by Jackie Hollenkamp Bentley
Previously, we established that the National Automated Clearing House Association has spelled out the guidelines requiring specific authorizations for online transactions across the ACH network (see Aug. 24 post).
At first glance, the rules governing how authorization can be obtained when debiting a customer’s account look too complex. However, iCheckGateway.com provides their clients the support needed to navigate the various methods to obtain proper authorization.
In this second post of our series detailing the best practices for authorization, the focus will be on TEL Entries, or Telephone-Initiated Entries, for debiting a customer’s bank account.
A TEL entry allows a merchant to debit a customer’s account after receiving the customer’s consent orally over the telephone. This type of authorization for payment can only occur when there is already an existing relationship with the customer, or if the customer contacts the merchant first. The merchant cannot receive a TEL authorization if they are the ones who initiated the communication (i.e. telemarketers).
Preferably, iCheckGateway.com recommends audio recordings of the consent to document authorization for one-time transactions. However, if an audio recording is not available, a written notice, which can be in the form of an email, must be sent to the customer before the settlement date of the one-time transaction.
The merchant is required to keep all copies—audio and written—of the authorization record for two years should a customer’s bank require proof of authorization in a disputed transaction.
There are certain elements that have to be included in the authorization:
- ✓ The date the customer’s authorization was given
- ✓ The date on or after which the customer’s account will be debited
- ✓ The amount of the transaction
- ✓ The customer’s name
- ✓ The customer’s account information
- ✓ A telephone number customers can call with questions
- ✓ How a customer can revoke the authorization
- ✓ A statement from the merchant that this authorization is only for a single, one-time ACH transaction to the customer’s account
With all that being said, exactly what should an authorization sound like? Here is a sample:
Sample Authorization for One-Time Debit TEL Transaction
“Customer First & Last Name, Merchant Name is requesting your authorization to electronically debit your checking/savings account in the amount of $ amount on or about date of ACH debit. The account information you’ve provided is as follows:
Bank Routing Number: routing number of customer’s bank
Bank Account Number: customer’s bank account #
Is this information correct?
This authorization will be used to originate a single entry, one-time ACH debit entry to your account. At any time prior to processing, you may revoke this authorization by calling our customer service department at ###-###-####. Do I have your authorization today, today’s date, to process this transaction?”
It’s important to note that when dealing with recurring TEL transactions, additional steps must be taken to remain NACHA compliant. Both a written and verbal authorization is needed before initiating the ongoing transactions.
In addition to including the customer’s name, account, revocation method, the merchant’s telephone number, and the date authorization was given, a recurring TEL entry authorization must also contain the following:
- ✓ the amount of the transactions or a method to determine the amounts to be debited from the customer’s account
- ✓ the start date and frequency of such transactions
Again, the written notification can be a notice in the form of an email to the customer, or “snail mail” via the U.S. Postal Service or other delivery services.
Of course, these authorization requirements only cover telephone transactions. Our next post will detail the rules governing ACH Network transactions over the Internet, or WEB Entries (Internet-Initiated/Mobile Entries).