AAP Exam Review Sample Test

According to the NACHA operating rules, what is the minimum dollar amount of loss suffered to file a claim for compensation?

$200

What is the minimum amount of dispute BEFORE a complaint can be filed to initiate an arbitration proceeding for the ACH Network?

$250

State Bank and Trust returns an entry as unauthorized after having the customer complete and sign the written statement of unauthorized debit (WSUD). How long is State Bank and Trust required to retain a copy of the WSUD?

One Year

The NACHA operating rules require that each ACH operator must retain a record of all entries for at least:

One Year from the receipt or transmittal of the entry

Your institution originated an erroneous debit. Your operations department realized it quickly and initiated a REVESAL. Unfortunately, the RDFI returned the erroneous debit prior to receiving the REVERSAL and now has the credit from the REVERSAL. Your procedures give you no additional step to take to recover the erroneous credit. Which risk applies?

Operational

ACH Operations primary staff at an RDFI are out sick and the backup staff is unsure of how to do ACH returns so they decide not to process them until the other employees return. Three days later the returns cannot be completed as they were NSF and are now outside of the return timeframe. What type of risk is this?

Operational Risk

which of the following is the flow of an ACH transaction within the ACH Network?

Originator, ODFI, ACH Operator, RDFI, Receiver

which entry does not require an addenda record?

PPD

Several ARC entries are posted to Mr. Jones' account on Monday, January 31st to inform them that he didn't authorize the entries. The check serial numbers associated with he ARC entries were out of the range of checks that were posting to Mr. Jones' account. what return reason code would the financial institution use to return the ARC entries?

The financial institution should have Mr. Jones complete a Written Statement of Unauthorized debit for the ARC entries and return the entries using the R10 return reason code.

Community financial institution made the decision to begin offering ACH origination as a product to its business customers. The financial institution developed an ACH origination agreement for its business customers to sign. The NACHA operating rules require which of the following to be included in the agreement:

The financial institution's restriction on the type of entries that may be originated.

The NACHA operating rules require that all credit entries not credited to its receivers must be returned by the RDFI to its ACH operator by the ACH operator's deposit deadline for the return entry to be made available to the ODFI no later than:

The opening of business on the second banking day following the settlement date of the entry

Upon request of a receiver, an RDFI must provide all payment related information for CCD, CIE, CTX, and IAT entries to non-consumer accounts by:

The opening of business on the second banking day following the settlement date of the entry

A TEL entry can be initiated in the following situations except when:

The originator initiates the call to the consumer with whom they have no prior relationship

What is considered an Open Loop Network?

Visa

Sally received a $400 credit entry into her account on Friday. The following Friday, Sally contacted her financial institution to tell them it's not her transaction. What is the timeframe to return this entry?

Available to the ODFI no later than opening of business on the second banking day following receipt of notification of refusal from the receiver

U.S. Steel Company is stating it has an unauthorized debit entry posting to its corporate account on Sept 22. On Sept 29,it is requesting the RDFI (Star Bank) to return the entry as unauthorized. What is the timeframe to return an unauthorized ACH corporate entry?

Available to the ODFI no later than opening of business on the second banking day following settlement date of original entry

Which of the following specifically addresses national banks and their need to evaluate a large dollar payment system network risks and requires reporting this to top management and maintaining agreements with all parties that they do business with?

OCC Banking Circular 235

An ODFI or originator cannot reinitiate an entry more than:

180 days after the settlement date of the original transaction

Anthony opened his checking account with Northern Bank in February. In the initial disclosures provided by Northern Bank upon account opening, the ATM fee was clearly stated as being $3.00 per transaction. Effective October 1, the fee for using an ATM will increase to $3.50. According to Reg E, how many days prior notice is required when there is a change to the initial disclosures which results in greater consumer liability?

21 Days

which of the following is NOT a service Class code?

230

Lakes Credit Union sends a written request for a copy of the item to which an XCK relates within 6 years of the date on which the XCK entry was initiated; the ODFI needs to supply a copy of the item to which the XCK relates to the RDFI within what timeframe?

30 calendar days

An erroneous file was transmitted by the ODFI. The reversing file and if necessary a correcting file must be transmitted to the ACH operator within:

5 Banking days after the settlement date of the erroneous file and within 24 hours of the discovery

First Bank (ODFI) is creating XCK entries due to a lost cash letter. According to the NACHA operating rules, First Bank needs to keep a copy of the item(s) to which each XCK entry pertains for:

6 Years

Which of the following is true relating to addenda records for an IAT Entry?

7 mandatory, 2 optional remittance, 5 optional foreign correspondent (only a combined maximum of 12 addenda records)

What are the characteristics of a CTX entry?

