Automated Clearing House Debit Protection Service - Capital One

Automated Clearing House Debit Protection Service

THE SERVICE

ACH Debit Protection service (the "Service") helps customers minimize ACH debit fraud on their accounts by blocking unauthorized transactions. Customers can choose to (i) block all ACH debits ("Block All"), or (ii) specify select business trading partners that are pre-approved to post against accounts and (a) have Bank automatically return debits that do not match ("Selective Authorization ? Automatic Return"), or (b) receive an exception report to review and decision nonmatching debits before they are returned ("Selective Authorization with ACH Positive Pay"). Both options are described below and customers must choose one on the applicable Operational Instructions.

Block All ? By selecting "Block All" on the applicable Operational Instructions, Customer will authorize Bank to block all ACH debits from posting to Customer's Account. Bank will automatically return any ACH debit(s) presented on Customer's Account.

Selective Authorization ? By selecting "Selective Authorization" (either Option 1 or Option 2 ? see below) on the applicable Operational Instructions, Customer will provide to Bank a list of preauthorized ACH debit instruction originators that are allowed to debit Customer's Account. Each of these pre-authorized debit instructions originators has an ACH company identification number associated with it which is used to create Customer's authorization list on the ACH processing system. Customer can also set certain threshold parameters for transactions initiated by preauthorized originators. Bank will verify that incoming ACH debits have been originated by a preauthorized originator and are within set parameters, if applicable.

Option 1. Automatic Return ? By specifying "Automatic Return" on the applicable Operational Instructions, Bank will automatically return any ACH debit instructions that do not match.

Option 2. ACH Positive Pay ?By specifying ACH Positive Pay" on the applicable Operational instructions, Bank will verify incoming ACH debits against Customer's list and threshold parameters on the ACH processing system. Unauthorized ACH Debits (debits presented to Bank that are drawn on the Account(s) and either do not match the trading partner company identification number or parameter settings) are identified and a report describing exception debits ("Exception Report") is provided to Customer. Customer will manage its users and trading partner(s) company identification list online. Instructions received online will be sent to the ACH processing system for updating.

Bank will pay (charge to the Account(s)) or return (to the originating bank) unauthorized debits pursuant to Customer's instructions ("Pay Selected" and "Return Selected"), or pursuant to the default return decision applied at the deadline time outlined in the applicable Operational Instructions. Bank shall not be obligated to comply with any Pay or Return request received after a deadline and shall treat such a Pay or Return request as though it had not been received. Bank will notify Customer of the availability of the Exception Report by e-mail sent to the address(s) specified for that purpose in the applicable Operational Instructions. If Customer does not make the necessary Pay or Return request by the deadline specified in the applicable Operational instruction ("Deadline"), Bank will use the default return. Customer acknowledges that Pay or Return decisions must be based on Exception Report. The failure of Customer to receive the e-mail transmission for any reason does not affect Customer's responsibility to make the appropriate Pay or Return request by the Deadline.

Dual approval option is available for customers who want to require a second person to approve the following action: add, modify or delete a trading partner; add, modify or delete a user; a pay or return unauthorized debit that has been decision. If dual approval

is selected on the applicable Operational Instruction, the second person with the appropriate authority must approve the request before the change is effective. If the second approval is not received for unauthorized debit(s) by the deadline, the default return will be applied to the item(s).

Except as expressly provided otherwise herein, if Bank pays an unauthorized debit in accordance with a Pay request issued by Customer, such payment shall be proper, and Customer waives any right Customer may have to assert that the unauthorized debit was not properly payable. If Bank returns an unauthorized debit in accordance with the Return system default applied at deadline or in accordance with a Return request issued by Customer, the dishonor shall be proper, and Customer waives any right Customer may have to assert that the return was improper. Customer agrees that Bank has exercised ordinary care if Bank pays or returns an unauthorized debit consistent with the provisions of the Agreement. If an unauthorized debit is paid improperly, Bank will be liable to Customer for the lesser of the amount of the improperly paid unauthorized debit or Customer's actual damages resulting from such improper payment. Bank retains the right to assert Customer's failure to exercise reasonable care. Bank retains the right to assert the defense that Customer has sustained no actual damages because Bank's payment of the unauthorized debit discharged Customer's indebtedness. Anything to the contrary herein notwithstanding, Bank shall have no liability to Customer for wrongful dishonor when Bank, acting in good faith, returns an unauthorized debit: (a) that it reasonably believed was not properly payable; or (b) if there are insufficient Available Funds on deposit in the Account(s); or (c) if required to do so by the service of legal process on Bank or the instructions of regulatory or government authorities or courts.

OTHER CONDITIONS

Customer is solely responsible for the timeliness, accuracy, and completeness of any instruction and information provided by Customer or Customer's employees in connection with the Service. Any additions or changes to Customer instructions and / or information regarding the Service must be submitted to Bank no less than five (5) Business Days prior to Bank's receipt of any ACH debit instructions relating to Customer's 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 by Bank (whether automated or pursuant to Customer's Return decision as provided for in the ACH Positive Pay service described herein) of ACH debits.

Bank shall use best efforts to review Customer's Account(s) designated for use with the Service with the manner of the service Customer wants to select and subsequent instructions and /or information provided to Bank. Bank shall enter these instructions and / or information into Bank's processing system as soon as reasonably possible. Bank shall not be liable to Customer for any / and all damages whatsoever arising in connection with a failure of Bank's 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 in connection with events beyond Bank's control. Bank shall not be liable to Customer for any and all damages howsoever occurring in connection with the accuracy or completeness of instructions and / or information supplied by Customer to Bank regarding Customer's Account(s) and the service. Subject to the foregoing exclusions, Bank's sole liability for damages to Customer for any cause whatsoever and regardless of the form of action shall be limited to direct damages sustained by Customer, but only to the extent that such damages are the direct result of Bank's own gross negligence or willful misconduct, and, in such case, damages will be limited to the amount of the average monthly service fees and charges paid by Customer for no more than six (6) months immediately preceding the event or events giving rise to Customer's claim. In no event shall Bank be liable for any special, indirect, consequential or punitive damages even if Bank is advised of the possibility of such damages.

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