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AAP Flashcards > Payment Systems Overview > Flashcards

Payment Systems Overview Flashcards

1
Q

The __?__ is a processing and delivery system that provides for the distribution and settlement of electronic credits and debits among financial institutions.

A

ACH Network

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2
Q

The ACH movement began in __?__ when a group of California bankers formed the Special Committee on Paperless Entries (SCOPE).

A

1968

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3
Q

In 1974, __?__ was formed to coordinate the ACH movement nationwide.

A

NACHA (National Automated Clearing House Association)

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4
Q

The main benefits associated with the use of the ACH Network are __?__ and improved productivity over paper check transactions.

A

cost reduction

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5
Q

ACH Operators may be private companies or the Federal Reserve Bank. The current private sector operator is the __?__

A

EPN (Electronic Payments Network)

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6
Q

__?__ provide management, education, assistance, and services to link all types of financial institutions (commercial banks, savings banks and credit unions) across the US.

A

Payments Association

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7
Q

The __?__ is the entity that agrees to initiate ACH Entries into the payment system according to an arrangement with a Receiver.

A

Originator

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8
Q

An __?__ is the central clearing facility operated by a private organization or a FRB on behalf of DFIs to or from which participating DFIs transmit or receive ACH Entries.

A

ACH Operator

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9
Q

The __?__ is the institution that receives payment instructions from the __?__ and forwards entries to the ACH Operator.

A

ODFI; Originator

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10
Q

A __?__ is a natural person or an Organization that has authorized an Originator to initiate an ACH Entry to Person’s or Organizations account with the RDFI.

A

Receiver

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11
Q

Unlike a check, which is always a debit instrubment, an ACH entry may be either a __?__, __?__, or __?__ entry.

A

Debit; Credit; Non-Monetary

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12
Q

Dividends, payrolls, or government vendor pmts are all examples of ACH __?__.

A

Credits

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13
Q

Before any transaction is initiated, the Originator and ODFI execute an __?__ to use the ACH Network to originate payments.

A

agreement

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14
Q

Among other things, the __?__ should bind the originating company to the __?__, define the parameters of the relationship between the two parties, identify processing requirements for the specific applications, and establish liability and accountability for procedures related to certain applications.

A

agreement; NACHA Operating Rules

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15
Q

the Fedwire securities are held and transferred in __?__ form known as book-entry securities; unlike the Fedwire Funds Service, the Fedwire Securities service is a __?__ system with regard to payments.

A

electronic; debit/pull

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16
Q

The Fedwire funds Service is a __?__ system in which only the Originator’s financial institution can remove funds from its Federal Reserve account.

A

credit/push

17
Q

Unlike a __?__ card, where the cost of goods is charged to an account that is paid later and to which interest may be applied, the cost of goods charged against a __?__ card is taken directly from a demand deposit account.

A

credit; debit

18
Q

When a check is sent to another depository institution for collection, it is called a __?__ check.

A

Transit

19
Q

What type of card is similar to a debit card but the balance is not associated with a DDA or other financial institution account?

A

Prepaid/Stored Value

20
Q

The use of a __?__ debit card results in immediate funds transfer.

A

PIN/Online

21
Q

Document Retention Requirements for each of the following:
Originator, ODFI, RDFI, RCK Entries, ACH Operator

A

Originator-2 Years after revoked/paid
ODFI/RDFI-ACH docs 6 years
RCK-Check law=7 years
ACH Operator-1 year

22
Q

What two types of transactions is an RDFI allowed NOT to accept?

A

GL/Loan account entries (can classify as non-transaction accounts) & XCK Destroyed check entries

23
Q

ACH Legal Framework:
Rules, Regulations, Rights & Departments

A

NACHA Operating Rules
Title 31 CFR Part 210 (Green Book/Federal Pmts)
Federal Reserve Operating Circular 4
UCC 4
UCC 4A (Wholesale Credits)
Reg D, E, CC
Right to Financial Privacy Act
OFAC

24
Q

Year ABA was adopted to advance check processing?
What year was the MICR developed?
Year California bankers began ACH movement (SCOPE)?
Year NACHA was formed to coordinate the ACH movement nationwide?

A

ABA = 1911
MICR = 1956
SCOPE = 1968
NACHA = 1974

25
Q

Check Payment Legal Framework:
Rules, Regulations, Rights & Departments

A

UCC 3 (governs negotiable instruments)
UCC 4 (Check collection)
Reg CC (Subparts: B=funds availability, C=Collection, D=Substitute chks C21)
Reg J (Subpart A: chk collection through FRB)
FRB Operating Circular 3 (clearing & settlement of chks through Federal Reserve)
ECCHO Rules (Image rules between ECCHO mbrs)
NACHA Operating Rules: Chk conversion (ARC, BOC, POP) & truncation (RCK, SCK, TRC, TRX)

26
Q

Card Payment Legal Framework:
Rules, Regulations, Rights & Departments

A

Regulation Z (truth in lending=covers notices to members, rate change limits & fees)
Regulation E (guidelines for issuers and sellers of debit cards, guidelines for error resolution)
Regulation II-Durbin Amendment (Cap debit card interchange fees, requires 2 networks for card processing)

27
Q

Fedwire Funds Service Legal Framework:
Rules, Regulations, Rights & Departments

A

Regulation E (subpart B = remittance transfers)
Regulation J (subpart B = Funds transfer through fedwire)
UCC 4A (wholesale credit funds transfers not governed by REG E)
Federal Reserve Bank Operating Circulars (OC1=FRB acct maintenance, OC5=Electronic Access, OC6=funds transfer through Fedwire funds service) **NOT OC4, THAT IS FOR ACH
Regulation CC (funds availability)
BSA - 31 CFR103 (recordkeeping requirements/travel rule)
OFAC (administration & enforcement of economic & trade sanctions based on US foreign policy)

28
Q

Fedwire Funds Transfer Vs. Fedwire Securities Transfers?

A

Funds transfer = credit push
Securities = debit pull (sender initiates, debits pmt from bene bank FRB acct) **Allows for electronic issuance, transfer and maintenance of securities issued by US Treasury, government agencies, certain international organizations

29
Q

Fedwire Securities Service Legal Framework:
Rules, Regulations, Rights & Departments

A

UCC Article 8 (rights of direct and indirect systems for holding securities)
UCC Article 9 (rights and obligations to secured transaction
Federal Reserve Bank Operating Circulars
(OC1=Maintaining FRB acct, OC5=electronic access, OC7=Terms with FRB security acct maintenance and effect book-entry transfers)

30
Q

Settlement between ODFI & Originator determined by?

A

Agreement

31
Q

Settlement between RDFI & Receiver determined by?

A

NACHA operating rules, federal reserve availability schedules & agreement

AAP Flashcards (21 decks)

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