ABA Number:* See Routing/Transit Number.

ACH Network: Funds transfer system governed by the Rules of the National Automated Clearing House Association, which provides for the interbank clearing of electronic entries for participating financial institutions.

Affidavit:* A sworn statement by a consumer declaring that a particular ACH transaction was unauthorized or that the authorization for that transaction has been revoked.

Authorizing Customer: The checkwriter who has the legal authority to sign checks on the account shown on the check and to sign an authorization for electronic payment.

Authentication:* A data security technique used to ensure that the professed sender of information or a payment order is actually who he claims to be.

Authorization:* A agreement by a Receiver to allow for the posting of debit or credit items to their account. Authorizations for credit transactions may be orally given, but debit transactions must be authorized in writing or similarly authenticated by other means (for example, by digital signature or PIN if by computer).

Business Practices: Essential features of processes needed to effect standard operating procedures in a consistent manner.

CCD:** A credit or debit ACH entry initiated by an organization to consolidate funds of that organization from its branches, franchises or agents, or from other organizations, or to fund the accounts of its branches, franchises or agents, or of another organization. CCD is a standard Entry Class Code.

Check: (1) A negotiable demand draft drawn on or payable through or at an office of a bank; (2) A negotiable demand draft drawn on a Federal Reserve Bank or a Federal Home Loan Bank; (3) A negotiable demand draft drawn on the Treasury of the United States; (4) A demand draft drawn on state government or unit of general local government that is not payable through or at a bank; (5) A United States Postal Service money order; or (6) A traveler's check drawn on or payable through or at a bank. The term "check" does not include a noncash item or an item payable in a medium other than United States money. A draft may be a check even though it is described on its face by another term, such as "money order." For some purposes, the term "check" also includes a demand draft of the type described above that is nonnegotiable. (Definition is from Regulation CC: Availability of Funds and Collection of Checks.)

Check Authorization: A service that validates routing numbers and account information to determine if the checking account is valid.

Check Debit: An EFT Network service through which a paper check, presented to a merchant or other check acceptor, is converted into a real-time electronic transaction that debits funds for the amount of the check from the accountholder's account and credits those funds to the merchant's or check acceptor's account, provided that the account is valid and has sufficient funds to cover the transaction. Such funds are guaranteed for transactions accepted by the payor bank.

Check Digit: A digit, often the final digit of a number and usually calculated by applying an algorithm to all or some of the digits in the number, which may be used to test validity of the non-check-digit number. For example, routing/transit numbers have nine digits, eight of which provided FI identification information and the ninth is the check digit.

Check Guarantee: A service that guarantees the checkwriter's payment and assumes the collections risk of check payments for a merchant.

Check Safekeeping: The customer's financial institution keeps the customer's checks, not returning it in the customer's statement. The customer may receive an image of the check in the statement.

Check Truncation: The conversion of a check to an electronic debit or image of the check by someone in the payment system other then the paying bank. The transaction may be governed by check law (UCC, Reg CC and Clearing house rules) or by electronic banking law (Electronic Fund Transfer Act).

Check Verification: A service accessing customer and/or account databases through a point of sale system and/or by phone to verify or authorize that the check writer and/or checking account information is valid and/or in good standing.

Clearing House: The organization that collects, sorts and classifies, and distributes information, usually among a large number of organizations or entities.

Composite Receivers File:* A directory of all RDFIs served by an ACH Operator.

Consumer:* Usually refers to a natural person not engaged in commercial transactions.

Consumer Account:* A deposit account held by a participating DFI and established by a natural person primarily for personal, family, or household use, and not for commercial use.

Controlled Disbursement: A bank service provided typically to corporate customers wherein the company is notified early in the day of the dollar amount of items waiting to clear the account later that day; the company funds the account with the exact amount to clear the items.

Conversion: Transforming a payment initiated by paper check that has not been negotiated to an electronic payment.

Customer: Both consumer and corporate. Individual or company that purchases or uses the goods or services of another individual or company.

Depository Financial Institution:* A financial institution able to receive deposits from its customers or credits from the Federal Reserve Bank.

E-check: A generic term for an ACH debit to a consumer account that is originated on the Internet, at the point of sale, over the telephone, or by a bill payment sent through the mail or dropped in an unattended dropbox.

