Accredited ACH Professional (AAP) Practice Exam

Which SEC Code requires notice and authorization for transaction processing?

1. ARC

2. POP

3. RCK

4. PAY

The correct answer is: POP

The correct choice is indeed the SEC Code that pertains to notice and authorization for transaction processing. In the context of ACH transactions, the POP (Point of Purchase) SEC Code is specifically designed for consumer transactions conducted at the point of sale. This code requires that the originating depository financial institution (ODFI) obtains prior authorization from the consumer for the debit to occur, as well as to provide proper notification both for the consumer and the merchant involved in the transaction. This requirement for explicit notice and authorization is crucial as it helps protect consumers and ensures that they are aware of and agree to the transaction being processed. It lays the groundwork for consumer rights in ACH transfers and reinforces the importance of transparency in financial transactions. Other SEC Codes, while they may have varying requirements, do not necessitate the same level of notice or authorization from the consumer for the transaction to be processed. For example, the ARC (Accounts Receivable) is used for converting checks received in the mail to ACH debits but doesn't require the same advance notice and authorization from the consumer. Similarly, the RCK (Re-presented Check) Code is used when a check is returned for insufficient funds and is then re-presented through the ACH network, while the PAY (Payroll) Code