AAP key terms

An electronic funds transfer system in which participating U.S. depository financial institutions exchange batches of debit and credit entries through a central operator instead of settling each payment individually.

The central clearing facility that receives ACH files from originating institutions, edits and sorts them, distributes entries to receiving institutions, and calculates the net settlement positions of participants.

The banking day on which an ACH entry is processed and funds are exchanged between the ODFI and the RDFI through the operator. Return and reversal deadlines are measured from it.

The depository financial institution that transmits entries into the ACH Network on behalf of an originator or third-party sender and warrants that those entries are authorized and properly formatted.

The depository financial institution that holds the receiver's account, receives entries from the operator, posts them, and may return entries it cannot process or that the receiver disputes.

The person or company that initiates an ACH entry and is responsible for its content, timing, and authorization. It may act directly under an ODFI agreement or through a service provider.

The person or account holder whose account is debited or credited by an ACH entry. The receiver grants the authorization that permits an originator to debit its account.

An entry that adds funds to the receiver's account, such as direct deposit of payroll. The originator pushes funds and bears the risk if account information is incorrect.

An entry that withdraws funds from the receiver's account, such as a subscription payment. The originator must hold a valid authorization and may face a return if none exists.

The banking day on which the originator intends entries in a batch to settle, as stated in the batch header. The operator uses it to assign a settlement date.

The daily deadline by which an ODFI must deliver a file to the operator for an entry to be processed on a particular banking day or processing window.

A non-dollar entry sent before the first live entry to confirm that the receiver's account and routing numbers are valid. It must precede the first live entry by at least three banking days.

An offsetting entry, matching the dollar amount of an erroneous entry and flagged as a reversal, used to correct a duplicate or wrong-amount transmission. It must be initiated promptly after the error is found.

The receiver's permission for an ACH debit, which must meet the method allowed for its SEC code, state the terms agreed to, and be retained by the originator for two years after termination.

The private rulebook that governs ACH formatting, transmission, settlement, returns, and warranties among participants. Network participation contractually binds institutions and their originators to comply.

The process of comparing parties to a payment against U.S. Treasury sanctions lists before origination. Prohibited entries must be blocked or rejected, and matches reported to the government.

The federal regulation implementing the Electronic Fund Transfer Act. It sets consumer authorization, error resolution, disclosure, and liability rules for ACH debits to consumer accounts.

State law governing wholesale funds transfers, which covers most corporate ACH credit payments. It sets when a transfer is final and allocates risk among the parties.

A three-character Standard Entry Class code in the batch header identifying the payment type and authorization method, such as PPD, CCD, WEB, or IAT, and which rules apply.

Prearranged Payment and Deposit: the SEC code for consumer credits such as payroll and consumer debits authorized in writing, typically for recurring bills.

Cash Concentration or Disbursement: the SEC code for business-to-business entries and transfers between a company's own accounts. It carries limited remittance data.

Corporate Trade Exchange: a business SEC code that carries full remittance data in multiple addenda records, supporting ANSI X12 invoice and payment information end to end.

Internet-Initiated/Mobile Entry: a consumer debit authorized electronically over the internet or a mobile device, requiring commercially reasonable authentication and clear authorization terms.

Telephone-Initiated Entry: a single consumer debit authorized orally by phone under an existing relationship, where the call is recorded or the consumer gets written confirmation.

Accounts Receivable Entry: a consumer check received at a lockbox or drop box that is converted to an ACH debit, with the check truncated and notice given to the consumer.

A standardized code beginning with R that an RDFI uses to state why an entry is being returned, such as insufficient funds, closed account, or unauthorized debit.

A non-dollar entry an RDFI sends to correct information in a prior entry, such as an account number or transaction code. The originator must apply the correction.

A return of a return entry by the ODFI because the RDFI missed the return deadline, returned an ineligible entry, or the funds were already available. It uses its own reason codes.

A receiver's request that the RDFI block a specific debit or range of debits before posting. The receiver must allow enough time for the RDFI to act.

A return using a code such as R05, R07, R10, or R29, indicating the receiver never authorized the debit or revoked authorization. It creates warranty and compliance exposure for the originator.

An entity other than the originator that transmits entries to an ODFI on the originator's behalf. It assumes rule obligations, warranties, and audit responsibilities for those entries.

A third-party sender that is itself a customer of another third-party sender, creating layered relationships. The ODFI must identify, register, and monitor these arrangements for risk.

A periodic review of a participant's ACH activity against Nacha rules, required at least annually for third-party senders and performed by or reported to the ODFI.

A cap an ODFI places on the total dollar amount of ACH credit or debit exposure it will accept from one originator or third-party sender over a period, based on creditworthiness.

A pre-origination check that the receiver's account exists, is open, and belongs to the receiver, using tools such as verification services or micro-deposits to reduce returns and fraud.

Nacha's security requirement that account numbers used to originate or receive ACH entries be protected with encryption when stored or transmitted electronically, or by an approved alternative.

The service that lets an ODFI transmit entries that settle on the same banking day they are initiated, using designated processing windows and subject to a per-entry dollar cap.

The maximum amount permitted for a single Same Day ACH entry. Entries above the cap must be sent as next-day or future-dated entries instead.

International ACH Transaction: the SEC code for entries where the originator's or receiver's account is outside the United States, carrying detailed addenda for screening and foreign exchange.

An ACH operator that processes IAT entries, translating between ACH and foreign payment formats and forwarding entries to or from the foreign country's payment system.