A Credit or debit transaction for corporate payments

Choose the correct description of the Acquirer in the card network system:

A Financial institution that represents merchants in accepting POS transactions

Which entity is required by the NACHA operating rules to enter into an agreement with a sending point?

ODFI

Which is not a responsibility of the RDFI as outlined in the NACHA operating rules?

Obtain a copy of the authorization for every entry received

Which of the following is an ANSI transaction set used for making health care payments?

ASC X12 835

The party that represents merchants in the processing, acceptance and settlement of POS transactions is the:

Acquier

An ACH Operator acting as a Gateway must not process

Any debit Inbound IAT entry, except for reversing entries

Which of the following would be a method by the RDFI to officially notify a Federal Government Agency of the death of a federal government benefit payment recipient?

By returning a post death benefit R14 or R15

A Health Care EFT transaction must comply with the following format:

CCD with one addenda record

Which of the following standard entry class codes can be used for both a Zero-Dollar entry and a payment related information?

CTX and CCD

For a destroyed check entry (XCK) transaction, what needs to be in the company name field?

Check Destroyed

Which of the following types of checks are not eligible to be converted to an ARC, POP or BOC entry?

Checks drawn against lines of credit

Blue Sky Bank does ACH origination for two local companies in town. The bank has agreements in place with the two Originators in which it provides the necessary disclosures for UCC Article 4A as required by the NACHA operating rules. Which provision of UCC Article 4A can be varied by agreement (with disclosure to Originator)?

Choice of Law

In what record is the Standard Entry Class code found?

Company Batch Header Record

In what record is the Transaction Code Found?

Entry Detail Record

What is not a requirement for Regulation E?

Corporate electronic funds transfers

What type of risk may be incurred by the RDFI if they choose to pay an ACH debit entry that overdraws the receiver's account?

Credit Risk

When is settlement considered final for ACH credit entries?

Credit entries are final on the settlement date

The federal reserve's operating circular No. 4 does not do:

Establishes return reason codes for disputed entries

which SEC code is initiated only by the Federal Government?

DNE

The definition of "designated data" in the NACHA operating rules includes the following data, processed by an ACH operator, to the extent such ACH operator agrees to provide such data to NACHA from time to time:

Data derived from Return Entries or Extended Return Entries

Which payment mechanism is a closed loop system?

Dwolla

Which of the following requires virtually all non-tax related payments by the federal government to be made via electronic funds transfer?

EFT Mandate

Which of the following is not an ACH benefit to an RDFI?

Elimination of stop payment charges and check reissue costs

Which of the following statements regarding regulation CC is true?

Enacts the Expedited Funds Availability Act of 1988

In what ACH record will you find the addenda record indicator?

Entry Detail Record

As a prerequisite to Origination, and to help control credit risk an originating depository financial institution must have this in place for all the originators for which it transmits ACH entries:

Exposure Limits

The quest operating rules put forth the requirements for the distribution of which types of payments?

Federal and state government payments

What payment system uses gross settlement?

Fedwire

Which of the following payment systems is referred to as a real-time and gross settlement?

Fedwire Funds Transfer

This summarizes the control totals from batch controls within the file. It also contains the number of blocks & batches within the file.

File Control record

File creation time and date are found in the:

File header record

The file header record is _________________ record in an ACH file.

First

The use of strong data security, access limitations, authentication, encryption, tokenization, KYC, KYCC, dual control, and separation of duties mitigates which type of risk?

Fraud

The purpose of the federal reserve bank operating circular 4 (OC4) is to:

Govern the clearing and settlement of ACH entries

Which regulatory body requires the RDFI to perform a review of all parties to an IAT entry including remittance and foreign correspondent addenda records?

Office of Foreign Assets Control

Stan uses a check to pay for a purchase at the hardware store. When the check is presented to Stan's financial institution, Stan's account is NSF and the check is returned. The store provide proper notice at the point of sale, so when it receives the check back NSF it re-presents the check using an RCK entry. According to the NACHA operating rules, which of the following is true regarding a copy of the check to which the entry relates?

Keep a copy of the front and back of the check for 7 years and when requested in writing from the RDFI, provide a copy, indicating paid-if paid, to the ODFI so it can meet its requirement to provide a copy within 10 banking days to RDFI

Alphameric Field Are:

Left justified and space filled

The company name (all batches except IAT) is:

Mandatory

Which of the following lists the participants in check processing order?

Payee/Bank of First Deposit/correspondent Bank/Paying Bank

The monetary control act of 1980 allowed:

Private sector ACH operators to compete with the Federal Reserve

Numeric fields are:

Right justified, unsigned and zero filled

Regulation E does NOT apply to which of the following ACH products (identified by SEC Code)?

