Obtaining the proper authorization for your Echeck (ACH) transactions is the most important step you can take to protect yourself against disputes, return fees, and reversed transactions.
According to NACHA (the organization that oversees the Automated Clearing House (ACH) network) rules, there are only three reasons people can dispute ACH charges to their account:
If it was processed on a date earlier than authorized; or
If
it is for an amount different than authorized.
NOTE: The transaction must be for the
exact amount authorized—it cannot be higher or lower. However, you
are permitted to have customers authorize payments for variable amounts,
and/or not to exceed amounts.
That's it. And, disputing an ACH charge requires that the account holder provide notice to the bank in writing (or the electronic equivalent) that one of those three conditions exists. (Note that this is significantly different from credit card transactions where a customer can have a charge reversed simply by claiming that the product or service received was not what they expected.)
The key word is Authorized—which according to NACHA means something very specific depending on the ACH Type used to submit the transaction. ReceivablesPro supports the following ACH Types (though your account many not be enabled for all of them):
PPD: Used for a one-time or recurring business to consumer ACH transaction, for which you have written authorization—Meaning a signed form or contract.
TEL: Used for a one-time or recurring business to consumer ACH transaction that was authorized over the telephone.
WEB: Used for a one-time or recurring business to consumer ACH transaction that was authorized by submitting a form over the Internet.
CCD: Used for a one-time or recurring business to business ACH transaction, for which you have written (mail, email, or fax) or telephone authorization in addition to having a general written agreement with the company for ACH debits to its account.
You must fulfill the authorization requirements for the ACH Type submitted, or your customer can have the charge reversed. For example, if your customer calls to place an order over the phone, and you process it as a PPD transaction instead of a TEL transaction, your customer can claim that the transaction was not authorized and have it reversed.
The following sections provide guidance on how to obtain the proper authorization for each ACH Type, and provide authorization form templates that can be customized for your business when it needs to obtain written authorizations. The final section covers ACH Chargebacks and what you can do to prevent them. You'll find more details and handy templates in each section of the guide. You can click on the Next links, located at the bottom of each screen, to read through the entire section. Or click one of the links below to jump to a particular area of interest.
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