ACH SEC Codes: A Comprehensive List

Managing financial transactions can sometimes feel confusing, especially when many abbreviations and acronyms are involved. You may have encountered SEC codes if you’ve dealt with ACH (Automated Clearing House) transfers. But what are ACH SEC codes, and why are they crucial in electronic bank transfers?

In this guide, we’ll explain the meaning of ACH SEC codes, discuss their role in ACH transactions, and review the full list of ACH SEC codes.

What Is an SEC Code?

An SEC code is a three-letter identifier used to specify the authorization method of a payment in an ACH transaction. SEC stands for ‘Standard Entry Class’. NACHA (National Automated Clearing House Association) oversees the ACH network and establishes and updates these codes. For instance, the SEC code PPD, meaning ‘Prearranged Payment and Deposit Entry,’ is applied to routine ACH debits like monthly utility bill payments. This code might also appear on your bank statement when such a transaction occurs.

Including an SEC code is required for all ACH transactions, including credits and debits. Typically, companies use a limited set of SEC codes that best suit their specific transaction types. Here are the key things you get to know with SEC codes:

• Transaction Type: ACH SEC codes identify whether the transaction is a debit (money taken from an account) or a credit (deposited into an account).
• Initiation Method: They tell you how the transaction was authorized, such as whether it was initiated electronically (via web, phone, etc.), on paper, or through some other medium.
• Purpose of the Transaction: Different codes correspond to different purposes, such as payroll (direct deposit), consumer payments (utility bills), business-to-business transactions, or government benefits.
• Authorization Process: ACH SEC codes reveal how the authorization for the transaction was obtained. For instance, some transactions are pre-authorized (like direct debits), while others are authorized over the Internet or phone.
• Risk Profile: Some SEC codes indicate higher-risk transactions, especially those initiated online or over the phone, where fraudulent activity might be more likely than face-to-face transactions.
• Transaction Timing: The SEC code may give you insight into the expected timing of the transaction’s settlement (e.g., same-day ACH or regular ACH).

These SEC codes are instrumental in ensuring that ACH transactions are correctly executed and adhere to the necessary frequency, type, and compliance standards, whether the transaction involves debiting or crediting an account.

But before we focus on ACH SEC codes, it’s essential to grasp what a NACHA file is, as these codes only apply to it.

What Is a NACHA File?

A NACHA file is a standardized format for processing ACH (Automated Clearing House) payments. It contains structured instructions for initiating electronic transactions between banks in the U.S. financial system. These files are typically made up of records with specific information, including details about the parties involved, transaction amounts, and account numbers.

Each NACHA file comprises various records, such as the File Header, Batch Header, Entry Detail, and Control Records. These sections are crucial for ensuring the proper execution of transactions, such as direct deposits, bill payments, or business-to-business payments. The file’s structure ensures financial institutions can communicate effectively when processing ACH payments. Businesses often use software to generate these files automatically, reducing manual effort and minimizing errors.

How Do the ACH SEC Codes Work?

In practical terms, SEC codes are vital for classifying ACH transactions. These codes determine the method of authorization and the transaction type, which are crucial for adhering to the regulations set by NACHA. They are included in the ACH payment requests within the NACHA file format.

• ODFI (Originating Depository Financial Institution): The ODFI’s responsibility is to ensure that the correct SEC code is used in the ACH payment file. Each transaction must include the appropriate SEC code to prevent errors such as ACH returns, which can incur additional fees and require resubmission with the correct code.

• Originator (Business): The business utilizing the ODFI must secure the proper authorization from the Receiver (the individual or business receiving the payment). The required authorization type varies based on the nature of the transaction and the SEC code applied. For instance, ACH debit transactions generally need written authorization, whereas ACH credits might require less formal authorization.

Using the wrong SEC code can result in the return of the ACH transaction, making ODFI liable for any return fees. To prevent additional delays and penalties, ODFI must also address the error by resubmitting the transaction using the correct SEC code.

The ODFI and the Originator ensure the correct SEC code is used. Each code demands specific authorization types based on whether the transaction is consumer or business-related, debit or credit. Ensuring compliance is crucial to avoiding transaction errors and potential financial repercussions.

Why Are ACH SEC Codes Important?

ACH SEC codes are essential identifiers used within the Automated Clearing House (ACH) network to ensure transactions are processed accurately and in compliance with regulatory standards. These codes determine the method of authorization and the type of account involved, whether personal or business, playing a crucial role in managing electronic payments between banks.

• Compliance with Regulatory Standards:

The NACHA, which oversees the ACH network, requires ACH SEC codes. These codes ensure each transaction is authorized correctly and adheres to specific protocols. Non-compliance can lead to fines, increased rates of transaction rejections, or potential legal challenges for businesses and financial institutions.

