by Jackie Hollenkamp Bentley
As we’ve stated before (see July 12, 2016 post), the number of transactions across the ACH network has increased dramatically, even in the last year. But that’s not to say that these transactions can occur arbitrarily, without some oversight and protections for both the consumer and the business owner.
The National Automated Clearing House Association has established guidelines that require specific authorizations that allow funds to be debited from or credited to bank accounts to pay for goods and services. Those authorizations can be either written, verbal, and/or electronic, depending upon the type of transaction.
Sound too involved, confusing and legalistic? Not with iCheckGateway.com, which offers support for getting the proper authorizations, thereby protecting their merchants should future disputes arise over transactions.
NACHA rules require you to keep copies of ACH authorization for at least two years following the termination or revocation of the authorization. It may be retained as an electronic record that (1) accurately reflects the information in the record, and (2) is capable of being accurately reproduced for later reference. A customer’s bank could request proof of authorization from a merchant, especially if a transaction is ever disputed.
Fortunately, for iCheckGateway.com merchants, support is offered for four different types of authorizations: PPD Transactions (Prearranged Payment and Deposit Entries), TEL Entries (Telephone-Initiated Entries), CCD Transactions (Cash Concentration or Disbursement) and WEB Entries (Internet Initiated/Mobile Entries). Over the next several weeks, we’ll guide you through the process of obtaining authorization for each type.
This post will cover PPD Transactions (Prearranged Payment and Deposit Entries), which allow a business to debit or credit a customer’s bank account via their bank’s routing and account numbers. iCheckGateway.com advises businesses to obtain authorization by having customers sign a written form that includes the amount of the transaction, the date it is to be processed and the bank account information from which the payment is to be debited.
If it is a recurring transaction, such as payments for utility bills, monthly membership fees or loans, the authorization form should also include the frequency of the payments, the not-to-exceed amount for variable recurring amounts, and, if discharging a large debt, the number of payments and total due.
Below are some sample PPD authorizations that can be modified for your business needs.
For recurring PPD entries:
At the top of the form
Sign and complete this form to authorize Merchant Name to make regularly scheduled charges to your bank account. By signing this form, you give us permission to debit your account for the amount indicated below each billing period until the designated expiration date. You agree that no prior notification will be provided unless the date or amount changes, in which case you will receive notice from us at least 10 days prior to the payment being collected.
Below the customer’s signature
I understand this authorization will remain in effect until I cancel it in writing and I agree to notify Merchant Name in writing of any changes in my account information or termination of this authorization at least 15 days prior to the next billing date. If the above noted periodic payment dates fall on a weekend or holiday, I understand that the payment may be withdrawn from my account as soon as the above noted periodic transaction dates. In the case of an ACH Transaction being rejected for Non-Sufficient Funds (NSF), I understand that Merchant Name may attempt to process the charge again within 30 days, and agree to an additional $XX charge for each attempt returned NSF which will be initiated as a separate transaction from the authorized recurring payment. I acknowledge that the origination of ACH transactions to my account must comply with the provisions of U.S. law. I agree not to dispute this recurring billing with my bank so long as the transactions correspond to the terms indicated in this authorization form.
For a one-time PPD entry:
Sign and complete this form to authorize Merchant Name to make a one-time debit to your bank account. By signing this form, you give us permission to debit your account for the amount indicated on or after the date indicated. This permission is only for a single transaction and does not provide authorization for any additional unrelated debits or credits to your account.
It’s important to note, as well, that NACHA doesn’t specify exactly HOW a merchant can obtain a customer’s bank information for PPD transactions.
For example, some merchants have their customers write their routing number and account number on the form. Other merchants also prefer their customers to provide a corresponding voided check or bank letter to reduce potential errors.
Keep in mind, whichever transaction type is used, merchants are required to keep records of authorization for at least two years in order to remain in compliance with NACHA regulations.