General Payments Overview

Question 1

The ACH Network

Answer 1

is a processing and delivery system that provides for the distribution and settlement
among financial institutions of electronic credits and debits, as well as non-monetary entries with payment
related information.

Question 2

NACHA Founding Date

Answer 2

1974

Question 3

SCOPE

Answer 3

Special committee on paperless entries

California bankers in1968 attempting to develop an alternative to checks

Question 4

What are the primary functions of NACHA

Answer 4

develops rules and standards, provides industry solutions, and delivers education, accreditation, and advisory services.

Question 5

Who are the ACH Operators

Answer 5

Electronic Payments Network (EPN) which is private and the Federal Reserve Board (FRB)

Question 6

What is the function of an ACH operator

Answer 6

Central clearing facility for the clearing delivery and settlement of entries between and among participation DFIs

Question 7

batch processing

Answer 7

store-and-forward system. Transactions received by a financial
institution during the day may be stored and processed later or may be processed immediately but are
always processed in a batch mode.

Question 8

Originator

Answer 8

originating company or individual that has authorized an ODFI to transmit

Question 9

ODFI

Answer 9

Originating depository financial institution that receives payment instruction from originator and transmits payments to ach operator

Question 10

RDFI

Answer 10

receiving depository financial institution that receives ach entries from ach operator and posts to the account of the receiver

Question 11

Receiver

Answer 11

natural person or organization that has authorized originator to initiate an ACH entry to their account

Question 12

Do all Financial institutions originate ACH payments

Do all financial institutions that originate ach payments receive ach payments

Answer 12

no

yes

Question 13

On-Us entries

Answer 13

An “on-us” transaction is one in which the sending and receiving accounts are both at the same financial
institution. Therefore, the transaction need not be sent through the ACH Network but may instead be
retained by the financial institution and posted to the appropriate account.

Question 14

Name two banking industry conventions responsible for the efficient evolution of automated check processing.

Answer 14

Routing number policy adopted by the American Bankers Association (ABA) in 1911; and National standard for imprinting checks with machine-readable numbers and characters in magnetic ink (Magnetic Ink Character Recognition or MICR) in 1956.

Question 15

What are common uses for preauthorized debit transactions?

Answer 15

Recurring payments, such as, loan payments, insurance premiums, utility payments, membership dues.

Question 16

What rules and federal regulations govern the processing of ACH transactions?

Answer 16

Nacha Operating Rules & Guidelines; Title 31 CFR Part 210; Regulation E; Regulation CC; Regulation D; UCC 4A; UCC 4

Question 17

Payor

Answer 17

Writer of the check

Question 18

Payee

Answer 18

Recipient of the check

Question 19

BOFD

Answer 19

Bank of first deposit - where the check is first deposited

Question 20

Correspondent Bank

Answer 20

Providing payment clearing servives to a BOFD and paying bank

Question 21

Payor Bank

Answer 21

Bank where the check is written from