FINANCIAL TERMS

Certified Check - A check certified by a bank to show sufficient funds within the account to meet the
amount the check is drawn for.
Notes:
A check is certified by the bank only if the checking account has enough funds to cover the amount made
out on the check.

ALT: A bank guaranteed check for which funds are immediately withdrawn, and for which the bank is
legally liable.

Cashiers Check: A check drawn by a bank upon itself and thus secured by the issuing bank.
Notes:
An individual could use a cashier's check instead of a personal check to guarantee that his or her funds
for payment are available. A cashier's check is secured because the amount of the check must first be
deposited by the individual into the issuing institution's account. The person or entity to whom the check is
made out is then guaranteed to receive the money when cashing the check.

Rubber Check: A check that bounces for lack of funds.

Post-dated check: A check that becomes payable or negotiable on a specified future date.

What is ACH?

The Automated Clearing House (ACH) Network

The ACH Network is a highly reliable and efficient nationwide batch-oriented electronic funds
transfer system governed by the NACHA OPERATING RULES which provide for the interbank
clearing of electronic payments for participating depository financial institutions. The Federal
Reserve and Electronic Payments Network act as ACH Operators, central clearing facilities
through which financial institutions transmit or receive ACH entries.

ACH payments include:

• Direct Deposit of payroll, Social Security and other government benefits, and tax
refunds;
• Direct Payment of consumer bills such as mortgages, loans, utility bills and insurance
premiums;
• Business-to-business payments;
• E-checks;
• E-commerce payments;
• Federal, state and local tax payments.

The number of ACH payments originated by financial institutions increased to 8.05 billion in
2002, up 13.6 percent from 2001. These payments were valued at $21.7 trillion. Including
payments originated by the Federal government, there were a total of 8.94 billion ACH
payments in 2002 worth more than $24.4 trillion.
 Originator
Any individual, corporation or other entity that initiates entries into the
Automated Clearing House Network

Originating Depository Financial Institution (ODFI)

A participating financial institution that originates ACH entries at the
request of and by (ODFI) agreement with it's customers. ODFI's must
abide by the provisions of the NACHA Operating Rules and Guidelines

Receiving Depository Financial Institution

Any financial institution qualified to receive ACH entries that agrees to
abide by the NACHA Operating Rules and Guidelines

Receiver
An individual, corporation or other entity who has authorized an
Originator to initiate a credit or debit entry to a transaction account held
at an RDFI.

Automated Clearing House (ACH) is the name of an electronic network for financial transactions in the
United States. ACH processes large volumes of both credit and debit transactions which are originated in
batches. Rules and regulations governing the ACH network are established by NACHA-The Electronic
Payments Association, formerly the National Automated Clearing House Association, and the Federal
Reserve (Fed). In 2002, this network processed an estimated 8.05 billion ACH transactions with a total
value of $21.7 trillion.[1] In the rest of the developed world, these rules and regulations are defined by
each country's regulatory bodies. European Payments Council is currently implementing a PE-ACH, Pan-
European ACH.

ACH credit transfers include direct-deposit payroll payments and payments to contractors and vendors.
ACH debit transfers include consumer payments on insurance premiums, mortgage loans, and other
kinds of bills. Businesses are also increasingly using ACH to collect from customers online, rather than
accepting credit or debit cards.

Debit transfers also include new applications such as the Point-of-Purchase (POP) check conversion pilot
program sponsored by NACHA. FedACH is the Federal Reserve's centralized application software used
to process ACH transactions. Both the government and the commercial sectors use ACH payments. The
Electronic Payments Network (EPN) is the only private sector ACH Operator in the United States.

The Federal Reserve Banks are collectively the nation's largest automated clearinghouse operator and in
2005 processed 60% of commercial interbank ACH transactions. The EPN processed the remaining 40%.
EPN and the Reserve Banks rely on each other for the processing of some transactions in which either
the Originating Depository Financial Institution (ODFI) or Receiving Depository Financial Institution (RDFI)
is not their customer. These inter-operator transactions are settled by the Reserve Banks.

