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Q.) Knowing that the return time frame for corporate ACH transactions is only two days, we take extra steps to avoid unauthorized ACH debit activity on our business accounts. Specifically, when a large ACH debit (over $5k) from a new payee is received, we reach out to the customer to verify it. But when the customer doesn’t respond in a timely manner to tell us the transaction isn’t authorized, we feel we can’t deny the claim because we initially contacted them regarding the transaction and now we have the risk of being out the money for a late return. Would you recommend that we stop this verification practice or can you suggest a better way of handling courtesy verifications?
A.) Receiving Depository Financial Institutions (RDFIs) may rely solely on the account number contained in an ACH entry for the purpose of posting to the Receiver’s account (ACH Rules, Article Three, Subsection 3.1.2). By providing a courtesy call, you are making a business decision take steps not required by the Nacha rules.
Your account disclosures and other key messages to account holders (consumers and companies alike) should clearly state that they are responsible for monitoring their account activity in a timely manner. For your business account holders who would like an additional layer of protection, you might consider offering Positive Pay services. This allows the business to provide the FI with a list of ACH debits they are expecting from vendors, suppliers and utilities (etc.) All other ACH Debits can be returned as unauthorized. This could take the place of you reaching out to account holders and also eliminate your concerns about write-offs for untimely responses. Positive Pay can also provide a new revenue stream for your financial institution as most FIs charge for the service.
In addition, even if your institution misses the return deadline under the Nacha Rules, it still may be able to bring a breach of authorization warranty claim against the ODFI outside of the ACH Network (e.g., through a direct claim).
The information contained herein has been prepared for general informational purposes only and is not offered as and does not constitute legal advice. You should consult with your legal counsel regarding the legal, regulatory and payments industry rule requirements that apply to specific transaction scenarios.
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