"Pre Test" Flashcards
Which regulation specifies the requirements for reserves that a depository institution must
maintain at a Federal Reserve Bank?
Regulation D
Which regulation specifically imposes reserve requirements on certain types of deposits and
other depository institution liabilities?
Regulation D
Which payment systems is referred to as real-time and gross settlement?
Fedwire Funds Transfer
What is a description of the Acquirer in the card network system:
A financial institution that represents merchants in accepting POS transactions
What is the minimum amount of dispute BEFORE a complaint can be filed to initiate an arbitration
proceeding for the ACH Network?
$250
Blue Sky Bank does ACH origination for two local companies in town. The bank has agreements in place with the two Originators in which it provides the necessary disclosures for UCC Article 4A as required by the Nacha Operating Rules & Guidelines. What provision of UCC Article 4A can be varied by agreement (with disclosure to Originator)?
Choice of Law
Anthony opened his checking account with Northern Bank in February. In the initial disclosures provided by Northern Bank upon account opening, the ATM fee was clearly stated as being $3.00 per transaction. Effective October 1, the fee for using an ATM will increase to $3.50. According to Regulation E, how many days prior notice is required when there is a change to the initial disclosures which results in greater consumer liability?
21 days
Which regulatory body requires the RDFI to perform a review of all parties to an IAT entry including Remittance and Foreign Correspondent Addenda Records?
Office of Foreign Assets Control
What is the check processing order?
Payee/Bank of First Deposit/Correspondent Bank/Paying Bank
What is a method by the RDFI to officially notify a federal government agency of the death of a federal government benefit payment recipient?
By returning a post-death benefit R14 or R15
Regulation E does NOT apply to which of the ACH products (identified by SEC Code)?
RCK, CCD, CTX
For IAT Transactions, how do the Addenda Records breakdown?
7 mandatory, 2 optional remittance, 5 optional foreign correspondent (only a combined maximum of
12 addenda records)
State Bank and Trust returns an entry as unauthorized after having the customer complete and sign the Written Statement of Unauthorized Debit (WSUD). How long is State Bank and Trust required to retain a copy of the WSUD?
One year
First Bank (the ODFI) is creating XCK entries due to a lost cash letter. According to the Nacha Operating Rules & Guidelines, First Bank needs to keep a copy of the item(s) to which each XCK entry pertains for:
6 years
U.S. Steel Company is stating it has an unauthorized debit entry posting to its corporate account on Sept 22. On Sept 29, it is requesting the RDFI (Star Bank) to return the entry as unauthorized. What is the timeframe to return an unauthorized ACH corporate entry?
Available to the ODFI no later than opening of business on the second banking day following
settlement date of original entry
According to the Nacha Operating Rules & Guidelines, what is the minimum dollar amount of loss suffered to file a claim for compensation?
$200
Written and signed or similarly authenticated authorizations are REQUIRED for which of the following debit transactions?
WEB, POP, PPD
Which field contains the reason for payment as required by OFAC for IAT entries?
Transaction Type Code field
Sally received a $400 credit entry into her account on Friday. The following Friday, Sally contacted her
financial institution to tell them it’s not her transaction. What is the timeframe to return this entry?
Available to the ODFI no later than opening of business on the second banking day following receipt of notification of refusal from the Receiver
State Bank & Trust sends a PPD debit entry to Rose’s account at Third Street Bank. Rose’s account is overdrawn and the entry is returned NSF. When State Bank & Trust receives the return, what can State Bank & Trust do?
The entry can be reinitiated up to two (2) more times within 180 days after settlement date of
original entry
This summarizes the control totals from batch controls within the file. It also contains the number of blocks & batches within the file.
File Control Record
An ODFI is transmitting ACH entries for a local pharmaceutical company. An undiscovered problem in its software causes the last four digits in various account numbers to be transposed, resulting in 30 percent of the entries being returned R03 (Unable to Locate Account). Before the problem is resolved, the situation is leaked to the local news. This is an example of what type of risk?
Reputational Risk
Give a statement regarding Regulation CC.
Enacts the Expedited Funds Availability Act of 1988
For a Destroyed Check entry (XCK) transaction, what needs to be in the company name field?
CHECK DESTROYED
In what ACH record will you find the addenda record indicator?
Entry Detail Record
What is the flow of an ACH transaction within the ACH Network?
Originator, ODFI, ACH Operator, RDFI, Receiver
First Bank and U.S. Steele Company have an ACH origination agreement. What provides guidelines when determining the commercially reasonable security procedures that are addressed and followed in that agreement?
Uniform Commercial Code Article 4A
What record contains the check serial number, terminal city and state, and terminal ID for an IAT
transaction that contains a secondary SEC Code of BOC?
