presents Business to Business Payments The CCD and CTX Entry Disclaimer 2011 NEACH. All rights reserved. This material is not intended to provide any warranties or legal advice, and is intended for educational purposes only. NACHA owns the copyright for the NACHA Operating Rules & Guidelines.Any unauthorized use or access is expressly prohibited. 1
Agenda Requirements for Agreements The Company/Financial Institution Relationship Authorization Requirements Addenda Records Handling Exception Items Returns & NOCs Reversals Data Security Originator Agreement Initiating Direct Payments Origination Agreement Binds the company to the NACHA Operating Rules Highlights obligations under OFAC Outlines unique requirements, including processing schedules, credit limits, handling exceptions and errors, and data security Be familiar with the Agreement and with any subsequent changes to it. 2
Terms and Definitions Originator. The Company sending the entry, the Originating Company. If the Company is sending money, it is sending credits If the Company is collecting money, it is sending debits Accounts Receivable (A/R). Debit files. Accounts Payable (A/P). Credit files. Business to business transactions (B2B). ACH transactions. Receiver. The Company on the other end of the transaction. The Receiver may be a vendor, business customer, trading partner, or another account of the originator. Terms and Definitions continued Corporate Credit or Debit (CCD) are payments that are generally used for basic business debits or credits, such as: Concentrating money between different accounts Paying a vendor or collecting payment on a bill/invoice Paying Federal or state tax payments Corporate Trade Exchange (CTX) is typically used to pay multiple bills or invoices payable to a specific company with one transaction which is then automatically integrated into the accounts receivable system of the receiving company. It is used by companies that have a trade partnership in which one party requires its use and uses the invoice information in a predefined format. Some examples are: Auto dealers paying for multiple vehicle purchase from a supplier Payment to trading partners A large company paying utility bills for all locations in a single entry 3
Terms and Definitions continued Credit. Sending a payment to a Receiving Company Debit. Collecting fees or charges from a Receiving Company Entry Detail Record. Payment record containing information such as Receiving Company name, amount, account number and bank routing number Addenda Record. Associated with the Entry Detail Record that immediately precedes it, it contains additional information related to the transaction, such as invoice or payment information, remittance data, or tax payment information Remittance Data. Content of the Addenda Record. The data must be in ANSI X12 or a NACHA endorsed payment convention. ANSI X12. The organization that created payments standards. Those standards are from Committee 12, so American National Standard Institute Committee 12 is ANSI X12. NACHA Endorsed Payment Conventions. Can include specific characters or standards borrowed from other Industry Groups like Tax Collectors. Please refer to your business partner or Financial Institution for additional information. Requirement for Agreements The NACHA Operating Rules require an agreement between businesses in a B2B transaction An agreement must be in place prior to sending or receiving B2B payments and charges The agreement must reference the NACHA Operating Rules The rules do not regulate the method by which the agreement must be obtained. The agreement may be oral, written, or electronic EXAMPLE: if a company creates a secure website to allow their corporate customers to give their banking information and agree to be charged, that entry should be coded as a CCD or CTX and the site should reference both the customers agreement to the charge and reference that they agree to be bound by the NACHA Operating Rules. Requirements apply to both single entry or recurring debit or credit transactions. 4
CCD or CCD+ /CTX If your Company simply uses the ACH to transfer funds to or from another business or between accounts, or you know that you are Originating CCD entries with no Remittance data in the Addenda record click the CCD button to learn more about these entries. If your Company is using the ACH to transfer funds and Remittance data between you and another company such as a Tax Payment with addenda information or Invoice information for multiple invoices, click the CCD+/CTX button to learn more. CCD CCD+ CTX CCD Move Dollars Payments (credits) or charges (debits) cannot be processed until the Originator obtains certain information from the Receiving Company related to their account at a financial institution. The information must include: Valid account number Type of account, typically a checking but potentially a general ledger account Routing/transit number CCD+ Go to Exceptions CTX 5
CCD+ / CTX Move Dollars and Remittance Data Remittance Data is the information related to the payment that is being sent, and is found in the Addenda Record. Seek additional assistance from your Financial Institution if you have questions regarding addenda information CCD Plus Entry allows for a single Addenda Record to be attached to a payment or charge. One of the most common uses of the CCD plus addenda is for state or federal tax payments. CTX allows for 9,999 addenda records. These can be 9,999 separate lines of information, or information for one payment that fills 9,999 lines. A Common use of the CTX entry is to credit a supplier and include the invoice or multiple invoice information in the Addenda Records. Errors can delay payment Addenda Records CCD and CTX entries can carry both the payment and remittance data together Typically business to business payments that do not move the remittance along with the payment are sent using the CCD entry Business to business payments that are sent to collect multiple invoices or that need documented line items are sent by using the CTX entry Addenda records hold 80 characters of space for remittance information CTX entries can have up to 9,999 addenda records CCD entries typically have only 1 addenda record 6
