Origination and Receipt of ACH Entries
The origination chain
Every entry needs a valid authorization from the Receiver, the correct SEC code and transaction codes, a complete 94-character record format, and an Effective Entry Date the Originator intends for settlement. The ODFI may not alter the amount, Receiver name, account number, or individual identification once the entry is originated - a favorite exam trap. The ODFI's only real latitude is settlement timing.
Authorizations
Consumer debit authorizations must be in writing, signed or similarly authenticated, with a copy provided to the consumer; oral authorization is permitted only where a specific SEC code allows it (TEL). Corporate authorizations may be by agreement. Records are kept two years from termination.
Prenotes and reversals
A prenote is a zero-dollar entry used to validate account data. If used, it must be sent at least three banking days before the first live entry, and it is never a substitute for authorization. A reversal corrects an erroneous entry: it must be transmitted within five banking days of the original settlement date, carry "REVERSAL" in the Company Entry Description, match the original amount, and the Originator must notify the Receiver.
Receipt duties
The RDFI must post to the correct account and make funds available under Reg CC. If it cannot post, it returns the entry rather than holding it.
Traps
Treating a prenote as consent; sending a reversal on day six; believing an ODFI can repair a wrong account number by editing the entry; confusing the Effective Entry Date with the settlement date.
Rule of thumb: three banking days for a prenote, five banking days for a reversal, two years for records.