Uses of ACH Payment Systems

• Direct Deposit of payroll, Social security and other government benefits, and tax refunds
• Direct Payment of consumer bills such as mortgages, loans, utility bills, and insurance
premiums, rents, and any other regular payment.
• Business-to-business (B2B) payments
• E-check : An e-Check is an electronic transfer of funds in which the money is taken from
a bank account, typically a checking account. The account's routing number and account number
are used to draw funds from the account. e-Checks can clear much faster than written checks.
• E-commerce payments
• Federal, state, and local tax payments

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Automated Clearing House (ACH) is the name of an electronic network for financial transactions in the
United States. ACH processes large volumes of both credit and debit transactions which are originated in
batches. Rules and regulations governing the ACH network are established by NACHA-The Electronic
Payments Association, formerly the National Automated Clearing House Association, and the Federal
Reserve (Fed). In 2002, this network processed an estimated 8.05 billion ACH transactions with a total
value of $21.7 trillion.[1] In the rest of the developed world, these rules and regulations are defined by
each country's regulatory bodies. European Payments Council is currently implementing a PE-ACH, Pan-
European ACH.

ACH credit transfers include direct-deposit payroll payments and payments to contractors and vendors.
ACH debit transfers include consumer payments on insurance premiums, mortgage loans, and other
kinds of bills. Businesses are also increasingly using ACH to collect from customers online, rather than
accepting credit or debit cards.

Debit transfers also include new applications such as the Point-of-Purchase (POP) check conversion pilot
program sponsored by NACHA. FedACH is the Federal Reserve's centralized application software used
to process ACH transactions. Both the government and the commercial sectors use ACH payments. The
Electronic Payments Network (EPN) is the only private sector ACH Operator in the United States.

The Federal Reserve Banks are collectively the nation's largest automated clearinghouse operator and in
2005 processed 60% of commercial interbank ACH transactions. The EPN processed the remaining 40%.
EPN and the Reserve Banks rely on each other for the processing of some transactions in which either
the Originating Depository Financial Institution (ODFI) or Receiving Depository Financial Institution (RDFI)
is not their customer. These interoperator transactions are settled by the Reserve Banks.

Uses of the ACH Payment System

• Direct Deposit of payroll, Social security and other government benefits, and tax refunds
 • Direct Payment of consumer bills such as mortgages, loans, utility bills, and insurance premiums,
rents, and any other regular payment.
• Business-to-business (B2B) payments
• E-check
• E-commerce payments
• Federal, state, and local tax payments

ACH process

In accordance with the rules and regulations of ACH, no financial institution may simply issue an ACH
transaction (whether it be debit or credit) towards an account without prior authorization from the account
holder (known as the Receiver in ACH terminology).

An ACH entry starts with a Receiver authorizing an Originator to issue ACH debit or credit to an account.
An Originator can be a person or a company (such as the gas company, a local cable company, or one's
employer). Depending on the ACH transaction, the Originator must receive written (ARC, POP, PPD),
verbal (TEL), or electronic (WEB) authorization from the Receiver. Written authorization constitutes a
signed form giving consent on the amount, date, or even frequency of the transaction. Verbal
authorization needs to be either audio recorded or the "Originator" must send a receipt of the transaction
details before or on the date of the transaction. A WEB authorization must include a customer reading the
terms of the agreement and typing or selecting some form of an "I agree" statement.

Once authorization is acquired, the Originator then creates an ACH entry to be given to an Originating
Depository Financial Institution (ODFI), which can be any financial institution that does ACH origination.
This ACH entry is then sent to an ACH Operator (usually the Fed) and is passed on to the Receiving
Depository Financial Institution (RDFI), where the Receiver's account is issued either a credit or debit,
depending on the ACH transaction.

The RDFI may, however, reject the ACH transaction and return it to the ODFI with the appropriate reason,
such as that there were insufficient funds in the account or that the account holder indicated that the
transaction was unauthorized. An RDFI has a prescribed amount of time in which to perform returns,
ranging from 2 to 60 days from the receipt of the ACH transaction. However, the majority of transactions,
if going to be returned, are done so within 24 hours from midnight of the day the RDFI receives the
transaction.

An ODFI receiving a return of an ACH entry may re-present the ACH entry two more times, or up to three
total times, for settlement. Again, the RDFI may reject the transaction. After which, the ODFI may no
longer represent the transaction via ACH.

