Resources: ACH Transaction Code PPD

Prearranged Payment and Deposit Entry

• Preauthorized Bill Payment – A debit application where companies with billing operations may participate in the ACH through the electronic transfer (direct debit) of bill payment entries. Through standing authorizations, the consumer grants the company authority to initiate periodic charges to their account as bills become due.
• Direct Deposit – A credit application that transfers funds into a consumer’s account. The funds being deposited can represent a variety of products, such as payroll, interest, pension, dividends, etc.

Authorization Requirements for PPD Transactions

PPD transactions are by definition those that are authorized in writing on a form or contract that grants a business permission to debit a consumer’s personal checking or savings account.

The authorization form outlines the conditions under which the business is permitted to debit the account (such as amount, date, and frequency), aswell as conditions for termination or change of the authorization.

One Time Payments

One-time PPD transactions are often used as part of a contract when a customer is making a single payment for products or services rendered. For example:

• Paying for a year of service in advance when a service contract is signed.
• Making a major purchase such as furniture, art, or a used vehicle.
• Placing an order for a product or service that will be billed in full on a future date.

How to Authorize:

1. Have your customer sign and date a form that includes the amount of the payment, the date the payment is to be processed, and the bank account from which the payment is to be debited.
2. Keep this form on file, stored digitally or in paper form, for two years.

One-time ACH Payment Authorization Form

Recurring Payments

• Recurring PPD Transaction Authorizations
• There are three typical uses for recurring PPD transactions:
• Payments for the same amount on a regular schedule, such as weekly or monthly service fees.
• Payments for a different amount on a regular schedule, such as utility bills and country club usage fees.
• Payment plans for discharging a large debt, such as car loan payments and layaway payments.