1. Amanda Johnson Utility Payment Conference September 19, 2011

2. Payments Tenders Terms Acronyms Organizations and Associations Regulations

3. Federal Reserve NACHA

4. Central Bank system Created in 1913 Private bank system: President appointed Board of Governors Federal Open Market Committee 12 regional Banks Member banks Advisory councils

5. Not-for-profit association Direct memberships represented by more than 11,000 financial institutions Network of regional payments associations, and 650 organizations through its industry councils Develops operating rules and business practices for: ACH - Automated Clearing House Network EBPP - Electronic Bill Presentment and Payments EIPP - Electronic Bill and Invoice Presentment and Payment EDI - Electronic Data Interchange Payments EBS - Electronic Benefits Services NACHA-The Electronic Payments Association (formerly known as the National Automated Clearing House)

6. Red Flag Regulation E

7. Issued by the Board of Governors of the Federal Reserve System Implemented in 1978 Governs electronic fund transfers from a consumer’s account Protects consumers’ rights and sets limits on consumer liability for unauthorized payments Imposes specific obligations to billers for recurring payments

8. Indicators 1.Alerts, notifications or warnings from consumer reporting agent 2.Suspicious documents 3.Unusual use of or suspicious activity related to a covered account 4.Suspicious personal identifying information A pattern, practice, or specific activity that indicates the possible existence of identify theft

9. Your program must be reasonable For additional information go to: www.ftc.gov/redflagsrule 2. DETECT Red flags that have been incorporated into the program 3. RESPOND Appropriately to any RED FLAG(s) detected 4. UPDATE Program periodically to capture lessons learned and changes in risks 1. IDENTIFY Relevant patterns, practices and specific forms of identifying possible red flags

10. The ACH network is a highly reliable and efficient nationwide batch-oriented electronic funds transfer system Governed by the NACHA operating rules Provides for the inter-bank clearing of electronic payments for participating depository financial institutions The ACH network can be used to send either debits (payments) or credits (refunds) A credit sends funds to a Receiver’s account A debit takes funds from a Receiver’s account

11.  Originator: Company /individual initiating an ACH transaction according to Receiver agreement  Originating Depository Financial Institution (ODFI): Financial institution transmitting ACH files for the Originator into the ACH Network  ACH Operator: Central clearing facility operated by a private organization or Federal Reserve Bank for participating financial institutions, to or from which financial institutions transmit or receive ACH entries.

12.  Receiver: A person or organization that has authorized the Originator to initiate an ACH entry (debit or credit) to the Receiver's account with the RDFI.  Receiving Depository Financial Institution (RDFI): Financial institution that receives ACH entries from the ACH Operator and posts the entries to the accounts of the depositors (Receivers).  Third-Party Processors: Processors that participate between any relationship within the ACH processing flow (i.e., correspondents, sending-point processors or payroll processors).

13. Each type/method of payment in the ACH “world” has its own rules and guidelines. These are determined by the SEC (Standard Entry Code) used in the payment file. Commonly used SEC codes

14.  ARC – Accounts Receivable Conversion (mail) 4 BOC – Back Office Conversion  POP – Point-of-Purchase; Includes check serial number  TEL – Telephone 8 WEB – Internet 8 PPD – Pre-authorized Payment and Deposit (auto draft) - RCK – Return Check  RDFI – Receiving Depository Financial Institution  ODFI – Originating Depository Financial Institution

16.  ARC – Mail-in payments  Check 21 – Mail in payments  POP – Walk-up Retail Locations  TEL – IVR (Credit or debit card/Check) Payments  WEB – E-Lock box (Consolidators)  PPD and CCD – EFT – Auto Pay /CTX – EDI 820’s

17. Accounts Receivable Check (ARC); lock box/drop box received eligible consumer checks can be converted into electronic debits and processed through the ACH network.  Checks drawn on consumer accounts payable in U.S. dollars are eligible for ARC conversion.  Checks are machine read to capture the Magnetic Ink Character Recognition (MICR) information routing number, account number and check serial number along the bottom of the check.  The data elements, along with the check amount, are used to create an ACH record. Typically, the billers bank account is credited the next business day. http://www.federalreserve.gov/pubs/checkconv/#what http://www.federalreserve.gov/pubs/checkconv/#what

18. Eligible checks converted to ACH debits Controlled environment in the back-office Authorized signature for conversion not required Scanning equipment installation not required Customer notification of conversion disclosed at the register and on documents Checks that contain auxiliary on-us fields or those over $25,000 are ineligible for BOC http://www.federalreserve.gov/pubs/checkconv/#what

