Fraud Prevention – Services Addendum

The Fraud Prevention Solutions – Services Addendum (this “FPS Addendum”) governs Customer’s use of the Fraud Prevention Services provided by Bank. Customer and Bank have previously entered into the Master Treasury Services Agreement. Customer has executed the Treasury Services Implementation Form and wishes to use the Fraud Prevention Services pursuant to the terms of this FPS Addendum.

Bank will provide the Fraud Prevention Services pursuant to the terms of this FPS Addendum. The Fraud Prevention Services are designed to reduce the possibility that unauthorized check or ACH transactions will post to your Account(s).Customer may sign up for any of the Fraud Prevention Services.

  1. Definitions
    (a) “Account” means a business deposit account(s) Customer or Customer’s affiliate maintains at Bank that is eligible to use as a funding, payment, and billing account(s) for the Fraud Prevention Services and Customer designates the Account(s) for such use on the Treasury Services Implementation Form.
    (b) “ACH” means the Automated Clearing House.
    (c) “ACH Authorization List” means a file containing the ACH company identification number for all companies that are authorized to issue ACH debit Entries to Accounts enrolled in the ACH Positive Pay.
    (d) “ACH Credit Block” means Bank’s ACH fraud prevention service where Customer instructs Bank to block all ACH credit Entries received for deposit to Account(s).
    (e) “ACH Debit Block” means Bank’s ACH fraud prevention service where Customer instructs Bank to block all ACH debit Entries presented for payment against Account(s).
    (f) “ACH Positive Pay” means Bank’s ACH fraud prevention service where Customer instructs Bank how and whether to process certain ACH debit Entries presented for payment against Account(s) based on the information provided by Customer in the ACH Authorization List.
    (g) “Bank” means Forbright Bank.
    (h) “Banking Day” means the active banking days as designated by the Federal Reserve Bank of Richmond, Virginia excluding Saturday, Sunday and specified federal holidays. For the ACH Services, a Banking Day must be a day the ACH operator is open to receive Entries.
    (i) “Check” means a draft (including a demand draft) other than a documentary draft, payable on demand and drawn on Account.
    (j) “Check Payee Positive Pay” means Bank’s check fraud prevention service where Customer instructs Bank how and whether to process certain Checks presented for payment against Account(s) based on the payee name, Account number, check sequence number, and check amount that is provided by Customer in a Check Issue File.
    (k) “Check Positive Pay” means the Bank’s check fraud prevention service where Customer instructs Bank how and whether to process certain Checks presented for payment against Account(s) based on the Account number, check sequence number and check amount that that is provided by Customer in a Check Issue File.
    (l) “Check Reverse Positive Pay” means Bank’s check fraud prevention service where Customer reviewed each Check presented for payment against Account(s) and instructs Bank whether to Pay or Return the Check.
    (m) “Check Issue File” means a file containing the Account number, check number, check issue date, check payee name, and check dollar amount of all checks issued by Customer from an Account enrolled in the Check Positive Pay or a file containing the payee name, Account number, check number, check issue date, check payee name, and check dollar amount of all checks issued by Customer from an Account enrolled in the Check Payee Positive Pay.
    (n) “Credentials” means a User’s User ID, Password, digital certificate, security tokens, Devices and instructions.
    (o) “Customer” means the entity for which the authorized signatory party executed the Treasury Services Implementation Form to receive the Services provided pursuant to this FPS Addendum.
    (p) “Deadline” for the purposes of decisioning Exception Items, means 12:00 p.m. Eastern Time for Checks and 3:00 P.M. Eastern Time for ACH debit Entries on the same Banking Day on which the Exception Report is available for Pay or Return decision on Exception Items.
    (q) “Device” means the hardware and software Customer uses to access the Fraud Prevention Services.
    (r) “Entries” has the meaning set forth in the Nacha Rules.
    (s) “Exception Item” means for the purposes of Check Positive Pay, Check Payee Positive Pay, or Check Reverse Positive Pay, a Check presented to Bank for payment through the normal interbank clearing process that does not match a Check listed in a Check Issue File provided to Bank or for ACH Positive Pay, an ACH debit Entry presented to Bank for payment through the ACH processing system or direct exchange with another financial institution that does not match an ACH listed on the ACH Authorization List.
    (t) “Exception Default Decision” means the default decision selected by Customer on the Treasury Services Implementation Form to either Return or Pay all Exception Items and used when a User has not entered a payment decision prior to the Deadline into the Business eBanking.
    (u) “Exception Report” means a listing of all Exception Items identified as such through the Fraud Prevention Services since the most recent Exception Report was previously prepared and furnished to Customer.
    (v) “MICR” means magnetic ink character recognition line encoded on the bottom of all checks that identifies the routing number, account number and check number used by financial institutions to process the payment of checks.
    (w) “Nacha” means the National Automated Clearing House Association.
    (x) “Nacha Rules” means the Nacha Operating Rules and Guidelines.
    (y) “Password” means the combination of numbers, upper case letters, lower case letters, and symbols a User selects for authenticating the User after entering the User ID when accessing the Services.
    (z) “Pay” for the purposes of Check Positive Pay and ACH Positive Pay, means the decision to pay an Exception Item.
    (aa) “Return” for the purposes of Check Positive Pay and ACH Positive Pay, means the decision to return an Exception Item unpaid.
    (bb) “Security Procedure” means a procedure established by agreement between Bank and its customers for the purpose of verifying that a payment order, electronic file, payment decision, or communication amending or cancelling a payment order is that of the customer, which may include the use of codes, identifying words or numbers, encryption, callback procedures, or similar security devices.
    (cc) “Fraud Prevention Services” means the banking services Bank offers under this FPS Addendum and Customer elects to receive under the Treasury Services Implementation Form, which may include Check Positive Pay, Check Payee Positive Pay, Check Reverse Positive Pay, ACH Positive Pay, ACH Debit Block or ACH Credit Block.
    (dd) “User” means Customer’s User of Business eBanking.
    (ee) “User ID” means the username a User selects for identifying the User when accessing Business eBanking.

