What You Can Do to Prevent ACH Chargebacks

Unfortunately there is no remedy within the ACH system itself to dispute chargebacks, even if you've done everything right. Once your customer has disputed the charge with the bank, your only recourse is to take your customer to court and prove to a judge that you actually did have proper authorization to debit the account. While you are likely to prevail if you have proof of authorization, going to court is never fun—to say nothing of the time and money it will cost you. In most cases merchants simply decide to absorb the loss and move on.

Thus, your best course of action is to do everything possible to prevent Chargebacks, so you'll never have to worry about remedying them. The following are some suggestions for steps you can take to address and prevent chargebacks as part of your standard business practices.

Follow all the ACH Transaction authorization rules outlined in this Appendix to properly authorize all one time and recurring transactions, and use the correct ACH Type for each transaction.
Tell your customers how the ACH debit will appear on their bank statements. For most electronic debits, it will say "ACH DEBIT" followed by your company name. In some cases it will also include the name of the person who authorized the debit.
Make sure your customer remembers the authorization and the details of the authorized charge-this is particularly important when debits are part of a recurring payment schedule. Steps you can take:
Always send a receipt for transactions. (ReceivablesPro can do this for you automatically with a single setting—see Email Preferences and Templates in Chapter 8.)
Always send a pre-notification email in advance of transactions that are part of recurring billing schedules. (ReceivablesPro can do this for you automatically with a single setting-- see Email Preferences and Templates in Chapter 8.)
Always provide a copy of recurring billing authorizations to your customers.
Always notify customers of any change in a recurring billing schedule. (ReceivablesPro can do this for you automatically with a single setting—see Email Preferences and Templates in Chapter 8.)
Remind your customers to tell joint account owners about the authorized charges.
Make certain that your business customers confirm that their accounts are enabled for ACH transactions before you initiate any debits against them. You can also include in your contract language that your business customer is responsible for reimbursing you for all fees incurred if a transaction you initiate is returned as a chargeback because the account turns out not to be ACH enabled. (See CCD Transaction Authorization Guide.)
Encourage your customers to call you first if they have any questions about a charge. Institute a reasonable refund policy and quickly acknowledge and remedy any errors you may have made.

Remember, once the customer disputes the charge with the bank, there is nothing you can do to reverse the chargeback.

So as with most business matters, maintaining good customer relationships is the single most important thing you can do to protect yourself. If customers call you first, you can refresh their memory about authorizations, or if a mistake was made you can correct it. Even if you end up refunding a transaction that you think is valid, it's a smart move to do it yourself before the bank gets involved. Taking preemptive action will save you chargeback fees, protect your processing record, and hopefully enhance customer satisfaction.

Next Section: Authorization Templates Including Both ACH and Credit Card Payment Options >