Proper Authorization: PPD Transactions

The number of transactions across the ACH Processing Network increased dramatically, even in the last year. These transactions occur with a lot of oversight. Protections provide security benefiting both the consumer and the business owner.

The National Automated Clearing House Association, NACHA, 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, 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. Retain the copies as an electronic record that (1) accurately reflects the information in the record, and (2) can be accurately reproduced for later reference. A customer’s bank could request proof of authorization from a merchant, especially for disputed transactions.

Fortunately, for merchants, support offers assistance 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).

The Process of Obtaining Authorization for Each Type


PPD Transactions (Prearranged Payment and Deposit Entries), allows a business to debit or credit a customer’s bank account via their bank’s routing and account numbers. advises businesses to obtain authorization. They need to have customers sign a written form that includes the amount of the transaction.  The document needs to indicate the date to process the transaction. Customers must include the bank account information where to make the debited payment.

For recurring transactions, such as payments for utility bills, monthly membership fees, or loans, the authorization form should also include the frequency of the payments. It also needs the not-to-exceed amount for variable recurring amounts, and, if discharging a large debt, customers will authorize the number of payments and total due.

Merchants Modify PPD Authorizations for Their Business Needs.

For a recurring PPD transaction entry: 

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 transaction 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.

NACHA Accepts the Information Recorded in a Variety of Ways

Acknowedge 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 gets used, NACHA requires merchants to keep records of authorization for at least two years in order to remain in compliance with NACHA regulations.

By ICG Digital
August 24, 2016
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