• Effective Transaction Categorization:

SEC codes help categorize the nature of transactions, facilitating accurate and efficient processing. For instance, PPD codes apply to recurring payments like monthly utilities, while CCD codes are utilized for business-to-business transactions.

Proper use of SEC codes ensures smooth transaction processing and impacts how transactions are documented and handled by financial institutions.

• Ensuring Authorization Accuracy:

The codes reflect the method of obtaining the payer’s authorization—whether written, verbal, or online. For example, TEL codes signify telephonic consent, whereas WEB codes indicate online authorization.

This specificity helps maintain the traceability of transactions, thereby minimizing the risk of disputes and fraud.

• Boosting Operational Efficiency:

Utilizing the correct SEC code enhances operational efficiency by reducing processing errors. Each code necessitates distinct authorization and processing steps, helping businesses and financial institutions avoid delays, unnecessary returns, or manual correction.

What Are the Commonly Used SEC Codes?

Here is a list of commonly used ACH SEC codes and their specific functions:

• CCD (Corporate Credit or Debit): Predominantly used for business-to-business transactions, the CCD code facilitates the processing of payments like payroll, vendor invoices, and other business transfers. These transactions can include credits or debits and usually provide detailed remittance information that aids in the accounting processes of the businesses involved.
• PPD (Prearranged Payment and Deposit): Widely utilized for consumer-based transactions, the PPD code governs direct deposits such as employee payroll and preauthorized payments like utility bills or loan repayments. These transactions can be set up as either one-time or recurring and are typically used in business-to-consumer interactions.
• WEB (Internet-Initiated Entry): This code is assigned to transactions initiated via the Internet, covering consumer payments like online bill settlements, electronic fund transfers, and online purchases. These transactions must be authorized electronically to meet the standards set by NACHA.
• ARC (Accounts Receivable Entry): Employed when converting received paper checks into electronic payments, the ARC code helps businesses streamline their receivables. This conversion reduces processing times and enhances cash flow by expediting the transition from paper checks to electronic deposits.
• POP (Point of Purchase Entry): The POP code is used at retail points of sale to convert customer checks into electronic payments immediately. This process speeds up payment handling by transforming physical checks into electronic formats at the point of sale.

These codes are integral to classifying and managing different transaction types within the ACH network, ensuring compliance and payment processing efficiency.

Full List of ACH SEC Codes

SEC codes classify different ACH transactions based on factors like the type of account (consumer or corporate) and the authorization method. These codes can be divided into four categories: corporate codes, consumer codes, debit card/point-of-sale (POS) codes, and consumer/corporate codes.

Corporate Codes

Code	Title	Description	Transaction Type	Account Type	Agreement/Authorization
ARC	Accounts Receivable Entry	Converts checks received by mail or at a lockbox into ACH transactions.	Debit Single	Consumer or Non-Consumer	Paper check received by mail or dropbox, converted to an electronic entry
BOC	Back Office Conversion Entry	Converts checks presented at the point of sale into ACH transactions after processing.	Debit Single	Consumer or Non-Consumer	Check converted into ACH debit after in-person transaction
CCD	Corporate Credit or Debit Entry	Typically used for business-to-business payments.	Single (Debit and Credit) or recurring	Corporate	Agreement between originator and receiver (corporate entities)
CTX	Corporate Trade Exchange Entry	Similar to CCD, but supports more detailed remittance information for complex business payments.	Single (Debit and Credit) or recurring	Corporate	Corporate trade payment with detailed remittance info (up to 9,999 addenda records)
POP	Point-of-Purchase Entry	Allows merchants to convert checks into electronic payments at the point of sale.	Debit Single	Consumer or Non-Consumer	Check presented at point-of-sale, authorized for electronic conversion

Consumer Codes

Code	Title	Description	Transaction Type	Account Type	Agreement/Authorization
CIE	Customer Initiated Entry	This code is used when a consumer initiates a payment to an organization, often seen in bill payments.	Credit Single	Consumer	Consumer-initiated payment to an organization (typically via bill pay platforms)
DNE	Death Notification Entry	Only used by federal agencies to notify a bank of the death of a benefit recipient.	Non-monetary	Consumer (used by Federal Government only)	Notification by Federal Government of a death
ENR	Automated Enrollment Entry	Represented Check Entry	Non-monetary	Consumer (for federal enrollment services)	Receiver request or government enrollment authorization
PPD	Prearranged Payment and Deposit	Notification by the Federal Government of a death	Single (Debit and Credit) or recurring	Consumer	Written authorization (for direct deposit or automatic bill payments)
RCK	Re-presented Check Entry	Applies when a previously returned check (e.g., due to insufficient funds) is resubmitted electronically.	Debit Single	Consumer	Check returned due to insufficient funds, authorized for re-presentation
TEL	Telephone Initiated Entry	Used for consumer debit transactions authorized via a phone call.	Debit Single or recurring	Consumer	Oral authorization, typically recorded during a phone call
WEB	Internet-Initiated/Mobile Entry	Used for consumer transactions authorized online, such as payments via an e-commerce platform.	Debit Single or recurring	Consumer	Internet-based authorization

