Business to Consumer (People) Payments and Collections

TEL - Telephone-Initiated Entry - Nacha Operating Rules Subsection 2.5.15

A TEL entry is used by an organization (business) to originate to the account of a consumer (person) Receiver based on an authorization from the Receiver. The authorization for a debit TEL entry must be obtained via a telephone call and the Originator must establish and implement commercially reasonable procedures to verify the identity of the consumer. TEL entries can be used for single and recurring payments. A TEL entry may only be used when there is an existing relationship between the organization and the consumer. When there is not an existing relationship between the organization and the consumer, the consumer has to be the one initiating the telephone call.

Authorization Requirements for TEL Entries - Nacha Operating Rules Subsection 2.3.2.2

• Must be readily identifiable as an ACH authorization (i.e., “I authorize” or similar)

• Must have clear and readily understandable terms including:

• The amount or how the amount is determined

• Indicate if the authorization is for a single, multiple, or recurring entry

• The start date and frequency of the debit

• The date the entry will occur (i.e., 15th of each month, if a weekend or holiday, the next banking day)

• A method for the Receiver to revoke the authorization (i.e., in writing, email or phone)

• Receiver’s bank routing number and account number

In addition to the requirements above, the Nacha Operating Rules Subsection 2.5.15.3 states that the oral authorization obtained via a telephone call must also provide the consumer as part of the terms of the authorization, a telephone number for consumer inquiries that is answered during normal business hours.

Authorization Retention Requirements

• Single entries - The Originator must either retain the original or a duplicate audio recording of the consumer’s oral authorization or the original or a copy of the written notice confirming the consumer’s oral authorization for two years from the date of the authorization.

• Recurring entries - The Originator must retain the original or a duplicate audio recording of the consumer’s oral authorization and evidence that a copy of the authorization was provided to the consumer in compliance with Regulation E for two years from the date of termination or revocation of the authorization.

Documents Video Presentation - TEL Entries

Business to Consumer (People) Payments and Collections

WEB - Internet initiated/Mobile Entry - Nacha Operating Rules Subsection 2.5.17

A WEB entry is used by an organization (business) to originate to the account of a consumer (person) Receiver based on an authorization from the Receiver. The authorization for a debit WEB entry must be obtained via the internet or a wireless network and the Originator must establish and implement commercially reasonable procedures to verify the identity of the consumer. WEB entries can be used for single and recurring payments. WEB credit entries are used to conduct person-to-person transfers (P2P).

Authorization Requirements for WEB Entries - Nacha Operating Rules Subsection 2.3.2.2

• Must be readily identifiable as an ACH authorization (i.e., “I authorize” or similar)

• Must have clear and readily understandable terms including:

• The amount or how the amount is determined

• Indicate if the authorization is for a single, multiple, or recurring entry

• The start date and frequency of the debit

• The date the entry will occur (i.e., 15th of each month, if a weekend or holiday, the next banking day)

• A method for the Receiver to revoke the authorization (i.e., in writing, email or phone)

• Receiver’s bank routing number and account number

Authorization Retention Requirements

• Must be retained, electronically or in hardcopy format, readily and accurately reproducible, for a period of two years following the termination or revocation of the authorization.

Annual Audit Requirements for WEB Debit Entries - Nacha Operating Rules Subsection 2.5.17.3

An Originator of a WEB debit entry must conduct, or have conducted on its behalf, annual audits to ensure that the financial information obtained from Receivers is protected by security practices and procedures that include, at a minimum, the following:

• Physical security to protect against theft, tampering, or damage

• Personnel and access controls to protect against unauthorized access and use

• Network security to ensure secure capture, storage, and distribution

In addition to the annual audit requirement, the Nacha Operating Rules Subsection 2.5.17.4 states that an Originator of a WEB debit entry must establish and implement a commercially reasonable fraudulent transaction detection system to screen WEB entries for potential fraud. The fraudulent transaction detection system must, at a minimum, validate the account to be debited for the first use of such account number and for any subsequent changes to the account number. The use of prenotifications, micro-deposits, or Plaid account validation would satisfy this requirement.

Also, the Originator must establish and implement a commercially reasonable procedure to verify that the routing number used to process a WEB debit entry is valid. This requirement is outlined in the Nacha Operating Rules Subsection 2.5.17.6.

Waiting Period Following Prenotication Entries - Nacha Operating Rules Subsection 2.6.2

An Originator that has originated a prenotification entry to a Receiver’s account may initiate entries to the Receiver’s account as soon as the third banking day following the settlement date of the prenotification entry, provided the Originator has not received a return or notification of change to the prenotification entry. If a return or notification of change is received in response to a prenotification entry by the opening of business on the second banking day following the settlement date of the prenotification, the Originator must not transmit subsequent entries to the Receiver’s account until it has remedied the reason for the return entry or made the correction requested by the notification of entry.

General Rules for Micro-Entries - Nacha Operating Rules Subsection 2.7.1

An Originator may originate one or more micro-entries to a Receiver’s account prior to initiating future credit or debit entries to a Receiver’s account. A credit micro-entry must be in the amount of less than $1.00. One or more debit micro-entries must not exceed, in total, the amount of the corresponding credit micro-entry.

Micro-entry formatting requirements are addressed in the Nacha Operating Rules Subsection 2.7.2; it states that micro-entries must be submitted as a separate batch of entries and contain “ACCTVERIFY” in the Company Entry Description Field of the Company Batch Header Record. The name of the Originator identified in the Company Name Field must reflect the same Originator that will be identified in future entries to the Receiver’s account. Minor variations to the Originator’s name, for accounting or tracking purposes, are acceptable as long as the name of the Originator remains readily recognizable to the Receiver.

The Nacha Operating Rules Subsections 2.7.3 and 2.7.4 address restrictions on transmission of debit micro-entries and waiting period following the origination of micro-entries.

Subsection 2.7.3 states that an Originator that transmits one or more debit micro-entries to a Receiver’s account must simultaneously transmit for settlement, at the same time, one or more credit micro-entries credit micro-entries that, in aggregate value, are equal to or greater than the amount of the debit micro-entry(ies).

Subsection 2.7.4 states that an Originator that originated one or more micro-entries to a Receiver’s account may initiate future entries to the Receiver’s account as soon as the Originator’s process for verifying the amounts of the micro-entries has been completed.

Documents Video Presentation - WEB Entries