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What are SEC codes?

An SEC code is a three-letter code that describes how a payment was authorized by the consumer or business receiving an ACH transaction.

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How SEC codes work in practice

The Originator is responsible for including the correct SEC code in the ACH payment when originating a file. SEC codes are attached to the ACH payment request as part of the NACHA file format. The Originator must also have proper authorization from the Receiver. The nature of this authorization depends on the SEC code and whether funds are being debited or credited.
Most ACH debits (Straddle charges) require written or electronic authorization from the recipient, while most ACH credits (Straddle payouts) do not.

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Phone authorization requirements

Debits authorized by phone call need to use the SEC code TEL (see full SEC Code authorization rules) and require the company originating the payment to:
  • Maintain a recording of the customer’s verbal authorization, or
  • Follow up with the customer for written confirmation of the authorization before initiating the payment
Including the incorrect SEC code could result in an ACH Return. The Originator is responsible for any return fees and must resubmit the payment with the correct code.

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Common SEC codes and their requirements

SEC CodeDescriptionDirectionAuthorization Requirement
PPDPrearranged Payment & Deposit (Corporate to Consumer)CreditsAuthorization required. Oral or non-written means (such as voided check) accepted.
PPDPrearranged Payment & Deposit (Corporate to Consumer)DebitsAuthorization required. Written, signed, or similarly authenticated.
CCDCorporate Credit or Debit (Corporate to Corporate)Debits/CreditsAgreement required for transfers between companies; written authorization implied.
WEBInternet-Initiated/Mobile Entry (Corporate to Consumer)DebitsSimilarly authenticated authorization required due to the nature of the Internet.
WEBInternet-Initiated/Mobile Entry (Consumer to Consumer)CreditsNo authorization required.
POSPoint-of-SaleDebit/CreditWritten and signed or similarly authenticated.

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Why proper authorization matters

Obtaining the proper authorization for your ACH transaction is the most important step you can take to ensure compliance with network rules and protect yourself against disputes, return fees, and reversed transactions.