Direct Pay 101: Everything You Need to Know

This article describes what Direct Pay is and the process of Direct Pay Set Up. It also describes the settlement negotiating process and the procedures required to convert settlement payments from an existing payment type to Direct Pay within the FORTH system. 

This article is divided into the following sections:

• Overview
• Setting Up Direct Pay
  • Scheduling Settlements
  • Settlement Payment Decisions
  • Related Reports
• Multi-Payee and Common Direct Pay clients
• Troubleshooting / FAQ
• Assistance

Overview

What is Direct Pay and how is it different from ACH Credit?

Direct Pay is a fast and convenient payment type that helps improve the delivery of settlement payments to creditors. FORTH uses Direct Pay to pay those creditors via ACH credits.

The Automated Clearing House (i.e., ACH), is an electronic network used to process bank-to-bank transactions.  An ACH credit occurs when funds are deposited electronically into a creditor account by FORTH.  FORTH initiates a payment through its bank, which then electronically transmits the payment through the ACH to the recipient's bank account.

How is this different from current payment processing?

Instead of a creditor submitting payment against your settlement account as a DEBIT (usually as a check by phone or ACH debit payment), FORTH sends ACH payments as a CREDIT directly to creditors. 

What does this mean in terms of settlements?

ACH Direct Pay or ACH Credits means you authorize FORTH to transfer a specified payment amount from your client’s custodial account to the creditor's account.  This eliminates the need for you to make daily decisions on the Decisions page, as there will not be a check payment presented to FORTH for a decision.  

A scheduled settlement payment is pushed to the creditor if the transaction is “pending” and has sufficient funds. Low-balance transactions will not be sent until they are funded by the consumer or advanced funds by your company.

What are the benefits of Direct Pay?

• Fewer decisions to handle and make each morning.
• Easier to monitor/manage settlement payments and advance funds when needed.
• Eliminates worry about checks getting lost in the mail.

Setting Up Direct Pay

For normal ACH/Check by phone payment types, there are five (5) steps involved in the negotiating process. With Direct Pay, there is no longer a need to call creditors to set up scheduled payments.

🔺For most settlements, please inform your team not to call in payments as they can cause duplicate payments with the creditor.   

Scheduling Settlements

Once you select the payment method under the payment terms as direct pay, the Creditor Payee Details section (left-hand side of the screen) updates with Direct Pay Details.

IMPORTANT: Copy the Loan number/reference number exactly as listed on the settlement letter agreement to the "Creditor Reference #" field to ensure the proper consumer’s account is credited when paid (see the example with the purple arrow above). Do not include the consumer’s name in parenthesis, append the reference field with words like File # or Account#, etc., or shorten the reference number field. 

Finally, double-check that the entries are correct before saving the settlement.

Failure to adhere to this process may delay or cause the payment file to fail and require manual intervention.  Payments could be lost and shown as UNPAID.   

Settlement Payment Decisions

WARNING: Most settlements set up as Direct Pay are not viewable on the Decisions Page.   

Why?   

FORTH sends funds to creditors based on the process date for certain settlements, eliminating the need for you to approve each settlement payment daily. Furthermore, settlement payments will be paid only if the consumer has sufficient funds in their special purpose account. Any shortage in funds will result in the transaction remaining in Low Balance status until funds are available or advanced to the client.  

What about low-balance accounts?   How do I advance if the Decisions page is gone?

FORTH created two (2) reports that enable you to make advances to address these exceptions.

Related Reports

1. Uncollected Settlements - lists all uncollected/unpaid settlements in pending, shipped, or low balance status. (Click here to learn more)
2. Low Balance Forecast Report - list all potential low balance accounts up to two (2) weeks out.  Features an advance button to facilitate on-the-fly account adjustments. (Click here to learn more)

At the beginning of each month, some gateway providers send their own Uncollected Debt Payments report to you. You are responsible for reviewing these reports and managing these missing or late payments directly with the gateway provider.  

Multi-Payee and Common Direct Pay Clients

All Direct Pay clients are categorized in one of two ways: Common and Multi-Payee.

• A multi-payee account for a creditor requires a critical decision - what account to select for a particular debt.  The user will know who the original creditor is, or which account to select, based on other information that they have (For example, Patenaude & Felix is based upon the account structure and if it ends with a -0, MCM is based upon if the MCM account starts with a "3" or other combination stated in the instructions.   Moore Law Group is based upon the original creditor (BofA, Chase, etc).
• Common is what all remaining Direct Play Clients are labeled as. This category of client uses only one account to select for a particular debt.

Troubleshooting / FAQ

Q: How is an ACH Credit different from ACH Debit?

A: ACH credits occur when funds are automatically deposited electronically into a creditor’s account by FORTH Pay.  ACH Debits happen when a creditor draws funds from a client/FORTH Pay account and are decisioned via the Decisions Page.

Q: How do ACH Credits affect daily settlements?

A: The daily reconciliation and matching process of settlements designated as ACH Credits is no longer on the review decisions page. You can manage your settlements via the low balance forecast report (Click here) and uncollected settlements report (Click here).

Q: What happens with NSF/ Low Balance client accounts?

A: For client accounts with a low balance, these are left in low balance status and not paid.  If you wish, you can manually advance funds before the payment is due and the system will then pay the settlement.  If you don’t advance, the settlement will be paid automatically once the client has funds available.

Q: How do I know what client accounts are Low Balance?

A: FORTH has created tools to help you manage low-balance settlements.  These include automatic email triggers sent to your settlements team, and the low balance forecast report.

Q: How do I know if the creditor got paid?

A:  Refer to the settlement.  If paid, the settlement will be automatically updated with a status of 'Cleared'.

Assistance

If you have any questions or need further information, contact us at settlements@setforth.com.

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