SEC Code Glossary: A Quick Guide to Entry Class Codes
In the world of electronic payments, the National Automated Clearing House Association (NACHA) governs and dictates the regulations for processing electronic transactions through the Federal Reserve. The regulations are serious, utilized in legal proceedings regarding transactions and relied upon by banks, payment processors, and both federal and state governments. NACHA keeps the order for the industry, and it’s important to abide by every one of its regulations.
Whenever a transaction is submitted, NACHA needs an SEC code along with it.
What Is an SEC Code?
SEC stands for “Standard Entry Class” and is a code that denotes the way a customer authorizes a payment. When you apply for payment processing, sometimes you will find that certain types of payment methods are associated with lower costs. An SEC code tells you or the entity involved in the transaction what type of transaction you’re dealing with. Using the right code helps everyone stay regulation-compliant and accurate. Incorrect codes can lead to errors, delaying or even rejecting payments. Mastering SEC codes ensures payments move smoothly and securely around the world.
Common SEC Code Meanings
There are dozens of SEC codes out there, each with its own meaning. Let’s take a look at some of the most common codes to help you navigate this world.
POS/POP
Point-of-Sale (POS) and Point-of-Purchase (POP) entries refer to single debit payments made in-person via credit/debit card (POS) or converted check (POP). Both the card and the check are used to record the account information in association with the payment, and the original payment method is then returned to the customer.
PPD
Prearranged Payment and Deposit (PPD) refers to Direct Deposit entries and any Preauthorized Bill Payment applications. In this way, these payments can be both debits or credits (meaning funds can be removed or deposited into an account) and either single or recurring (occurring as a one-time payment or scheduled multiple payments).
WEB
A Internet Initiated Entry (WEB) is simply any debit via the Internet. These entries may be single or recurring.
The receiver must authorize these debits via the Internet. In other words, if the authorization was actually received in person, via U.S. Mail or by phone, for example, even to suffice for a payment from the Internet—it’s not really a WEB entry. However the authorization was received is how the transaction must be classified via the SEC code.
Also, bear in mind that you may only initiate a credit here as a reversal of a WEB debit. You can’t submit a credit using the WEB entry code.
TEL
Telephone Initiated Entry (TEL) entries are single debit entries authorized via the telephone. In this oral authorization entry there must be a pre-existing relationship between the receiver (person authorizing the payment) and originator (person/entity receiving the payment). If there is no relationship already in place, then the receiver has to make the phone call.
Additionally, all TEL transactions have to be recorded and kept on file for a minimum of two years from the date of the transaction. If the transaction is not recorded, then the originator needs to provide the receiver with a written notice that confirms the oral authorization before the payment settles.
CCD
The SEC code Corporate Credit or Debit (CCD) is also known as “Cash Concentration or Disbursement.” A CCD payment is either a credit or debit – and occurs specifically between corporate entities. It can be a single entry or recurring.
All business bank account transactions are listed under this SEC code. Prior to the transaction date, a signed authorization must be obtained either separately or included in the contract between the businesses.
ARC
An Accounts Receivable Entry (ARC) is defined as a check conversion that is originally received via the U.S. Mail. This includes the United States Postal Service (USPS), as well as courier services like FedEx and UPS. According to NACHA, this does not include personally delivered or night drop-box items. Corporate checks are also not included.
CTX
Corporate Trade Exchange (CTX) entries are initiated by originators to pay or collect their obligations. The funds are transferred to other organizations and so mirror the same business entity requirements as the CCD entry code. Both credits and debits are allowed.
RCK
The Represented Check Entry (RCK) entry refers specifically to single debits that occur as a result of check representment. Check representment occurs after an item is returned Non-Sufficient Funds (NSF) or is bounced. The service will simply represent the check at a later, scheduled date after it is returned. Some businesses choose to initiate check representment in order to attempt to recollect their funds. For merchants that use RCK entries, a notice must be displayed visibly at the POS.
BOC
Back Office Conversion Entry (BOC) entries are single debit entries that are initiated by source documents (checks) received at POP or staffed bill payment locations (in-person). These checks are collected first and then converted to ACH transactions during back-office processing.
CIE
A Customer Initiated Entry (CIE) is a credit initiated usually through a bill payment service by an individual. These are meant to pay an obligation.
XCK
The Destroyed Check Entry (XCK) refers to a replacement entry that is initiated when an original check is unreadable, lost or destroyed and cannot be processed.
SHR
A Shared Network Transaction (SHR) is used for transactions at POS terminals in shared networks. Debit card transactions at retail stores are examples of an SHR. The SHR then supports transactions between the customer, bank and merchant.
MTE
Machine Transfer Entry (MTE) codes are used when someone initiates an ACH transition at an Automated Teller Machine (ATM). The MTE code tells the relevant entities that the fund transfer, withdrawal or deposit happened at an ATM.
IAT
International ACH Transaction (IAT) codes appear with financial institutions outside the United States. Any transactions that occur across borders are subject to international payment regulations, and the IAT code ensures compliance with international screening requirements.
ENR
Automated Enrollment Entry (ENR) codes are often used by federal agencies to enroll their customers in direct deposit programs, such as Social Security or veterans’ benefits. They simplify the enrollment process.
COR
Notification of Change or Refused Entry (COR) codes come into play when ACH codes are corrected or changed. Any outdated or incorrect account numbers that need changing are adjusted and sent with the COR code. The COR code tells the original entity there was an ACH transaction error. COR codes keep ACH transactions accurate without extra delays.
DNE
Government agencies use Death Notification Entry (DNE) codes to inform financial institutions of an account holder’s death. These codes are needed to terminate benefit payments sent to the account holder.
ADV
Automated Accounting Advice (ADV) codes are only used by financial institutions. They help them track ACH entries and keep their records accurate.
ACK
The Acknowledgment Entry (ACK) code gives the original company a transaction receipt. When corporations complete transactions, the transaction’s originator can ask for acknowledgment of successful payment. The ACK code lets them know their funds were transferred successfully.
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