ACH Origination Item Processing

ACH Origination items are processed in the following manner:

Step 1: Transmitting the ACH Origination File

Portico transmits ACH Origination online files at 6:00 PM ET to the Dallas FRB. After 6:00 PM ET, the system will respond with the FILE NOT AVAILABLE message.

Step 2: Scanning the Origination File and Extracting the ACH Items

The back-office cycle scans the Origination file nightly and extracts the ACH items that meet the effective date criteria. The following table compares the standard ACH Origination posting process and the Secure Funds in AM process.

Features/Functions	Standard ACH Origination Posting	Secure Funds in AM
Item Posting	All outgoing items are extracted at 5:00 PM daily. Extract file includes credits dated 2 business days in the future and debits dated 1 business day in the future. Outgoing credit/debit is transmitted and cannot be recalled. All new items entered on the extract date with an effective date of the current day, will be included in the extract file, and the offsetting debits and credits will post to the member’s credit union account in the batch cycle. Debits to the member’s credit union account post on the effective date of the outgoing credit. Credits to the member’s credit union account post on the same night as the extract file.	Outgoing items are extracted at 5:00 PM daily. Only qualified credits are included in the extract file. Portico will verify that funds are available before creating an ACH outgoing credit to another financial institution. Outgoing debits post to the member’s credit union account in the batch cycle. Outgoing credit/debit is transmitted and cannot be recalled. All new items entered on the extract date with an effective date of the current day, will be included in the extract file, and the offsetting debits and credits will post to the member’s credit union account in the batch cycle. Debits to the member’s credit union account post on the date of the extract file transmission, 1 day in advance of the effective date. Credits to the member’s credit union account post on the same night as the extract file.
Exceptions	Originated items that reject appear on the ACH Exception Items window and cannot be returned.	If funds are not available, the credit item is not included in the ACH extract file and the item appears as a rejected item on the morning 174 Report.
Risk	Increased risk for loss on outgoing credits for credit unions. Without authorization limits, risk is higher	Minimizes risk for loss for credit unions With authorization limit, items that exceed the credit union limit require supervisor approval before posting
Example: A member has a recurring ACH Origination item set up with an effective date of 04/01/2012 to debit their credit union share draft account and credit their loan at XYZ Bank.	The members account is debited on 04/01/2012 and the XYZ Bank account will be credited on 04/01/2012, regardless if the member has sufficient funds. If the member does not have sufficient funds for the debit, the item will appear on the 173 Report with a code of R01, but the XYZ Bank account is credited on 04/01/2012. The member’s loan payment is made at XYZ Bank, but the credit union has an insufficient ACH exception item on the ACH Exception Items window on the morning of 04/02 with a source of ORI. The only option for the credit union is to post the item negative.	If the member has sufficient funds, their credit union account will be debited in the morning on 03/29/2012 and the item will be included in the extract file to go out at 5:00 PM on 03/29/2012. XYZ Bank will receive and post the credit to their account with an effective date of 04/01/2012. If the member does not have sufficient funds for the debit, the item will appear on the 174 Report with a code of R01 and nothing will be sent to XYZ Bank.

The following table provides a comparison between same-day ACH outgoing credit and debit items and one-time request credit and debit items scheduled for today.

Same-Day ACH Origination Credit/Debit Item	One-Time Request Credit/Debit Item for Today
Included in transmission windows at 10:30 AM, 2:45 PM, or 4:45 PM ET (Files close 15 minutes prior to batch being sent)	Included in transmission windows at 6:00 PM ET
For same-day outgoing credit items, Portico checks the balance of the member account and places a hold for the amount of the transaction before allowing the item to be included in the transmission file, ensuring funds are available at posting time.	For one-time request credit items, Portico does not check the balance of the member account. The credit item is added to the transmission and sent to the other institution without qualifying the member account. The debit to the member will reject in the batch cycle if there are insufficient funds.
Lowers Risk for Credit Union: Items greater than the credit union-defined limit cannot be originated or posted as a same-day item. Currently, members cannot originate same-day items through online banking.	Higher Risk for Credit Union: There is no limit on the dollar amount of the item unless you have authorization limit defined. Members can originate items through online banking.
The credit or debit to the member’s other institution will be posted on the same day. Note: The offsetting credit to the originated outgoing debit is not posted online on the same day. It will post in the back-office cycle.	The credit or debit to the member’s other institution will be posted the next day.
Item will be settled with the FED at 1:00 PM or 5:00 PM ET and appear on the FedACH Advice on the same day.	Item will be settled with the FED the next day, and appear on FedACH Advice the next day.
The ACH Operator will charge your credit union a per item fee for same-day settlement on your monthly statement. Check with your ACH Operator for the current per item fee.	No charge by ACH Operator.
Provides income opportunity for the credit union and provides the member the benefit of an outgoing same-day credit or debit. The credit union may charge a same-day convenience fee to the member to cover the ACH Operator fee, allowing the credit union to establish a higher fee for same-day items versus regular originated items.	Provides income opportunity for the credit union. The credit union may charge an origination fee.