19.  Location where payment takes place  Purchaser and seller are both present  Information from the consumer's check is used to create the electronic transaction

20. 8One-time or recurring 8Should include Terms & Conditions 8Privacy statement 8Appropriate authorization language 8Receipts / confirmations delivered electronically upon completion of payment

21.  Can be either PPD or TEL Entry  Requires written authorization if treated as PPD  One-time or recurring for PPD  If no written authorization on file then can complete only per TEL rules.  This requires written receipt or tape recording (actual oral authorization)  TEL = one-time payment  Setting up PPD Payments via IVR is complex, normally IVR should be a TEL entry

22.  ACH  Authorized 7 Check21 4 Contracted : CTX : EBPP : Electronic Check Conversion 4 IRD 4 EDI : Internet payments  IVR. M-payments * MICR 3 NOC  Non-contracted  P2P  Unauthorized : E-Lockbox 8 EBIDS

23. Corporate Trade Exchange  The CTX payment format combines payment information and a variable length record (called an addendum record)  ACH format which allows for up to 9,999 addenda records with approximately 800,000 characters  Allows multiple payments to creditors or billers in a single transfer of funds

24. The legal equivalent of the original check

25.  A set of standards for structuring information electronically  Technical conversation between two entities, either internal or external  Information is the same displayed on paper documents  Transmission method is agreed to by the sender and recipient

26. Information sent by an RDFI to notify the ODFI that previously valid information for a receiver has become outdated or that information contained in a pre-notification is erroneous

27. Used to credit or debit a consumer account. Payroll direct deposits and preauthorized bill payments

28. Information sent by an RDFI to notify the ODFI that previously valid information for a receiver has become outdated or that information contained in a pre-notification is erroneous

29. A physical check that was presented and returned because of insufficient funds may be represented as an ACH entry

30. Enables bills to be created, delivered and paid over the Internet. Multiple applications exist for many industries including financial service providers, communications and utilities. Fast Secure Environmentally responsible

31. ☎ Mobile payment (M-payment) is a point-of-sale (POS) payment made through a mobile device; cell phone, Smart phone or personal digital assistant (PDA) ☎ Person to person (P2P) can be a wireless or text enabled device which can be used to pay a variety of bills at anytime without interacting with anyone including: Ability to transfer monies with a mobile phone from person-to-person (P2P) ☞ Account number and personal identification number (PIN) for authorization purposes required

32. A process in which your check is used as a source of information for the check number, your account number, and the number that identifies your financial institution. Transaction types include: ARC – Accounts Receivable Conversion BOC – Back Office Conversion POP – Point of Purchase Benefits Privacy Secure and Protected Information of descriptive statement Environmental http://www.federalreserve.gov/pubs/checkconv/#what http://www.federalreserve.gov/pubs/checkconv/#what

33. Passed in Oct 2004 Produces a digital image by scanning both sides of a paper check If a paper document is needed, a photo-reduced copy of the original checks is created (“substitute check” or IRD (Image Replacement Document) Check21 is represented by: IRD – Image Replacement Document POP – Point of Purchase http://www.federalreserve.gov/pubs/checkconv/#what

34. In person payment Authorized or unauthorized Utility office location or 3rd party vendor relationship Receipt issued for payment transaction Data terminal equipment Kiosk – customer initiated Terminal – store or cashier initiated Potential 'real-time' payment posting

35. An official contract/agreement with a 3 rd party payment vendor The vendor authorize business or retailer to accept payments for the utility Cash, Check and Money Order tenders accepted Advertised by utility

36. No official contract or agreement with 3 rd party payment vendor A business or retailer who accepts biller/utility payments without contract Typically only accepts cash as tender Usually 2 - 5 (business) day delay of payment to biller Consumer funded convenience fee of $1 - $9.95

37. Credit / Debit Card eCheck Cash Check Recurring Scheduled One-Time Web Mobile Assisted Phone Mail In In Person Channels Customer ACH Methods Frequency

38. Are you currently looking to issue an RFP or RFI? Are you satisfied with your service provider? Are they providing exemplary service? If not, what are you going to do about it? Is it really too much effort to sever relations and/or add another service provider? Do you ask questions? Are they licensed? Is that really important? Are they doing exactly what you contracted with them to do?

40. Amanda Johnson Utility Payment Conference 309-762-2854 Office (CST) info@paymentconference.com ajohnson@paymentconference.com

41. Visit the Utility Payment Conference Exhibit Hall and learn more about the services available to you from your current and potential service providers