Document information and change log

Document Information

Change log

Gender And Entity Neutrality

The masculine form is used solely for the sake of better readability. It always refers to persons of any gender identity (m/f/diverse). This document uses the abbreviation “Give” for all legal entities and subsidiaries.

Table of Contents

Introduction        3

Scope and Applicability        3

Definitions and Terminology        3

Initial Identification of ACH Return        3

Categorizing ACH Returns        3

Administrative Returns        4

Consumer or Non-Consumer Returns        4

Unauthorized Returns        4

Roles and Responsibilities        5

Give’s Responsibilities        5

Merchant Responsibilities        5

Financial Institution Responsibilities (RDFI & ODFI)        5

Monitoring Procedures        5

Real-time        5

Monthly        6

Quarterly        6

Resolution Plans Based on Return Code        6

Record Keeping        6

Training and Awareness        7

Policy Review and Updates        7

Introduction

This document outlines the process and protocol in the case of ACH (Automated Clearing House) return transactions. ACH returns occur when a transaction fails due to various reasons such as insufficient funds, account closures, or invalid account numbers. This written procedure aims to ensure compliance with NACHA (National Automated Clearing House Association) rules and other relevant regulations.

Scope and Applicability

This policy applies to all ACH transactions processed by Give’s payment processing system. It covers the entire lifecycle of an ACH transaction, from initiation to settlement, and addresses the procedures to be followed in the event of a return. All employees, contractors, and third-party vendors involved in the ACH transaction process are expected to be familiar with and adhere to the guidelines set forth in this policy.

Definitions and Terminology

• ACH (Automated Clearing House): A network used for electronic payments and money transfers.
• ACH Return: A transaction that is returned to the originator by the receiving depository financial institution (RDFI) due to an error or other issue.
• Originator: An individual, corporation, or other entity that initiates an ACH transaction.
• RDFI (Receiving Depository Financial Institution): The financial institution that receives the ACH transaction.
• ODFI (Originating Depository Financial Institution): The financial institution that initiates the ACH transaction on behalf of the originator.
• Return Rate: The percentage of ACH transactions returned out of the total transactions initiated.

Initial Identification of ACH Return

Give’s back-office team will receive an electronic notification from its sponsor banks when an ACH return has occurred via email at backoffice@givecorporation.com. Within one business day, a designated team member will review the bank's information to confirm the reason for the return.

Categorizing ACH Returns

ACH return codes identify the reason an ACH payment was returned by the recipient’s bank. They make it easier for originating and receiving financial institutions to spot and communicate payment failures. Each code begins with ‘R’ followed by a two-digit number. Below are listed the most prominent codes, however, this is not a complete list of NACHA codes. ACH Return codes are constantly evolving, with NACHA clarifying and updating existing codes and adding new ones on a regular basis.

Administrative Returns

Administrative returns represent a group of return reasons where the ODFI needs to correct or change something before sending the transaction again. Examples include:

• R16: Account Frozen: Access to the account is restricted due to specific events, legal actions, or the RDFI's policies.
• R17: File Record Edit Criteria: The entry contains invalid information, which could be an invalid Immediate Destination or Immediate Origin, invalid dates, etc.
• R18: Improper Effective Entry Date: Entries have been presented before the first available processing window for the effective date.

Consumer or Non-Consumer Returns

These are return codes that could apply to either consumer or non-consumer accounts. Examples include:

• R01: Insufficient Funds. The available and/or cash reserve balance is not sufficient to cover the dollar value of the debit entry.
• R02: Account Closed. A previously active account has been closed by action of the customer or the RDFI.
• R03: No Account / Unable to Locate Account. The account number structure is valid and it passes the check digit validation, but the account number does not correspond to the individual identified in the entry, or the account number designated is not an open account.
• R04: Invalid Account Number. The account number structure is not valid.

Unauthorized Returns

These returns indicate that the originator did not have the proper authorization to initiate the transaction. Examples include:

• R05: Unauthorized Debit to Consumer Account Using Corporate SEC Code: A business debit was transmitted to a consumer account, and the consumer has not authorized the transaction.
• R07: Authorization Revoked by Customer: The consumer, who previously authorized ACH payment, has revoked authorization.
• R10: Customer Advises Not Authorized: The RDFI has been notified by the Receiver that the entry is unauthorized, improper, or ineligible.

Roles and Responsibilities

Give’s Responsibilities

When a return is identified, Give’s Customer Service team will notify the customer or vendor involved in the ACH return within one business day and depending on the occasion of the return, provide them with detailed information about the return, including its code and reason. The communication may be via email, phone, or both, depending on the severity of the situation. Give will also offer training resources and support to merchants to help them understand the nuances of ACH return codes and their implications if requested.

Merchant Responsibilities

It is imperative for merchants to provide proper authorization to Give before initiating any ACH transactions. This is achieved through Give’s merchant’s portal. Merchants shall also ensure that the account details provided are accurate and up-to-date. Open communication with Give is vital, especially when returns or disputes arise. When an ACH return occurs, merchants must be proactive in addressing and resolving the issue and updating their account details.

Financial Institution Responsibilities (RDFI & ODFI)

If an ACH return occurs, Give’s sponsor bank must notify Give providing details about the return such as account and the reason for the return.

Monitoring Procedures

Monitoring procedures at Give are designed to ensure the effective management of ACH returns. These procedures involve a combination of automated systems and manual reviews, and are carried out on a real-time, monthly, and quarterly basis. Through these monitoring procedures, Give ensures that it is effectively managing ACH returns, mitigating risks, and maintaining compliance with all relevant rules and regulations.

Real-time

On a real-time basis, Give’s payment processing system automatically checks for ACH returns. When a return is identified, the system updates the transaction record with the return code and triggers an alert for further review. This allows Give to respond quickly to returns and take appropriate action based on the return code.

