Businesses are required to receive authorizations on all Automated Clearing House (ACH) transactions prior to collecting payment from their customers. If an authorization is not on file, the business could be held liable. This article covers the highlights for your business’s protection.
What is an ACH authorization?
First, an ACH transaction is an electronic payment that either credits or debits funds directly from a customer’s bank account in lieu of using a debit or credit card.
An ACH Authorization is a signed or similarly authenticated document by the customer granting permission to debit an account.
Authorizations are required anytime the business is debiting the customer account. They’re also recommended for crediting customers in case the originator ever has to do a reversal of funds.
Transactions that require authorizations:
What you need to know:
These requirements come from National Automated Clearinghouse Association also known as NACHA, but as your financial institution, we must ensure these practices are followed.
If you need additional information:
Nacha.org has a guidebook that you may obtain for free to learn more about the rules around authorizations. Here’s how to get your copy.