Standard entry class code

The Standard Entry Class (SEC) code is a three letter code that identifies the nature of the ACH entry.
Here are some common SEC codes:

ARC
Accounts Receivable Entries. Checks received by a merchant through mail or drop box and
presented as an ACH entry.
BOC
Back Office Conversion. Checks that are converted from paper to an electronic debit at a
centralized location.
CCD
Corporate Cash Disbursement. Primarily used for business to business transactions.
DNE
Death Notification Entry. Issued by the Federal Government.
POP
Point-of-Purchase. A check presented in-person to a merchant for purchase is presented as an
ACH entry instead of a physical check.
POS
Point-of-Sale. A debit at electronic terminal initiated by use of a plastic card. An example is using
your Debit card to purchase gas.
PPD
Prearranged Payment and Deposits. Used to credit or debit a consumer account. Popularly used
for payroll direct deposits and preauthorized bill payments.
RCK
Represented Check Entries. A physical check that was presented but returned because of
insufficient funds may be represented as an ACH entry.
TEL
Telephone Initiated-Entry. Verbal authorization by telephone to issue an ACH entry such as
checks by phone. (TEL code allowed for inbound telephone orders only. NACHA disallows the
use of this code for outbound telephone solicitations calls. )
WEB
Web Initiated-Entry. Electronic authorization through the Internet to create an ACH entry such as
PayPal.
XCK
Destroyed Check Entry. A physical check that was destroyed because of a disaster can be
presented as an ACH entry.

Some problems with ACH

ACH payments have been around for some time now, but people are just getting used to them, especially
with the ARC, POP, and RCK, where the original instrument was a physical check. One problem occurs
when the account holder issues a stop payment on a physical check not knowing that the check was
presented as an ACH entry.

A timeframe problem can cause potential loss towards an RDFI due to irregular timeframes provided for
the return of ACH entries that are subject to Electronic Funds Transfer Act (Regulation E). An example is
a POP and ARC entry, where an RDFI has only 60 days from the date of settlement to return an
unauthorized debit, and the consumer has 60 days upon notification to dispute a transaction in his
statement under Regulation E. With these timeframes, it is possible that the 60-day period allowed for
ACH return would expire even before the consumer's 60-day protection (under Regulation E) would
expire.

Timeframe Problem

Another problem deals with compliance where the merchant causes an ODFI to issue an ARC or POP
entry (for check presentment) and then fails to comply with the handling of the physical check and
presents the physical check for payment as well. This causes a double-debit against a consumer account.

Patty's right. You are seeing the term "charge off" more frequently. That's because about 1% of
all credit card debt is ultimately charged off. And, whether you struggle to make credit card
payments or you have a perfect credit history, charge offs will effect your finances.

Let's begin by finding out what a charge off really is. Wachovia Bank offered a good definition
on their website "The removal of an account from a credit card issuer's books as an asset after it
has been delinquent for a period of time, usually 180 days. When an account is charged off, the
credit card issuer absorbs the outstanding balance as a loss."

For those of you who don't speak "financialese" that means that a "charge off" or "write off" is
really just an accounting entry. The lender is saying that they don't expect to collect the debt and
are not willing to claim it as an asset of the company any longer.

But it will not affect whether the borrower still owes the money. A charge off does not free you
from the debt. Think of it this way. Suppose you borrowed $100 from Joe. After a year passes,
he doesn't really expect to get his money back. Mentally he's "written off" the loan. He doesn't
believe that your IOU has value any more. But, that doesn't mean that you don't still owe Joe
$100. You do.

In fact, in the world of credit card debt, it's possible that it will be harder to avoid paying the debt
after it has been written off. That's because the original lender often sells those debts to a third
party when they write them off. And the third party, often a collection agency, gets to keep any
money that they collect. So they will work very hard to collect as much as they can. Even if that
means using questionable pressure tactics.

Note that it's the lender who gets to decide whether to write-off a debt as being uncorrectable.
You may have lost your job six months ago and not made a payment since. But you really plan
on making one next month. That doesn't prevent the lender from writing off the debt.

On the other hand, in approximately 50% of the cases, charge offs occur when a borrower
declares bankruptcy. Between one and 1.5 million people declare bankruptcy each year. Their
bankruptcy triggers the charge off.

So what happens to your credit rating when your card balance is written off? Thirty-five percent
of your credit score is based on past payment history. A "charge off" is about the worst mark that
you can get on your credit report. It says you are someone with a history of not paying his/her
debts.

And you don't need a charge off to be penalized. If you struggle to make your minimum
payment, the fear of a write off will cause the credit card company to raise your interest rate.
Based on a borrower's payment history, they can predict when someone is becoming a high risk.
When that happens, they'll increase the interest rates on the account very quickly. That costs you
more money every month.
OK, what happens if you always pay your bills on time? Unfortunately, you're still effected by
charge offs. The credit card companies expect that some loans will not be repaid. So in an effort
to stay profitable, they have to charge everyone a little higher interest rate to make up for the
losses. So everyone who uses a charge card makes some small contribution.