RCK, CCD, CTX

Which of the following statements is true regarding real time payments (RTP)?

RTP supports remittance information and other messaging

Which of the following is not a benefit of direct deposit VISA ACH?

Reduced disbursement float

Which of the following specify the requirements for reserves that a depository institution must maintain at a federal reserve bank?

Reg D

FedWire is subject to:

Reg J and Reg CC

Which is specifically designed to help consumers comparison shop for credit by requiring disclosures about terms and cost?

Reg Z

According to an original authorization between Georgia and her health club, the monthly membership dues are $35.00 each month. The health club must increase their monthly membership dues to $40.00 each month. Which of the following regulations requires the health club to provide a 10-day notice when there is a change in dollar amount of the original authorization?

Regulation E

The ACH network is not governed by what?

Regulation J

what record contains the check serial number, terminal city and state, terminal ID for an IAT transaction that contains a secondary SEC code of BOC?

Remittance Addenda Record

An ODFI is transmitting ACH entries for a local pharmaceutical company. An undiscovered problem in its software causes the last four digits in various account numbers to be transposed, resulting in 30 percent of the entries being returned R03. Before the problem is resolved, the situation is leaked to the local news. This is an example of what type of risk?

Reputational Risk

Great State Bank receives a notice from NACHA regarding reporting requirements for unauthorized returns for one or more originators or third-party senders that NACHA suspects exceeded the threshold of 0.5 percent. Great State Bank must:

Respond within 10 banking days VIA a traceable delivery method explaining the reason(s) causing the originator or TPS to have exceeded the unauthorized entry return rate threshold

A biller collecting a service fee associated with a payment returned as insufficient funds may do so as long as notice is provided at the time the underlying entry is authorized or check item is accepted for payment. To identify the debit as a service fee, the biller must format the company entry description field as follows:

Return Fee

What two banking industry conventions made the check payment system more efficient?

Routing transit number and MICR

If an Originator changes the scheduled debit date of an ACH entry, how many days in advance of the new date must the originator provide notice to the consumer receiver?

Seven Calendar days

An IAT Return entry must include:

Seven mandatory plus an additional (8th) addenda with return reason code and original entry trace number

The ASCX 12 Standard identifies the format to be used for:

Sharing and utilizing payment information sent electronically between trading partners

When a participant in the ACH network is unable to meet its financial obligation to another financial institution, causing that FI fail, it is an example of what type of ACH risk?

Systemic Risk

Individual name field is mandatory for:

TEL & WEB

Upon receipt of a written request from an ODFI, the RDFI must send a copy of a written statement of unauthorized debit to the ODFI within:

Ten Banking Days

What law provides protection that a substitute check is the legal equivalent of the original check?

The check clearing for the 21st century act (check 21)

Which of the following relates to the EFT mandate?

The debt collection improvement act of 1996

State Bank & Trust sends a PPD debit entry to Rose's account at Third Street Bank. Rose's account is overdrawn and the entry is returned NSF. When State Bank & Trust receives the return, which of the following statements is TRUE?

The entry can be reinitiated up to two more times within 180 days after settlement date of original entry

An RDFI must re-credit an accountholder for a debit entry, if the receiver has completed a written statement of unauthorized debit, for all of the following reasons except:

The entry was authorized but the originator did not send the ordered merchandise

Sue signs a policy with GoodDealz Insurance and authorizes it to ACH debit her account monthly for the premium. Sue contracts her financial institution to stop payment on all future ACH debits from her former insurance company. How can Sue's financial institution handle her request?

The financial institution can take Sue's stop payment request and stop all future entries from her old insurance company.

Per UCC 4A, a contract between a financial institution and a customer may limit liability to the bank unless:

The financial institution demonstrated "lack of good faith or failure to exercise ordinary care"

Which field contains the reason for payment as required by OFAC for IAT entries?

Transaction Type Code Field

First Bank and U.S. Steele Company have an ACH origination agreement. Which of the following provides guidelines when determining the commercially reasonable security procedures that are addressed and followed in that agreement?

Uniform Commercial Code Article 4A

An ODFI may dishonor a return entry that was _____________________________________.

Untimely

What SEC code is used for any form of authorization if the receiver's instructions for the initiation of the individual debit entry are communicated- other than by verbal communication-via a wireless device?

WEB

Written and signed or similarly authenticated authorizations are REQUIRED for which of the following debit transactions:

WEB, POP, PPD

A value added network (VAN) is best described as:

a communications network for sending and receiving data

All return entries must:

be in the amount of the related original entry

A value added network (VAN) is an entity that:

provides payment related information

If the effective entry date of a batch of entries is left blank by the ODFI, the ACH operator will insert the settlement date as:

the banking day of the processing date if received before 2:45 pm ET