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.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.
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.
Common SEC codes and their requirements
| SEC Code | Description | Direction | Authorization Requirement |
|---|---|---|---|
| PPD | Prearranged Payment & Deposit (Corporate to Consumer) | Credits | Authorization required. Oral or non-written means (such as voided check) accepted. |
| PPD | Prearranged Payment & Deposit (Corporate to Consumer) | Debits | Authorization required. Written, signed, or similarly authenticated. |
| CCD | Corporate Credit or Debit (Corporate to Corporate) | Debits/Credits | Agreement required for transfers between companies; written authorization implied. |
| WEB | Internet-Initiated/Mobile Entry (Corporate to Consumer) | Debits | Similarly authenticated authorization required due to the nature of the Internet. |
| WEB | Internet-Initiated/Mobile Entry (Consumer to Consumer) | Credits | No authorization required. |
| POS | Point-of-Sale | Debit/Credit | Written and signed or similarly authenticated. |