Are You Using or Abusing SEC Codes?

An SEC Code is a three-character code that identifies the type of payment contained in an ACH transaction. This code defines the ACH record format to be used and indicates what rules and regulations apply.

The PPD SEC code is to be used for debits or credits to consumer accounts. These transactions are governed by the ACH Operating Rules and Federal Regulation E. The unique characteristic of a PPD is the 60 day right of return of a PPD debit.

The CCD SEC code is to be used for debits or credits to corporate accounts. These transactions are governed by the ACH Operating Rules and (for credits) Uniform Commercial Code Article 4A. There is not an extended timeframe for the return of CCD debits.

You need to be aware of the potential risk when using these two SEC codes for debit transactions. For example, in the case of a sole proprietorship, even though ACH transactions are intended to be corporate transactions, they may be going to a consumer account. There is risk when a CCD debit is initiated to a consumer account and, because it was posted to a consumer account, is returned by the receiving financial institution within the 60-day timeframe. There is risk when a PPD debit is initiated to a corporate account and, because it is a PPD, the receiving financial institution returns it within the 60-day time frame. These can be situations that mean potential loss to one of the participants and are addressed on a case-by-case basis. Under the ACH Operating Rules the ODFI warrants the accuracy of the data in a transaction they originate and indemnifies the RDFI against loss.

PPD has been, and is currently being used to pilot new ACH transactions. Once the pilot is complete and rule amendments have been implemented, the new SEC codes must be used. Continued use of the PPD SEC code can increase risk and subject the participating financial institutions to rules violations. Our core ACH processing system, CAP 2000, is updated as rule amendments are implemented to keep you in compliance with all ACH rules.

If you have looked in the ACH Operating Rules and are still in doubt about which SEC code to use, consult your other resources. If you are a member of a regional ACH association check with them, or contact the National Automated Clearing House Association (NACHA).