The ACH batches that contain credit and debit items will appear on the current online ACH Pended Batch Report 171 until the effective date is reached.

Step 3: Send the ACH items to the Federal Reserve Bank

Portico delivers the Origination items to the Dallas Federal Reserve Bank by 10:30 AM ET the following morning for same day processing.

The effective date criteria is the Federal Reserve Bank processing date plus the following:

One day for debit items - withdrawal at receiving institution
Two days for credit items - deposit at receiving institution

Items entered in the Portico system on a Dallas Federal Reserve Bank holiday, that is not a Portico holiday, will be delivered to the Federal Reserve Bank on the first Federal Reserve Bank working day after the holiday. The Portico back-office cycle runs every night.

Prenotification

A prenotification (prenote) is an entry sent to the receiving institution (Receiver) prior to sending a live item. The prenotification contains almost the same information as subsequent live entries. The purpose of the prenotification is to let the Receiver verify the accuracy of the information and ensure that ensuing entries are posted correctly. NACHA recommends that a prenotification be sent to the Receiver prior to sending the live item.

Portico supports the following transaction codes for prenotifications:

23 - Prenote of credit to share draft/checking
28 - Prenote of debit to share draft/checking
33 - Prenote of credit to shares/savings
38 - Prenote of debit to shares/savings
48 - Prenote of debit to general ledger
43 - Prenote of credit to general ledger
53 - Prenote of loan payment

The prenotification must have a valid prenotification code and the actual live item effective date and actual amount. The phases of a prenotification are as follows:

The prenotification must be received and entered on the system 14 days prior to the live entry date.
Portico extracts the prenotification the night received and sends it to the Federal Reserve Bank with a zero dollar amount.
The system automatically changes the transaction code for the prenotification to the corresponding transaction code so the live item will be ready to be sent.
If accepted, the prenotification is valid. If rejected, the credit union can maintain the item and send another prenotification or send the live item.

Overdraft Protection and Insufficient Funds

If the overdraft protection option on the ACH table of the originator is selected, only one overdraft transfer will occur per member. ACH overdraft transfers process exactly like share draft overdraft transfer, using the option in the Protection Option field on the Shares – Draft Info tab, which is used to assist in processing debit transactions if funds are not available.

If a member has both received ACH and originated ACH debit items in an insufficient funds situation, one overdraft transfer will occur to cover all debit items. The Overdraft Protection Summary section on the ACH Posting/Exception Report 170 lists the overdrafts.

The Overdraft Account check box must be selected on the ACH Processing Options window.

Member Information

The system displays two-character transaction codes to identify ACH activity on the member's History – Financial Transaction History tab. EFT activity is identified by an E, which follows the transaction code.

The Print EFT With Description check box must be selected on the ACH Processing Options window for EFT activity.

The following codes indicate ACH activity:

ACE - ACH batch description
ADE - Autopost ACH payroll deposit
FPE - Fee ACH stop pay
HDE - ACH overdraft deposit (loan advance)
HFE - Fee ACH transaction
THE - ACH share overdraft deposit
HWE - ACH share overdraft withdrawal
HAE - ACH overdraft loan

The following fields from the Batch Maintenance window and Member/GL Items window determine the member's statement description:

Company Name (Batch Maintenance window)
Effective Date (Member/GL Items window)
ACH Description (Batch Maintenance window)

ACH Origination for Loan Payoff, Deceased and Dormancy

Portico will stop an ACH origination loan payment when a loan has been paid off or has a zero balance. Prior to creating an outbound ACH origination item, Portico will review the loan plan and loan balance and loan status:

If the loan plan is closed-end and the balance is zero, the origination item will not be created and the effective date will be reset to 999999. The exception will be reported in a new Unsuccessful Originations section on the ACH Outbound Returns/NOC Report 174 with the exception code ELP – Loan Paid Off.
If the loan plan is open-end and the balance is zero, the origination item will not be created and the effective date will be advanced based on the payment frequency. The exception will be reported in the Unsuccessful Originations section on the 174 Report with the exception code ELZ – Loan Zero Balance.
If the loan status is Hold, the origination item will not be created. The exception will be reported in the Unsuccessful Originations section on the 174 Report with the exception code E52 – Loan on Hold.
If the loan is a third-party mortgage loan and the loan balance is zero, the origination item will not be created and the effective date will be reset to 999999. The exception will be reported in the Unsuccessful Originations section on the 174 Report with the exception code VPO – Vendor Paid Off.

If the scheduled ACH origination loan payment is more than the loan payoff amount, Portico will originate the ACH loan payment amount, pay off the loan, and deposit the excess funds into the lowest open share type.

ACH origination will also be stopped when a member is dormant or deceased. Portico will also review the Deceased check box and Dormant check box on the Contact Information tab for a member before creating an outbound ACH origination item.

If the Deceased check box is selected, the origination item will not be created. The exception will be reported in the Unsuccessful Originations section on the 174 Report with the exception code R14 – Member Deceased.
If the Dormant check box is selected, the origination item will not be created. The exception will be reported in the Unsuccessful Originations section on the 174 Report with the exception code E27 – Member Dormant.