Monthly

On a monthly basis, Give conducts a more comprehensive review of ACH return activity. This involves analyzing summary reports to identify trends or issues, such as an increase in a particular type of return or a high Return Rate for a specific merchant. If any issues are identified, they are escalated to the Senior Risk Officer for further investigation.

Quarterly^[a]

On a quarterly basis, Give conducts a review of its ACH return monitoring procedures. This involves reviewing a sample of transaction records and communications to ensure that returns are being handled correctly and that all required records are being maintained. The review also assesses compliance with NACHA rules and any relevant regulatory requirements.

Resolution Plans Based on Return Code

Give places paramount importance on accurately interpreting and handling the return codes. Each code, whether it pertains to administrative, unauthorized, or technical issues, requires a tailored response to ensure the smooth continuation of transactions and to maintain the trust of all involved parties.

• For administrative returns, such as R16 (Account Frozen), Give will work with its ODFI and the merchant to resolve the issue. This might involve correcting account information. The merchant may await clearance from legal authorities before proceeding with any transactions.

• For consumer or non-consumer returns, such as R01 (Insufficient Funds) or R02 (Account Closed), Give has established protocols to notify the merchant promptly. For example, the merchant will be given the option to resubmit the payment within three business days or provide new bank account details for payment processing.

• For unauthorized returns, such as R05 (Unauthorized Debit to Consumer Account Using Corporate SEC Code) or R10 (Customer Advises Not Authorized), Give takes immediate action. This might involve reversing the transaction, investigating potential fraud, or even terminating the customer’s account if necessary.

The Collection, Recovery and Write-off Process

Collection items include ACH rejects or any items the merchant had a financial and

contractual obligation to pay off the negative amount. The collection amount may include the following:

• Uncollected ACH return amounts evidenced by the ACH return.

• Debt amounts owed from the following:

• Merchant equipment, early termination fees, fixed fees, miscellaneous fees, transactional fees, and/or chargebacks, internal/external fraud and/or credit losses, monthly debited processing fees, fines or special assessments related to merchant activity.

Record Keeping

All data related to ACH returns will be logged and tracked in the company's financial software. For further information, refer to Give’s AML/BSA Policy and Record Retention and Disposal Policy.

Training and Awareness

Training and awareness are integral parts of Give’s ACH return monitoring procedures. They ensure that all employees involved in the process are equipped with the knowledge and skills they need to effectively manage ACH returns.

Give provides regular training sessions ^[b]or whenever there is a significant update to the procedures for its back-office team which handles ACH returns. These sessions cover a range of topics, including the interpretation of ACH return codes, the handling of specific return scenarios, and the use of Give’s systems. The training also includes a thorough training of NACHA rules and any relevant regulatory requirements.

In addition to formal training sessions, Give fosters a culture of continuous learning. Employees are encouraged to stay up-to-date with the latest developments in the ACH Network and the wider payments industry.

Policy Review and Updates

Give’s Compliance Officer will regularly review the ACH return process to ensure adherence to NACHA rules and other regulations. Any discrepancies or violations will be reported to upper management and may result in a revision of this procedure.

Common ACH Return Codes

R01 - Insufficient Funds

The available balance is not sufficient to cover the amount of the debit entry.

R02 - Account Closed

The account to which the transaction was directed is closed.

R03 - No Account/Unable to Locate Account

The account number structure is valid, but the account does not exist.

R04 - Invalid Account Number

The account number structure is not valid or is incorrect.

R05 - Unauthorized Debit to Consumer Account Using Corporate SEC Code

A debit entry was made to a consumer account that was unauthorized by the consumer.

R06 - Returned per ODFI's Request

The Originating Depository Financial Institution (ODFI) has requested that the transaction be returned.

R07 - Authorization Revoked by Customer

The consumer who previously authorized an entry has revoked that authorization.

R08 - Payment Stopped or Stop Payment on Item

The account holder has requested a stop payment on the item.

R09 - Uncollected Funds

Available balance is sufficient, but collected balance is not sufficient to cover the transaction.

R10 - Customer Advises Unauthorized, Improper, Ineligible, or Part of an Incomplete Transaction

The customer has advised that the transaction is unauthorized, improper, ineligible, or incomplete.

R11 - Check Truncation Entry Return

Used when a check truncation entry (truncated check) is being returned.

R12 - Branch Sold to Another DFI

The branch responsible for the account has been sold to another Depository Financial Institution (DFI).

R13 - RDFI Not Qualified to Participate

The Receiving Depository Financial Institution (RDFI) is not qualified to participate in the ACH network.

R14 - Representative Payee Deceased or Unable to Continue in that Capacity

The representative payee is deceased or unable to continue in that capacity.

R15 - Beneficiary or Account Holder (Other Than a Representative Payee) Deceased

The account holder is deceased.

The information contained herein is intended to provide a general overview of the Company’s policies and procedures relating to compliance with this Policy and does not constitute legal advice or a complete description of the laws and regulations relating to this Policy. The Company has made every effort to ensure the accuracy and completeness of this Policy.  This document is intended to provide guidance to employees of Company on how to comply with applicable laws and regulations related to this Policy. Employees should consult with the Legal or Compliance Department if they have any questions about the Policy or how to comply with it. Company reserves the right to modify or update this Policy at any time without notice. Employees are responsible for reviewing the Policy on a regular basis to ensure that they are aware of any changes. This Policy applies to all employees of Company, regardless of their position or location unless stated otherwise in the Policy. Employees are responsible for complying with the Policy and for reporting any suspected violations to their respective supervisor, the Legal Department, AMLCO or respective recipient of such violation as outlined in this Policy.