Accredited ACH Professional (AAP) Practice Exam

Which institution receives payment instructions from originators and forwards entries to the ACH operator?

1. Receiving Depository Financial Institution (RDFI)

2. Originating Depository Financial Institution (ODFI)

3. Paying Bank

4. Clearing House

The correct answer is: Originating Depository Financial Institution (ODFI)

The Originating Depository Financial Institution (ODFI) plays a crucial role in the ACH network by being the institution that receives payment instructions from the originators, which can include businesses or individuals initiating a payment. Once the ODFI gathers these instructions, it processes and forwards the ACH entries to the ACH operator, which is responsible for routing these entries to the appropriate Receiving Depository Financial Institution (RDFI). This role is essential because the ODFI acts as the gateway for all ACH transactions initiated by originators. They ensure that the payment instructions are formatted correctly, comply with regulatory standards, and are sent through the appropriate channels for successful transmission to the ACH operator. This function establishes a direct connection between the initiation of the payments and the broader network that facilitates their movement. The other options represent different roles within the ACH system. The RDFI is responsible for receiving and processing the entries that the ODFI sends. The Paying Bank typically refers to the financial institution that services the account from which funds are drawn, while Clearing Houses facilitate the settlement of payments between financial institutions without directly engaging in the receipt and forwarding of payment instructions.