Accredited ACH Professional (AAP) Practice Exam

What is the term for a company or individual authorized to initiate ACH transactions?

1. Originator

2. Receiver

3. Clearing House

4. Card Issuer

The correct answer is: Originator

The correct term for a company or individual authorized to initiate ACH (Automated Clearing House) transactions is "Originator." An Originator can be a business or individual that originates an ACH transaction by providing the necessary payment instructions to their bank or financial institution. This entity is responsible for ensuring that the transaction conforms to applicable NACHA operating rules and regulations. In the ACH network, the Originator works closely with their bank, known as the Originating Depository Financial Institution (ODFI), to process the transactions. The ODFI then takes these transactions and sends them through the ACH network for clearing and settlement. Understanding the role of the Originator is crucial in the context of ACH transactions, as they initiate the transfer of funds, whether it be for payroll, vendor payments, or other financial transactions. Other terms mentioned, such as Receiver, Clearing House, and Card Issuer, refer to different roles or entities within the payment process but do not describe the party that initiates the transaction. The Receiver is the party that receives the funds, the Clearing House processes those transactions, and the Card Issuer is associated with debit or credit cards, not ACH transactions.