Remittance Addenda Record
Stan uses a check to pay for a purchase at the hardware store. When the check is presented to Stan’s financial institution, Stan’s account is NSF and the check is returned. The store provided proper notice at the point of sale, so when it receives the check back NSF it re-presents the check using an RCK entry. According to the Nacha Operating Rules & Guidelines, which of the following is true regarding a copy of the check to which the entry relates?
Keep a copy of the front and back of the check for 7 years and when requested in writing from the
RDFI, provide a copy (indicating paid - if paid) to the ODFI so it can meet its requirement to provide a
copy within 10 banking days to RDFI
Numeric fields are:
Right justified, unsigned and zero filled
What relates to the EFT Mandate?
The Debt Collection Improvement Act of 1996
The definition of “Designated Data” in the Nacha Operating Rules & Guidelines includes the following data, processed by an ACH Operator, to the extent such ACH Operator agrees to provide such data to Nacha from time to time:
Data derived from return entries or extended return entries
Which of the following is NOT a service class code?
230
Great State Bank receives a notice from Nacha regarding reporting requirements for unauthorized
returns for one or more Originators or Third-Party Senders (TPS) that Nacha suspects exceeded the
threshold of 0.5 percent. Great State Bank must:
respond within 10 banking days via a traceable delivery method explaining the reason(s) causing the Originator or TPS to have exceeded the unauthorized entry return rate threshold
Lakes Credit Union sends a written request for a copy of the item to which an XCK relates within 6 years of the date on which the XCK entry was initiated; the ODFI needs to supply a copy of the item to which the XCK relates to the RDFI within what timeframe?
30 calendar days
In what record is the standard entry class code found?
Company Batch Header Record
As a prerequisite to origination, and to help control credit risk, an ODFI must have this in place for all
the Originators for which it transmits ACH entries:
Exposure Limits
An ACH Operator acting as a Gateway must not process:
Any debit Inbound IAT entry, except for reversing entries
An RDFI must recredit an account holder for a debit entry, if the Receiver has completed a Written
Statement of Unauthorized Debit, for all of the following reasons EXCEPT:
The entry was authorized but the Originator did not send the ordered merchandise
File creation time and date are found in the
File Header Record
When a participant in the ACH network is unable to meet its financial obligation to another financial
institution, causing that FI fail, it is an example of what type of ACH risk?
Systemic Risk
A Health Care EFT Transaction must comply with the following format
CCD with one Addenda Record
An IAT return entry must include:
seven mandatory plus an additional (8th) addenda with return reason code and original entry trace
number
Which is a warranty made by the ODFI to the RDFI?
The Originator has no knowledge of the Receiver’s revoked authorization.
If the RDFI requires written confirmation of a verbal stop payment order, the verbal stop payment
order will cease to be binding after how many days?
14
An ACH Operator receives an ACH Credit item with a stale effective entry date. When will settlement
occur?
The next available settlement opportunity
If an Originator changes the scheduled debit date of an ACH entry, how many days in advance of the
new date must the Originator provide notice to the consumer Receiver?
Seven calendar days
Upon request of a Receiver, an RDFI must provide all payment-related information for CCD, CIE, CTX,
and IAT entries to non-consumer accounts by:
The opening of business on the second banking day following the settlement date of the entry.
The Nacha Operating Rules & Guidelines require that all credit entries not credited to its Receivers
must be returned by the RDFI to its ACH Operator by the ACH Operator’s deposit deadline for the return entry to be made available to the ODFI no later than:
The opening of business on the second banking day following the settlement date of the entry.
Alphameric fields are:
Left justified and space filled
Upon receipt of a written request from an ODFI, the RDFI must send a copy of a Written Statement of
Unauthorized Debit to the ODFI within:
10 banking days
The Nacha Operating Rules & Guidelines require that each ACH Operator must retain a record of all
entries for at least:
One year from the receipt or transmittal of the entry
An erroneous file was transmitted by the ODFI. The reversing file, and if necessary, a correcting file
must be transmitted to the ACH Operator within:
5 banking days after the settlement date of the erroneous file and within 24 hours of the discovery
Which is NOT a responsibility of the RDFI as outlined in the Nacha Operating Rules & Guidelines?
Obtain a copy of the authorization for every entry received
The Company Name (all batches except IAT) is:
Mandatory
An ODFI or Originator cannot reinitiate an entry more than:
180 days after the settlement date of the original transaction
Which SEC code is initiated only by the federal government?
DNE
What is NOT an ACH benefit to an RDFI?
Elimination of stop payment charges and check reissue costs
A Value-Added Network (VAN) is best described as:
A communications network for sending and receiving data
What is NOT a benefit of direct deposit via ACH?
Reduced disbursement float
Which regulation requires a health club to provide a 10-day notice when there is a change in dollar amount of the original authorization?
Regulation E
A TEL entry can be initiated EXCEPT when:
The Originator initiates the call to the consumer with whom they have no prior relationship
What is the ANSI transaction set used for making health care payments?