Electronic Check: The term "electronic check" is used to refer to several types of electronic transactions.
• ACH-based electronic check. A payment that begins as a paper check is converted into, or truncated to, an ACH debit entry. The paper check is not processed.
• Electronic network electronic check. A payment that begins as a paper check is converted into, or truncated to, an electronic network entry, using networks such as an ATM network or a credit card network. The paper check is not processed.
• Internet- or telephone-initiated payments. A transaction that is initiated over the Internet or via phone, with the debit carried out by an electronic debit, usually an ACH debit. Some users categorize payments initiated via Internet or telephone but that are effected by paper drafts as electronic checks, even though the debit is paper-based.
• A catch-all term used loosely to refer to any attempt to initiate payment through PCs, the Internet, and computer systems.

Electronic Check Council: A membership organization of financial institutions, companies and other interested entities dedicated to improving check clearing and collection. Operated under the auspices of NACHA ­ The Electronic Payments Association.

Electronic Check Presentment: The electronic transmission of the contents of a cash letter (as captured from the MICR line on each check) to the drawee bank ahead of the physical arrival of the checks actually in the cash letter.

Electronic Fund Transfer Act:* The law passed by the US Congress in 1978 which set out the rights and obligations of consumers and their financial institutions regarding the use of electronic systems to transfer funds. This act is implemented in the Federal Reserve Bank's Regulation E.

Financial Institution:* Any bank, savings and loan, credit union or other institution organized under either national or state banking laws capable of both accepting deposits and making loans.

Forward Collection: The process of collecting and settling funds for checks (demand instruments) from the Bank of First to Deposit to the Paying Bank.

Lockbox: A financial institution or third party processor service that facilitates rapid collection and posting of corporate receivables. Typically, customer payments are mailed to a lockbox or mailbox for collection, sorting, totaling and recording by the bank or provider rather than by the billing organization.

Magnetic Ink Character Recognition (MICR) Line: The characters on the bottom line on the face of a paper check that contains the routing/transit number of the financial institution the check is drawn on, the account number of the drawee (Receiver) and the check number, all printed in machine readable magnetic ink in a font devised for check reading

Merchant: The seller of goods and services.

Merchant Processor: A company that handles or provides transaction and sometimes data processing services to merchants (and, possibly, others).

MOTO (or MO/TO): Mail Order/Telephone Order.

NACHA: The national trade association for electronic payment associations, which establishes the rules, industry standards and procedures governing the exchange of commercial ACH payments by depository financial institutions. Network: A system of channels and interconnections such as among financial institutions, processors and merchants.

Originating Depository Financial Institution (ODFI):* The financial institution which delivers ACH entries directly or indirectly through a third party to its ACH operator.

Participant: A person or entity that has a share or plays a part in the activities at hand.

Point of Purchase: Location where payment for goods or services takes place where the purchaser and seller are both present.

POP entry:** An ACH debit entry initiated by an Originator pursuant to (1) a single entry authorization, and (2) a source document as set forth in subsection 3.7.1 (Source Documents), provided to the Originator by the Receiver at the point-of-purchase to effect a transfer of funds from a Consumer Account of the Receiver. This type of entry may only be used for non-recurring, in-person (i.e., at the point-of-purchase) entries for which there is no standing authorization with the Originator for the origination of ACH entries to the Receiver's account. POP is a Standard Entry Class Code.

PPD entry:** (1) An ACH credit or debit entry (other than an MTE or POS entry) initiated by an organization pursuant to a standing or a single entry authorization from a Receiver to effect a transfer of funds to or from a consumer account of the Receiver; or (2) an ACH debit entry constituting a presentment notice of an item eligible under section 2.9 (PPD Accounts Receivable Truncated Check Debit Entries). ... This debit entry is initiated pursuant to a check or share-draft provided to the Originator by the Receiver and delivered via the U.S. mail for payment of an obligation. "PPD+" is a PPD entry with one addenda record. PPD and PPD+ are Standard Entry Class Codes.

RCK entry:** An ACH debit entry constituting a presentment notice of an item eligible under section 2.8 (Re-presented Check Entries). An RCK entry is an item as defined by Revised Article 4 of the Uniform Commercial Code (1900 Official Text) only for the limited purpose of presentment as set forth in Article 4-110(c) and notice of dishonor as set forth in Article 4-301(a)(2). RCK is a Standard Entry Class Code.

Receiver: An individual, corporation or other entity who has authorized a company or an Originator to initiate a credit or debit entry to a transaction account held at an RDFI.

Receiving Depository Financial Institution (RDFI):* A financial institution which receives ACH entries directly or indirectly from its ACH operator.

Regulation CC:* The regulation published by the Federal Reserve Board to implement the law which mandates the time limits for funds availability on deposited items.

Regulation E:* The regulation published by the Federal Reserve Board to implement the Electronic Fund Transfer Act mandating consumer rights and obligations with regard to electronic fund transfers.