ANSI ASCX12 There are many acceptable ANSI x12 standards that are processed through the ACH Network. Some examples are: Abandoned Property Filings the 103 transaction set Income or Asset Offset the 521 transaction set Electronic Filing of Tax Return Data the 813 transaction set Payment Order/Remittance Advice the 820 transaction set Lockbox the 823 transaction set Health Care Claim Payment/Advice the 835 transaction set http://www.x12.org/x12org/index.cfm Handling Exception Items ACH Entries may be returned for a number of reasons, including but not limited to: Stop payment Insufficient Funds Account Closed Invalid account number/name Unauthorized Companies should discuss options for handling returns with their Financial Institution. 7
Handling Exception Items continued Helpful Hint Companies should monitor their returns for trends in return types. For instance, if many of your returns are due to invalid account numbers, you may want to revisit your process for obtaining this information to increase accuracy. NOCs Notification of Change Entries A non dollar transactions sent by your customer s or trading partner s institution that contains correction information for a transaction that was previously initiated. Reasons to receive an NOC can include, but are not limited to: an incorrect account type on the original entry (for example, checking vs. savings) an incomplete/incorrect account number, many other categories of information 6 Once your Financial Institution receives the NOC from the RDFI, it will send the information to the company. Companies are required to make the changes referenced within six (6) business days of receiving of the NOC, or prior to sending the next live entry to your customer or trading partner, whichever is later. 8
Potential Liability WARNING! Responding to Notifications of Change is the Company s responsibility under the NACHA Operating Rules. The Company must make the change prior to initiating subsequent entries. A Company s Financial Institution may receive a fine if the Company does not respond appropriately to Notifications of Change. This is true whether the entry was a recurring payment or a single entry. Companies should be aware of any language in their Origination Agreement that may allow their Financial Institution to pass any fines on to the Company. Failure to respond to NOCs by making the appropriate changes to entries may result in significant fine or termination of the Origination Agreement. Entry Reversals File Reversals Entire file needs to be reversed A Company may originate a file to reverse all the Entries in an erroneous file Send a correcting file unless the erroneous file was a duplicate While the reversing file must be sent within five (5) banking days of the original entries, the Company must notify their Financial Institution as soon as possible and transmit the reversing file within twenty four (24) hours of discovering the error. 24 5 9
Entry Reversals continued Helpful Hint When duplicate files have been originated, there is a risk that the Company may not be able to retrieve the funds when it processes the reversal. Sending the reversal file as soon as possible increases the chance that the money will still be in the receivers account. It is imperative that as soon as the error is discovered that the Company contacts the Financial Institution; they will be able to work with the Company on the process of sending out the reversal file as quickly as possible. Entry Reversals continued File Reversals Entry Reversal A Company may have a single entry within a file that needs to be reversed. The timeline differs from an entire file reversal. The reversing file must be sent within five (5) banking days of the original entries. While the 24 hour discovery rule doesn t apply to reversing entries, the reversal should be done as soon as possible to increase the possibility of recouping funds in a credit entry situation. The Company must attempt to notify the receiver that they will be reversing the entry. This needs to be done on or before the date that the reversal is posted to their account. Their authorization is not required for the reversal; but rules require that the Company notify them that it will happen. 5 10
Data Security Requirements NACHA Operating Rules include requirements for the use of unsecured networks, such as email and Internet. All communication of account related information must be encrypted at a level of 128 bit RC 4 when communicating via an unsecured network. Recommendations It is also recommended that Companies follow commercially reasonable security procedures when handling customers financial information. Authorizations, Notifications of Change, and Returns, for example, all include customer financial information. Data Security continued Other Considerations Additionally, the company needs to be aware of State laws that may include requirements for securing some data. Your Financial Institution may also issue guidelines within your Origination Agreement or as an attachment to the Agreement. Companies should check with their Financial Institution as to expectations related to obtaining data in a secure manner and retaining and maintaining data. 11
Questions For specific guidance or information on any topics addressed in this training please contact your financial institution. 12