2. ACH Fraud Prevention Services. Terms used in this section but not defined in this FPS Addendum have the meanings set forth in the Nacha Rules. Customer acknowledges that the ACH Positive Pay and ACH Debit Block address the process to be followed with regard to ACH debit Entries presented for payment against Account(s) to Bank through the ACH processing systems. If you maintain more than one Account with us, you do not need to select the same option for each Account; however, an Account can be set up for only one of the above Service options.

(a) ACH Positive Pay Process. The ACH Positive Pay service allows Customer to provide Bank instructions to permit individual ACH debit Entries to post to Account(s). If you maintain more than one Account with us, you do not need to select the same option for each Account; however, an Account can be set up for only one of the above Service options. ACH Positive Pay allows the approval of ACH debit Entries you instruct us in advance to Pay on the ACH authorization List, while identifying any other ACH debit Entries as Exception Items. The ACH Authorization List will be used for each debit Entry that is presented for payment from to the specified Account to determine whether the ACH debit Entry should be allowed to post to the Account automatically or whether it should be presented to you as an Exception Item. The ACH Authorization List must include the Originating Company ID number, and can also include a dollar amount range, an expiration date, the frequency of the ACH debit Entry and the number of its occurrences. You may create or change ACH Authorization List at any time and any changes will take effect for the ACH debit Entries presented on the next Banking Day.

If a pending ACH debit Entry is included on the ACH Authorization List for the Account, the Entry will post to your Account on the Settlement Date. If a pending ACH debit Entry is not included on the ACH Authorization List for the Account, or if no instructions have been created, the incoming ACH Debit Entry will be identified as an Exception Item. ACH return reason code R29 (Corporate Customer Advises Not Authorized) is used for all returned ACH debit Entries.

(b) ACH Debit Block Process. The ACH Debit Block service allows Customer to provide Bank instructions to block all ACH debit Entries from posting to Account(s). For ACH Debit Block, Customer authorizes Bank to block all ACH debit Entries from posting to the Account and automatically return unpaid any ACH debit Entry presented for payment on such Account(s). ACH Debit Block does not allow Customer to review and approve or return Entries or provide for payment instructions. Bank shall not be liable for any Entries that are returned unpaid due to implementation of the ACH Debit Block.

(c) ACH Credit Block Process. The ACH Credit Block service allows Customer to provide Bank instructions to block all ACH credit Entries from posting to Account(s). For ACH Credit Block, Customer authorizes Bank to block all ACH credit Entries from posting to the Account and automatically reject any ACH credit Entry on such Account(s). ACH Credit Block does not allow Customer to review and approve or return Entries or provide for payment instructions. Bank shall not be liable for any Entries that are rejected due to implementation of the ACH Credit Block.

(d) Erroneous ACH Entries. In Compliance with Nacha Rules, Bank will not comply with any instruction to block an ACH debit Entry that represents the reversal of an erroneous entry that (i) is a duplicate of an Entry previously initiated by the Originator or Originating Depository Financial Institution; (ii) orders payment to or from a Receiver different than the Receiver intended to be credited or debited by the Originator; or (iii) orders payment in a dollar amount different than was intended by the Originator. ACH Positive Pay and ACH Debit Block cannot be used to monitor or block ACH Entries Customer originates, including ACH return settlement Entries.