One final issue. If you do have a charge off on your record, you might want to consider repaying
the debt if you have the money. Negative remarks will stay on your report for seven years. You
may be able to negotiate a deal where you pay the debt and the lender changes the status of the
account to "Paid as Agreed." If you attempt to do this, make sure that you get the agreement in
writing.

Hello, Is Jonathan Brown there, may I speak with him please. Hi Jonathan, how are
you? This is Natalie Bryan and please be assured that this is not a telemarketing or
sales call. Before we continue, I ask that you verify the last 4 digits of your SSN and
your birth date and that is to make sure that I am actually speaking to Jonathan
Brown and sensitive material will be discussed. Again my name is Natalie Bryan
and I am calling you from Collectcorp concerning your outstanding bill with Chase
Efficiency. Please be advised that this is an attempt to collect debt owed and
information given will be used for that purpose.

Jonathan, how are you planning on paying this bill today?

Jonathan, How are you planning to settle this bill today?

I am not planning on settling any bill today? Is that so, and why is that

I’m not working: Jonathan, that does not mean that all your obligations should be
ignored, Chase hels up there end of the bargain and credited you this money with
the understanding that you will pay it back. They did not say oh well we have
losses this year so tough luck for our customers you know...we promised them this
available credit limit but we don’t feel like giving it to them...So why did you decide
to not honour this agreement. Are you looking for another job? Do you think that
you will be gainfully employed soon? But I don’t have any money? You must have
access to some money if you are able to pay this phone bill...have a roof over your
head and so on...At this point you probably should revise your spending
habits...make a budget that includes at least a min. payment towards your debt
obligations... How is your credit score at this juncture....are you aware that this has
a significant negative impact on your credit score as unpaid obligation and that it
will continue to negatively affect your credit score as long as it remains unpaid...you
can improve your score if its paid or even settled.

This $----- bill which keeps increasing due to late fees and interest payments...could
one day be the difference of 100 or 200 thousand dollars in mortgage of 1000 to
5000 in car payments due to the interest rates that you will be offered due to this
unpaid bill, which is a major red flag for creditors because it shows your propensity
for not honouring your bills. Think about...are you willing to face those
consequences. So at least show some effort that you are willing to pay back this
bill and I can stop the fees and so on...and also stop further collection activities on
this account.

Do you have any savings?

I see that you have a Revolving personal Line of Credit with Institution name, or a
credit card with ***** or IRA or *****

How are you able to keep up payments on Car Payment, Mortgage, Lease, Rent, etc.

Are you aware of the possible short-term and long-term implications of refusing to
settle this debt. Sir é Maam, this is reported to your credit bureau and it lowers
your score and the ramifications or possibly:

High interest rates for mortgage resulting in high monthly payments and much
higher totals after the term expires

High IR`S for car loans instead of 1.9 APR`s as advertised, you could end up paying
upwards of 10 – 15 % so a 25,000 car could potentially cost you 35,000 instead of
26,000.

Increasingly, employers are checking credit reports before hiring, particularly

careers in the financial sector.

Landlords are also checking credit reports and if you`re credit score is low , they will
demand higher deposits as well as demand a co-signer on the rental agreement.

Even insurance companies are charging higher premiums for persons with less than
desirable credit scores. Do not be quick to file bankruptcy as there are long-term
effects for that course of action as well. It takes ten years before it is removed from
your credit report and increasing applications for jobs, credit and other things will
ask if you have ever filed bankruptcy. Maam é Sir, my advice to you is that you
contact all the collections agencies or creditors dealing with your accounts and work
out a settlement and payment plan for resolving your debt, as well as reassessing
your spending habits. Ensure that you never have to face this situation again

According to MyFICO, a division of Fair Isaac, a consumer with a FICO score between 720 and 850 might get
a 5.922% rate on a $200,000 30-year fixed mortgage rate. That would give him a payment of $1,189 a
month and $228,072 in interest over the life of the loan. A consumer with a FICO score between 675 and 699
might get a 6.584% on the same loan, which would cost him $1,275 a month, with $259,074 in interest over
the life of the loan, or $31,002 more.
The consumer with a FICO score between 620 and 674 might get a 7.734% rate and pay $1,431 per month,
costing him $315,021 in interest over the life of the loan. That's $55,947 more than the middle-score
borrower and $86,949 more than the borrower with excellent credit.
Worse yet, a consumer with a score between 560 and 619 might get an 8.531% rate, pay $1,542 per month
and pay $355,200 in interest over the life of the loan. The difference in interest paid over the life of the loan
between the first and last example is more than $127,000.