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What is a ACH AUTHORIZATION ?

ACH AUTHORIZATION – Agreement by a receiver to allow an ACH credit or debit entry to its account. Authorizations for credit transactions may be oral, but consumer debit transactions must be authorized in writing or similarly authenticated by other means (e.g., by digital signature or PIN if by computer).

Businesses that accept payments via a checking or savings account (i.e. ACH) are required to obtain a signed agreement (ACH AUTHORIZATION) that grants permission to charge or refund the bank account for a customer or business.

An ACH authorization form will typically specify the following:

Example language to be included in the ACH AUTHORIZATION Disclaimer:

I authorize the charge on my account according to the terms indicated in this ACH Authorization Agreement. I agree to notify in writing of any changes to my account information or termination of this authorization at least 15 days prior to the next billing date. I understand that this authorization will remain in effect until I cancel it in writing. I certify that I am an authorized user of this account and will not dispute transactions with my bank; so long as the transactions correspond to the terms indicated herein.

WHY ARE ACH AUTHORIZATION FORMS IMPORTANT?

Rules regarding the acceptance of ACH payments are governed by NACHA. Obtaining proper ACH authorization to process an ACH payment will protect your business from disputes. Per NACHA rules, a customer can dispute an ACH transaction for the following reasons:

  • The transaction was never authorized by the account owner.
  • The transaction was processed earlier than the date specified on the authorization form.
  • The amount charged is different than the amount that was authorized. However, it is possible to obtain ACH authorization for variable amounts.

If a customer disputes an ACH transaction, and an authorization form was not obtained, then the business could lose the dispute.

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