(e) ACH Converted Check Entries. ACH Positive Pay and ACH Debit Block also allow you to establish a default instruction for converted check Entries. You can use either ACH Positive Pay or ACH Debit Block to screen converted check Entries (such as ARC, BOC, RCK, and POP standard entry class (SEC) codes), or you can have converted check Entries bypass ACH Positive Pay or ACH Debit Block to be screened through Check Positive Pay Service. Your default setting for screening or bypassing converted check Entries will be determined during implementation and can only be changed by contacting your Bank representative.

3. Check Fraud Prevention Services

(a) Check Positive Pay Process. Customer acknowledges that the Check Positive Pay addresses the process to be followed with regard to Checks presented to Bank for payment through the normal interbank clearing processes. Bank will rely solely on the MICR to review Checks presented to Bank for payment. The Check will be processed for payment if (1) the MICR matches the Account number, check sequence number and check amount that was listed in a Check Issue File provided to Bank and (2) the Check has not previously been paid by Bank, and (3) the Check is not subject to a valid stop payment order on file with Bank. Notwithstanding the foregoing, Bank shall not be required to pay a Check if there are reasons independent of Check Positive Pay for Bank not to pay such Check, such as the Account has insufficient funds to pay the Check, the Check is not properly payable, pursuant to any controlled disbursement agreement between Customer and Bank. Customer acknowledges that any counterfeit or duplicate Check containing information that matches a Check that (1) was listed in a Check Issued File provided to Bank and (2) has not previously been paid by Bank, is not an Exception Item. If either the MICR does not match the Check Issue File, then the Check will be an Exception Item.

(b) Check Payee Positive Pay Process. Customer acknowledges that the Check Payee Positive Pay addresses the process to be followed with regard to Checks presented to Bank for payment through the normal interbank clearing processes. Bank will rely solely on the payee name and MICR to review Checks presented to Bank for payment. The Check will be processed for payment if (1) the payee name and MICR matches the Account number, check sequence number and check amount that was listed in a Check Issue File provided to Bank and (2) the Check has not previously been paid by Bank, and (3) the Check is not subject to a valid stop payment order on file with Bank. Notwithstanding the foregoing, Bank shall not be required to pay a Check if there are reasons independent of Check Payee Positive Pay for Bank not to pay such Check, such as the Account has insufficient funds to pay the Check, the Check is not properly payable, pursuant to any controlled disbursement agreement between Customer and Bank. Customer acknowledges that any counterfeit or duplicate Check containing information that matches a Check that (1) was listed in a Check Issue File provided to Bank and (2) has not previously been paid by Bank, is not an Exception Item. If either the payee information or the MICR do not match the Check Issue File, then the Check will be an Exception Item.

(c) Check Issue File. Customer shall provide Bank with a Check Issue File through the Business eBanking at least once on each Banking Day during which one or more Checks are issued. A Check Issue File sent after 8:00 p.m. Eastern Time on a Banking Day or at any time on a non-Banking Day may not be available for use in Check Positive Pay until the following Banking Day. When a Check is presented for payment and Customer has not provided Bank with a Check Issue File including that Check, the Check will be flagged as an Exception Item. Bank is not responsible for detecting any Customer error contained in any Check Issue File or Pay or Return instruction sent by Customer to Bank. In addition to all other access requirements, to use Check Positive Pay, Customer must maintain software that can export and import Check Issue Files into a CSV, Excel, or FIXED format.

If Customer send to Bank a nonconforming Check Issue File, Bank will reject the file and notify Customer of the rejection. Customer shall provide a conforming Check Issue File as soon as is reasonably possible. Until such time that the conforming Check Issue File is provided, any Checks included in the nonconforming Check Issue File will be listed as Exception Items. Customer acknowledges that until Customer provides Bank with a conforming Check Issue File, the number of Exception Items may be higher than usual because Bank cannot automatically match and pay any properly issued Check that is presented to Bank for payment prior to Bank’s receipt of the conforming Check Issue File.

If the Customer desires to stop payment of any Issued Check listed in the Check Register, Customer may issue a stop-payment order with respect to such Issued Check in accordance with Bank’s usual stop-payment procedures. As an alternative, Customer may submit a request to Bank to delete such Issued Check from the Check Register, and Bank shall input such deletion into the Check Register when Bank next inputs Check Information respecting Customer’s Issued Checks into the Check Register. Customer acknowledges that issuance of a stop payment order may be more expeditious than a request to delete an Issued Check from the Check Register.

(d) Check Reverse Positive Pay. For Check Reverse Positive Pay, the Bank provides all Checks payable against Customer Account(s) as Exception Items.

