Transcript Headline style - Utility Payment Conference

Payments 101
Billie Higgins
Kay Limbaugh
Federal Reserve
• Central Banking system
• Created in 1913
• Private banking system composed of
Board of Governors appointed by the President
Federal Open Market Committee
12 regional Banks
Member banks
Advisory councils
Federal Reserve
Electronic Funds Transfer
Act (aka Reg E)
• Issued by the Board of Governors of the
Federal Reserve System
• Implemented in 1978
• Governs electronic fund transfers from a consumer’s account
• Protects consumers’ rights and sets limits on consumer liability
for unauthorized payments
• Imposes specific obligations to billers for recurring payments
Federal Reserve
Check 21
• Passed in Oct 2004
• Produces a digital image by scanning
both sides of a paper check
• If a paper document is needed, a
photo-reduced copy of the original
checks is created (“substitute check”
or IRD (Image Replacement Document)
IRD – Image Replacement Document
Network = Automated Clearing House
(ACH)
ACH
ACH - Automated Clearing House
• The ACH network is a highly reliable and efficient
nationwide batch-oriented electronic funds transfer system
• Governed by the NACHA operating rules
• Provides for the interbank clearing of electronic payments
for participating depository financial institutions
• The ACH network can be used to send either debits
(payments) or credits (refunds)
 A credit sends funds to a Receiver’s account
 A debit takes funds from a Receiver’s account
ACH Participants & Definitions
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Originator: The company or individual that initiates an ACH transaction according to
an agreement with a Receiver.
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Originating Depository Financial Institution (ODFI): The financial institution that
transmits ACH files on behalf of the Originator into the ACH Network.
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ACH Operator: The central clearing facility operated by a private organization or
Federal Reserve Bank, on behalf of participating financial institutions, to or from
which financial institutions transmit or receive ACH entries.
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Receiver: A natural person (or organization) that has authorized the Originator to
initiate an ACH entry (debit or credit) to the Receiver's account with the RDFI.
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Receiving Depository Financial Institution (RDFI): The financial institution that
receives ACH entries from the ACH Operator and posts the entries to the accounts of
the depositors (Receivers).
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Third-Party Processors: Processors that participate between any relationship within
the ACH processing flow (i.e., correspondents, sending-point processors or payroll
processors).
Network =
Automated Clearing House
(ACH)
NACHA
NACHA – The Electronic
Payments Association
(formerly known as the National Automated Clearing House Association)
• Not-for-profit association
• Represents more than 11,000 financial institutions through direct
memberships
• Develops operating rules and business practices for:
– Automated Clearing House (ACH) Network (not Check 21)
– Electronic payments in the areas of Internet commerce, e-bill and
invoice presentment, e-checks, EDI an electronic benefits services
(EBS)
• NACHA estimates that more than 8.5 billion consumer bills were paid via
the ACH Network in 2007, including pre-authorized debits, Internet and
telephone-initiated payments, and checks converted into ACH payments.
Network =
Automated Clearing House
(ACH)
NACHA
ACH Rules
Each type/method of payment in the ACH
“world” has its own rules and guidelines.
These are determined by the Standard
Entry Code (SEC) used in the payment
file.
PPD
MTE
ARC
CIE
CCD
AAAAAHHHHHHH ! ! ! !
Commonly used SEC codes
for the Utility Industry
(High level definitions!)
• ARC – Accounts Receivable Conversion
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Mailed in payments to a biller’s lockbox
Dollar limit $25,000
Must be a consumer check
Check is scanned, destroyed
Must have notification on bill statement each month (see
ACH rules for requirements)
Must give customer option to Opt-out
Must retain legible copy of front for 2 years
Original document must be stored securely and/or
destroyed
Volume in 2007 for ARC grew by more than 600 million
payments to 3.5 billion, an increase of 23 percent.
• POP – Point of Purchase
– Customer writes check and it’s converted at
time of purchase
– Check is returned to the customer
– Authorization = supplied by merchant and
signed by customer at time of payment
– $25,000 limit
– No AUX On-Us on MICR line
• WEB - Internet Initiated Payments
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Authorization received via the internet
Authorization must be in writing or similarly authenticated.
Consumer transactions only
Customer must be “reasonably” authenticated
Applies to both one-time or recurring payments; but rules
are different for each (stop payment, revocation of
authorization, etc.)
– NACHA reports WEB payments grew by an estimated 26
percent to 2.3 billion in 2007
• TEL – Telephone Initiated Entries
– Single entry payments
– Consumer accounts
– Must use commercially reasonable procedures to verify
consumer’s identity
– Authorization must be oral and recorded (cannot use key
entry for authorization)
– Must provide in authorization:
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Date
Amount
Name
Telephone number to be reached during business hours
– Cannot exceed 2.5% “unauthorized payments”
• RCK – Re-Presented Check Entries
– Returned paper checks can be converted by your financial
institution to an ACH item
– This allows 2 re-presentments instead of 1 with paper
check
– PGE (before ARC) enjoyed a 25+% success rate on the 2nd
re-presentment
– Notification must be clear and conspicuous on your billing
statement
– Must retain copy of the front and back of the check for 7
years
• PPD or CCD
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Used for Automatic Debit Programs (Direct Payment)
Recurring payments initiated by biller
Must have written authorization
Retention of authorization - kept for 2 years after customer
requests cancel
– PPD used for “Consumer” bank accounts
– CCD used for “Corporate” bank accounts (have an
auxiliary on-us in MICR line)
– NACHA reports pre-authorized payments increased by 3.6
percent to 3.4 billion payments in 2007
Resources
• Nacha.org
• Ebilling.org
Your New Best Friend
• PGE has converted all payment channels to
ACH……
Mail-in payments – ARC
Community Office – Remote Deposit (BOC)
Walk-up Retail Locations – POP
Kiosk Payments - vendor
IVR Payments –TEL
IVR Credit Card payments – vendor
Consolidators
Auto Pay – PPD and CCD
Web payments – WEB
EDI 820’s - CTX
Other terms (Your homework!)
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Aux on us
EDI
MICR line
Non-contracted payments
NOC
EBPP
Lockbox
M-payments
B2B, B2C
Questions?