Retail Customer: A consumer (not a business) paying for a purchase at a retail point of purchase (point of sale).

Return Processing: The process of returning and settling funds for checks (demand instruments) that were dishonored by the RDFI (Paying Bank) and returned to the ODFI (Bank of First Deposit).

Routing/Transit Number:* Also known as Routing Number, Transit/Routing Number and ABA number. A nine digit number (eight digits plus a check digit) which identifies a specific financial institution. Routing numbers are administered by the Routing Number Administrative Board under the sponsorship of the American Bankers Association and officially maintained and published by Thomson Financial Publishing.

Routing Number Administrative Board:* The cross-industry board sponsored by the American Bankers Association which defines and administers all policies regarding routing/transit numbers.

Standard Entry Class Code: A three-letter code that uniquely identifies the class of ACH transaction. For example, "POP" stands for "Point of Purchase".

TEL:** A single-entry ACH debit initiated by an Originator pursuant to an oral authorization obtained over the telephone to effect a transfer of funds from a consumer account of the Receiver. This type of entry many only be used for a single-entry for which there is no standing authorization for the origination of the ACH entries to the Receiver's account. A TEL entry may only be used when there is an existing relationship between the Originator and the Receiver, or, when there is not an existing relationship between the Originator and the Receiver, when the Receiver initiates the telephone call. TEL is a Standard Entry Class Code.

Third Party Processor:* A party which processes ACH files and/or items on behalf of one of the participants in the ACH system. Examples of third party processors are payroll processing companies which create ACH files for transmission to the ACH Operators on behalf of an originator or ODFI, a data processing company which receives incoming ACH files and processes them for an RDFI, or a correspondent bank which processes ACH files for its correspondents.

TRC (Truncated (Check) Entry):* An ACH entry which originally represented a check, in which the actual check is safekept by one of the financial institutions in the chain of deposit and the MICR information is converted to an electronic entry and processed through the ACH network back to the issuing institution. TRC is a Standard Entry Class Code.

Truncation: See Check Truncation.

TRX (Truncated (Extended) (Check) Entry):* A series of TRC entries put together as addenda records with the payment item representing the total settlement of the TRC entries for that batch. TRC is a Standard Entry Class Code

Uniform Commercial Code: A body of law whose underlying purpose and policies are (a) to simplify, clarify and modernize the law governing commercial transactions; (b) to permit the continued expansion of commercial practices through custom, usage and agreement of the parties; (c) to make uniform the law among the various jurisdictions. The effect of provisions of this Act may be varied by agreement, except as otherwise provided in this Act and except that the obligations of good faith, diligence, reasonableness and care prescribe by this Act may not be disclaimed by agreement but the parties may by agreement determine the standards by which the performance of such obligations is to be measured if such standards are not manifestly unreasonable. (Taken from Article 1, General Provisions, Uniform Commercial Code, The Portable UCC, second edition.)

WEB:** An ACH debit entryinitiated by an Originator pursuant to an authorization that is obtained from the Receiver via the Internet to effect a transfer of funds from a consumer account of the Receiver. WEB is a Standard Entry Class Code.

XCK entry:** A debit entry initiated in the event an item eligible for section 2.7 (Destroyed Check Entries) is contained within a cash letter that is lost, destroyed, or otherwise unavailable to and cannot be obtained by an ODFI. XCK is a Standard Entry Class Code.

* From ACH Terms: A to Z Glossary
** Adapted from 2001 ACH Rules Book

Acronyms

ABA: American Bankers Association
ACB: America's Community Bankers
ACCU: Association of Corporate Credit Unions
ACH: Automated Clearing House
CBC: Computer Based Controls
CTA: Check Truncation Act
CUNA: Credit Union National Association
DFI: Depository Financial Institution
ECC: Electronic Check Council
ECCHO: Electronic Check Clearing House Organization
ECHO: Electronic Clearing House, Inc.
ECP: Electronic Check Presentment
EFT: Electronic Funds Transfer
FI: Financial Institution
FMS: Financial Management Service
FRB: Federal Reserve Bank
ICBA: Independent Community Bankers of America
MICR: Magnetic Ink Character Recognition
NACS: National Association for Check Safekeeping
NAFCU: National Association of Federal Credit Unions
NCN: National Check Network
ODFI: Originating Depository Financial Institution
POP: Point of Purchase
POS: Point of Sale
RCK: Re-presented Check
RDFI: Receiving Depository Financial Institution
RMRS: Rocky Mountain Retail Systems

Glossary terms and definitions provided by NACHA