4. Exception Items

(a) Bank will Pay or Return Exception Items pursuant to User’s instruction or the Exception Default Decision. The User must log into Business eBanking on a daily basis to review any Exception Items contained in the Exception Report. Prior to the Deadline, the User must instruct Bank whether to Pay or Return each Exception Item included on the Exception Report. Bank shall not be obligated to comply with any Pay or Return instruction received after the Deadline and shall treat such a Pay or Return request as though it had not been received. If Bank is instructed to return an Exception Item, User must include the reason for the decision in the instruction. If User makes no payment decision on an Exception Item, Bank will Pay or Return the Exception Item based on Customer’s Exception Default Decision.

(b) Customer can change the Exception Default Decision for any of the Fraud Prevention Services by contacting their Bank representative.

(c) Bank shall have no liability to Customer for wrongful dishonor when Bank, acting in good faith, returns an Exception Item (1) that was reasonably believed to not properly be payable; (2) if there are insufficient available funds in the Account; (3) if required to do so by legal process served on Bank or the instructions of regulatory or government authorities or courts; or (4) if Customer fails to provide proper and timely notice to pay the item.

(d) If our primary means of communication with you is unavailable for any reason and we are not able to present Exception Items, we will contact you to make alternative arrangements. If your primary means of communication with us is unavailable for any reason, you must notify us immediately in order to make alternative arrangements to review Exception Items. If we receive conflicting instructions from you, we may follow the most recent instruction received, or, at our option, we shall be entitled to return the Debit Entry, without liability, until the conflict is resolved to our satisfaction.

5. Security Procedures. In addition to all other applicable Security Procedures in the Master Treasury Services Agreement and Business eBanking Agreement, Bank may elect, in its sole and absolute discretion, to verify the authenticity or content of any Check Issue File or ACH Authorization List by contacting the User or any other person who is a signer on the Account against which a Check appears to have been drawn or an ACH debit initiated.

Bank will send a secure Business eBanking message to Users when the Exception Report is available for review. Bank shall not be liable for any loss or damage related to Customer’s internet service, browser or e-mail provider blocking (whether on account of firewall, system failure, or otherwise) or preventing Bank’s e-mails from reaching Customer or the User(s). Customer remains responsible for review the Exception Report daily prior to the Deadline regardless of whether the User receives the e-mail transmission.

6. Customer Obligations. Customer is solely responsible for the timeliness, accuracy, and completeness of any instruction or information provided by Customer or Users in connection with the Fraud Prevention Services. Any additions or changes to Exception Default Decisions, Users or information regarding the Fraud Prevention Services must be submitted to Bank in writing no less than five (5) Business Days prior to Bank’s receipt of any instructions relating to Account(s) which may be affected by Customer’s proposed additions or changes. Customer is solely responsible for any return fees, late charges, or other third-party fees that may be associated with or assessed in conjunction with the Return (whether Bank-automated or pursuant to Users’ Return instruction). Customer is obligated to review in a timely fashion the periodic statement and the Checks and ACH debits listed (or that should have been listed) thereon.

7. Bank Disclaimers and Liabilities. Bank shall not be liable to Customer for any and all damages whatsoever arising in connection with a failure of Bank’s Fraud Prevention Services processing system, a failure of ACH processing system, a third party’s willful and intentional misuse of a valid pre-authorization ACH company identification number or routing number, a third party’s change in its ACH company identification number, or an event beyond Bank’s control.

Bank shall not be liable for any and all damages or losses relating to: (1) the accuracy or completeness of instructions or information Customer or a User provides to Bank regarding Account(s) and the Fraud Prevention Services; (2) paying a Check that was not properly payable, wrongful dishonor of a Check, or Bank’s or Customer’s actions with respect to Pay or Return of any Check (under the UCC or otherwise); (3) Bank’s or Customer’s actions with respect to Pay or Return of any ACH debit Entry. Customer agrees that Bank exercises ordinary care whenever Bank rightfully Pay or Return a Check, Entry, or Exception Item consistent with Customer’s instructions, the Exception Default Decision, or this FPS Addendum. Customer’s failure to timely direct Bank to Return any Exception Items in accordance with this FPS Addendum will constitute Customer’s acceptance of such presented Checks and Entries and each paid item will be properly charged against the Account and Bank shall have no liability in connection with such payment.

Bank shall have no responsibility or liability for payment of any Check presented at a branch, or which is not an Exception Item or which is fraudulent or is not properly endorsed or Checks wherein the payee has been altered, insofar as the Check Positive Pay does not address such Check. Customer acknowledges that Customer may be obligated to pay any Check that is dishonored by Bank for any reasons should the claimant (including Bank) be a holder or holder in due course with respect to a Check.

8. Amendments. We may amend or update the Fraud Prevention Services and this FPS Addendum from time to time.