ASC X12 835
ACH operations primary staff at an RDFI are out sick and the backup staff is unsure of how to do ACH returns so they decide not to process them until the other employees return. Three days later the returns cannot be completed as they were NSF and are now outside of the return timeframe. What type of risk is this?
Operational Risk
Individual name field is mandatory for:
TEL & WEB
What types of checks are not eligible to be converted to an ARC, POP or BOC entry?
Checks drawn against lines of credit
What are the characteristics of a CTX entry?
A credit or debit transaction for corporate payments
The Federal Reserve’s Operating Circular No. 4 does what?
Establishes a process to monitor ongoing payment system risks & Establishes cutoff items, settlement dates and allowances for extensions
What requires virtually all non-tax related payments by the federal government to be
made via electronic funds transfer?
EFT Mandate
The ACH Network is governed by all of the following EXCEPT
Regulation J
The party that represents merchants in the processing, acceptance and settlement of POS transactions is the:
Acquirer
The file header record is the _____ record in an ACH file.
First
Which is specifically designed to help consumers comparison shop for credit by requiring disclosures
about terms and cost?
Regulation Z
What two banking industry conventions made the check payment system more efficient?
Routing Transit Number and MICR
The purpose of the Federal Reserve Bank Operating Circular 4 (OC4) is to:
Govern the clearing and settlement of ACH entries
What payment system uses gross settlement?
FedWire™
The Monetary Control Act of 1980 allowed:
Private sector ACH Operators to compete with the Federal Reserve
When is settlement considered final for ACH credit entries?
Credit entries are final on the settlement date
Which standard entry class codes can be used for both a Zero-Dollar entry and payment-related information?
CTX and CCD
A biller collecting a service fee associated with a payment returned as insufficient funds may do so if
notice is provided at the time the underlying entry is authorized or check item is accepted for payment. To identify the debit as a fee, the biller must format the company entry description field as follows:
RETURN FEE
An ODFI may dishonor a return entry that was
Untimely
Which entity is required by the Nacha Operating Rules & Guidelines to enter into an agreement with a Sending Point?
ODFI
If the effective entry date of a batch of entries is left blank by the ODFI, the ACH Operator will insert
the settlement date as:
the next available settlement opportunity
What law provides protection that a substitute check is the legal equivalent of the original check?
The Check Clearing for the 21st Century Act (Check 21)
What type of risk may be incurred by the RDFI if they choose to pay an ACH debit entry that overdraws the Receiver’s account?
Credit Risk
Which regulation implements the Expedited Funds Availability Act?
Regulation CC
FedWire™ is subject to:
Regulation J and Regulation CC
Several ARC Entries are posted to Mr. Jones’ account on Monday, January 24th. Mr. Jones called his financial institution on Monday, January 31st to inform them that he didn’t authorize the entries. The check serial numbers associated with the ARC Entries were out of the range of checks that were posting to Mr. Jones’ account. What return reason code would the financial institution use to return the ARC Entries?
The financial institution should have Mr. Jones complete a Written Statement of Unauthorized Debit for the ARC Entries and return the entries using the R10 return reason code.
Community Financial Institution developed an ACH origination agreement for its business customers to
sign. The Nacha Operating Rules & Guidelines require which of the following to be included in the
agreement:
The financial institution’s restriction on the type of entries that may be originated.
Sue signs a policy with Good Dealz Insurance and authorizes it to initiate an ACH debit entry to her
account monthly for the premium. Sue contacts her financial institution to stop payment on all future ACH debits from her former insurance company. How can Sue’s financial institution handle her request?
The financial institution can take Sue’s stop payment request and stop all future entries related to the authorization from her old insurance company.
Which statements is true regarding Real-Time Payments (RTP)?
RTP supports remittance information and other messaging
The Quest Operating Rules® put forth the requirements for the distribution of which types of payments under the Quest service mark?
Federal and state government payments
Which statements is true regarding Same Day ACH?
ODFIs can choose to originate Same Day ACH, but RDFIs are required to receive Same Day ACH.
Regulation E defines specific requirements for all of the following, EXCEPT:
Corporate electronic funds transfers
Per UCC 4A, a contract between a financial institution and a customer may limit liability to the bank unless:
The financial institution demonstrated “lack of good faith or failure to exercise ordinary care”
Your institution originated an erroneous debit. Your operations department realized it quickly and
initiated a REVERSAL. Unfortunately, the RDFI returned the erroneous debit prior to receiving the
REVERSAL and now has the credit from the REVERSAL. Which risk applies?
Operational
The ASCX 12 Standard identifies the format to be used for:
sharing and utilizing payment information sent electronically between trading partners
What does The Green Book govern?
Federal government payments
The use of strong data security, access limitations, authentication, encryption, tokenization, KYC, KYCC, dual control, and separation of duties mitigates which type of risk?
Fraud
Same Day ACH per- transaction dollar limit is:
$1,000,000
