Standard Entry Class (SEC) Code

A Standard Entry Class code, or SEC code, is a three-character code that classifies payments sent through the Automated Clearing House network in the United States. It shows whether the receiving account belongs to a consumer or a business, how the payment was authorized and through what channel it was initiated. Common examples are PPD for consumer payments such as payroll, CCD for payments between businesses and WEB for consumer debits authorized online.

The codes are defined in the Nacha Rules, the operating rules of the network, which are maintained by Nacha. The abbreviation has no connection with the Securities and Exchange Commission. Choosing the right code is the responsibility of the originator and its bank, and it matters because each code carries its own requirements for authorization, formatting and returns.

ACH payments travel in files that contain one or more batches. Each ACH batch begins with a company batch header record that names the originator, describes the purpose of the entries and states the SEC code. Every ACH entry in that batch must be of the type the code describes, so an originator sending both payroll credits and business-to-business debits places them in separate batches.

The code also governs the layout of the records that follow. Some codes permit or require addenda records carrying remittance or other information, and the international code uses a different record structure altogether.

• PPD, Prearranged Payment and Deposit. Credits or debits to a consumer account under a standing authorization, including direct deposit of wages and recurring bill payments. See PPD entry.
• CCD, Corporate Credit or Debit. Payments between business accounts, with optional remittance data in a single addenda record. See CCD entry.
• CTX, Corporate Trade Exchange. Business payments that carry full remittance detail in many addenda records.
• WEB, Internet-Initiated or Mobile Entry. Consumer debits authorized over the internet or a mobile device, and certain person-to-person credits. See WEB entry.
• TEL, Telephone-Initiated Entry. Consumer debits authorized orally by telephone.
• IAT, International ACH Transaction. Entries that are part of a payment to or from a financial agency outside the United States, with extra fields that support sanctions screening.
• ARC, BOC and POP. Codes for electronic check conversion, where a paper check received by mail, at a back office or at the point of purchase is turned into a one-time ACH debit.
• RCK, Re-presented Check Entry. An electronic re-presentment of a paper check that was returned for insufficient funds.
• CIE, Customer Initiated Entry. Credits started by a consumer, typically through a bank's online bill payment service.

The code tells every party which obligations apply.

Authorization differs by type. A consumer debit must be authorized in a way that the Nacha Rules specify for that channel: in writing or its electronic equivalent for PPD, through an online process for WEB, and by a recorded call or written confirmation for TEL. Business entries under CCD and CTX are authorized by agreement between the trading partners. The originator must keep proof of ACH authorization and produce it on request.

Return rights also differ. A consumer generally has 60 days from the statement to tell their bank that a debit was unauthorized, and the bank can return it through the network within a matching extended period. A business has a far shorter window, and an unauthorized corporate debit must be returned within two banking days unless the originating bank agrees to accept it later. An ACH return for ordinary reasons such as insufficient funds follows the same short deadline for all codes.

Some codes add risk controls. Originators of WEB debits must use a commercially reasonable system to detect fraudulent transactions, which includes validating the account number the first time it is used, and must verify the customer's identity. Consumer entries are also covered by Regulation E, which gives consumers error resolution rights that corporate accounts do not have.

The originating depository financial institution warrants to the network that each entry is properly authorized and correctly coded. In practice it passes this duty to its originators and any third-party sender by contract, and it reviews their activity.

Using the wrong code is a rules violation. The typical case is a consumer debit sent as CCD, whether by mistake or to benefit from the shorter return window. The receiving depository financial institution cannot always tell from the entry whether the account is personal or commercial, and disputes over miscoded entries can lead to returns, claims between the banks and fines under the Nacha enforcement process. Payment platforms therefore ask each customer whether the account being debited is a consumer or business account and select the code accordingly.

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