details that outline how and when the customer provided their consent offline. By following these instructions, businesses ensure compliance and readiness to process PPD debits efficiently.

The WEB SEC code is used for consumer payments initiated through the internet. This code is commonly used for online bill payments, online purchases, and electronic fund transfers initiated by consumers. It is important to note that the use of the WEB code implies consumer authorization for the transaction.

Understanding the WEB SEC Code

The WEB SEC code is a designation within the ACH (Automated Clearing House) network designed specifically for transactions that begin online or via mobile devices. When a consumer initiates a payment or transfer through an internet platform or a mobile application, the WEB SEC code comes into play.

Default Application

By default, any transaction that starts through web-based platforms automatically uses the WEB SEC code. This code serves as a standard unless specified otherwise by the entity processing the transaction.

Handling Refunds

If a refund is processed for a transaction originally using the WEB SEC code, it typically transitions to use the PPD (Prearranged Payment and Deposits) SEC code, ensuring the refund process aligns with prearranged payment guidelines.

This streamlined use of the WEB SEC code helps facilitate secure and efficient digital transactions, maintaining consistency across various online platforms.

The ARC SEC code is used for converting paper checks received by mail into electronic ACH payments. This code is commonly used by businesses that process large volumes of checks received as payments. By converting paper checks into electronic payments, businesses can improve their cash flow and reduce the time and cost associated with check processing.

The POP SEC code is used for processing electronic payments made at the point of sale. This code is commonly used by merchants and retailers to facilitate electronic fund transfers for purchases made in-store. POP transactions are typically authorized using a consumer’s check, which is then converted into an electronic payment.

6. TEL (Telephone Initiated Entry)

A single or a recurring ACH debit that occurs when the consumer’s authorization for a transfer of funds is received orally via the telephone.

When is a TEL Entry Allowed for ACH Transactions?

Businesses can utilize a TEL (Telephone-Initiated Entry) for ACH transactions under specific conditions. Here’s what you need to know:

• Existing Customer Relationship
  You can process a TEL entry if there is an established relationship with the customer, which includes:
  • A formal agreement with the customer for providing products or services.
  • A purchase of goods or services made by the customer within the last two years.
• Customer-Initiated Call
  If there is no pre-existing relationship, a TEL entry can still be used if the customer initiates the telephone call to the business.

Affiliated Relationships
Note that a pre-existing relationship between the customer and one of your affiliates does not qualify as a direct relationship with your business for the purpose of using TEL entries.

Understanding Authorization Requirements for TEL Entries

When initiating a TEL (Telephone-Initiated Entry) transaction, it’s essential to secure the customer’s approval. Here’s a breakdown of what’s required:

• Explicit Oral Authorization: Before proceeding, obtain clear verbal consent from your customer. This ensures they acknowledge and approve the debit to their account.
• Information Inclusion: The authorization must contain specific details akin to those found in online mandates. Additionally, provide a contact number so customers can address any inquiries.
• Recording the Authorization:
  • Audio Recording: Capture the conversation where the customer provides their consent, making sure to comply with state laws regarding call recordings.
  • Written Confirmation: Alternatively, you can send a written notice detailing the authorization terms to the customer. This must be done before the first debit occurs.
• Sample Authorization Statement: During the call, you should confirm details such as the date and amount of the transaction, the customer’s bank, the ABA routing number, account type, and account number. Then, ask the customer to verify the accuracy of this information.
• Validity and Cancellation: Let customers know this authorization remains effective until they decide to cancel it by contacting you through the specified support number.
• Single TEL Entries: If you opt for written notification instead of recording, clarify how the notice will be sent—whether by email or traditional mail.

By adhering to these steps, you ensure compliance and build trust with your customers during the authorization process for TEL transactions.

Guidelines for Providing Written Notice for TEL Authorizations

If a business opts to give written notification instead of an audio recording for Telephone-Initiated (TEL) authorizations, it’s crucial to clearly establish how this notice will be delivered. Businesses have a few options to ensure compliance and clarity:

• Choose Delivery Methods Wisely: Consider sending the written notice via email or traditional mail to document the authorization process.
• Ensure Clarity and Confirmation: Clearly communicate within the notice all the necessary details of the authorization. This includes specifics like transaction terms and conditions.
• Documentation: Maintain records of the sent notices. This not only provides a trail for compliance but also assists in resolving potential customer disputes.
• Customer Acknowledgment: If possible, request a read receipt for emails or a delivery confirmation for mailed letters to verify that the customer has received the notice.

By using these methods, businesses can effectively manage TEL authorizations through written communication, ensuring both compliance and customer understanding.

Always ensure compliance with relevant regulations and guidelines when processing TEL entries to maintain trust and legality in your transactions.

When you don’t set a mandate collection method, the default SEC code for consumer bank accounts is WEB. For business bank accounts, it defaults to CCD. These standard codes ensure proper processing, with WEB catering to consumer transactions and CCD designed for corporate dealings.

Understanding Mandate Requirements for ACH Direct Debit

Mandate requirements under ACH Direct Debit rules are not one-size-fits-all. They vary significantly depending on the type of mandate you are dealing with. Here’s a closer look at how these requirements differ:

Types of Mandates

1. Single-Entry vs. Recurring Mandates:
   • Single-Entry: These mandates are used for one-time payments. They typically require a straightforward authorization process.
   • Recurring: For regular payments, recurring mandates are used. They necessitate a more comprehensive agreement to ensure ongoing authority from the payer.
2. Consumer vs. Business Transactions:
   • Consumer Mandates: These usually require more detailed information and stricter guidelines to protect individuals from unauthorized debits.
   • Business-to-Business (B2B) Mandates: Generally, these are less regulated and allow for easier account debiting once the mandate is in place.

Compliance Considerations

• Authorization Details: Each type of mandate may require specific information to be included, such as the payer’s consent and details of the transaction.
• Record Keeping: You might need to maintain records of the mandate for a specified period to demonstrate compliance in case of disputes.
• Legal Obligations: Depending on local laws (like the Electronic Fund Transfer Act in the US), you may be subject to additional requirements.

Seeking Professional Advice

Given the complexity and variability of these mandates, it’s crucial to consult with a professional specializing in ACH transactions. They can provide you with tailored advice to ensure you’re meeting all applicable requirements, helping you avoid potential penalties or legal issues.

By understanding and adhering to these varying requirements, you can ensure your compliance with ACH Direct Debit rules while facilitating smooth transactions.

A complete glossary of all ACH SEC Codes follows below.

ACH SEC Codes Glossary