Debit Card/Point-of-Sale (POS) Codes

Code	Title	Description	Transaction Type	Account Type	Agreement/Authorization
MTE	Machine Transfer Entry	For ATM-initiated transactions, both credits and debits.	Single (Both Debit and Credit)	Consumer	Electronic funds transfer at an ATM or electronic terminal
POS	Point-of-Sale Entry	For transactions initiated at retail point-of-sale terminals.	Debit Single	Consumer or Non-Consumer	Authorization at the point of sale (usually with a debit card)
XCK	Destroyed Check Entry	Used when processing a check that has been physically destroyed but requires settlement electronically.	Debit Single	Consumer or Non-Consumer	Check destroyed and processed electronically by a bank

Consumer or Corporate Codes

Code	Title	Description	Transaction Type	Account Type	Agreement/Authorization
ACK	ACH Payment Acknowledgment	Acknowledges receipt of a payment from a corporate entity.	Non-monetary	Corporate	Acknowledges receipt of a CCD credit entry
IAT	International ACH Transaction	For cross-border ACH transactions.	Single (Debit and Credit) or recurring	Consumer or Non-Consumer	Depending on the originator and receiver, written authorization for consumer debts, oral for consumer credits
SHR	Shared Network Transaction	Used for shared network ATM or POS transactions.	Debit Single	Consumer	Transaction through a shared network using access devices (e.g., debit cards)
TRC	Truncated Entry	Applies to single-entry debits based on a truncated check.	Debit Single	Consumer or Non-Consumer	Based on a check truncated into an ACH debit
TRX	Truncated Entry Exchange	Used for exchanges involving multiple checks drawn from the same bank.	Debit Single (for multiple checks)	Consumer or Non-Consumer	Based on multiple checks drawn from the same bank

Some SEC codes, like PPD and CCD, can be used for ACH credits and debits. Others, like DNE, are restricted to specific entities like government agencies. Additionally, certain codes are reserved for single or recurring transactions, while others may be used in both contexts depending on the authorization method and the nature of the transaction.​

Real-Life Scenario on the Workings of ACH SEC Codes

ACH SEC codes are crucial for managing electronic payments effectively. To give you an example of their functionality, consider a common situation where you might utilize these codes—setting up automatic payments for a life insurance policy.

When you opt to automate your monthly premium payments, you provide your bank with essential details like your account information, the payment amount, and the insurance company’s bank details. This setup eliminates the need to handle transactions each month manually.

• Setting Up Automatic Monthly Payments: You start by signing a written agreement with your bank. This agreement authorizes them to withdraw a predetermined sum from your account each month and send it to your insurer.
• ACH Entry Creation: As your payment date nears each month, the insurer’s bank prepares an ACH entry. This entry records the necessary payment details, such as the amount, your account number, and the recipient’s account information. For consumer-initiated payments like these, the SEC code is PPD, typically used for regular transactions such as insurance premiums or mortgage payments.
• Processing the Payment: The payment is processed when the insurer’s bank, the ODFI, forwards the ACH entry to an ACH operator. In the U.S., these operators include the Federal Reserve Banks or the Electronic Payments Network (EPN), which serve as intermediaries to process and settle the payments.
• Funds Transfer: The ACH operator then sends the payment request to your bank, known as the Receiving Depository Financial Institution (RDFI). Your bank deducts the specified amount from your account and transfers it to the insurer’s bank. Once the payment clears, the funds reach the insurer, completing the transaction.

This automated process continues each month, ensuring your premiums are paid on time as long as your authorization remains in effect.

Conclusion

Understanding ACH SEC codes is crucial for ensuring electronic transactions are processed accurately and efficiently within the ACH network. These codes serve as essential identifiers determining how payments are authorized and categorized, helping businesses and financial institutions comply with NACHA regulations.

Whether it’s a consumer setting up an automatic bill payment or a business managing payroll transfers, selecting the correct SEC code minimizes processing errors, reduces the risk of transaction returns, and ensures proper documentation. By leveraging the right SEC codes, businesses and consumers can streamline their payment processes, enhancing operational efficiency and maintaining regulatory compliance.

Frequently Asked Questions