ACH Authorization
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      ACH Authorization - General Overview

      General information on Nacha requirements for ACH Authorization.

      In this article, you will learn:

      What is Nacha?

      Why is ACH Authorization important?

      What Type of Authorization is needed?

      What is your responsibility for authorizing ACH transactions?

      What is Nacha?

      Nacha is the organization that oversees the Automated Clearing House (ACH) network. Nacha has established rules and guidelines for processing ACH transactions. Merchants who process ACH payments must be sure to be in compliance with Nacha requirements.

      Why is ACH Authorization important?

      Obtaining strong authorization for your ACH transactions and keeping the authorizations on file is the most important step you can take to protect yourself against customer disputes and returns. Plus, you'll be in compliance with Nacha rules!

      To dispute an ACH transaction to their bank account, the customer would need to complete a Written Statement of Unauthorized Debit with their bank and indicate one of the following reasons for the dispute:

      1. I did not authorize the debit to my account.
      2. I revoked the authorization I had previously given before this debit was initiated.
      3. My account was debited before the date I authorized.
      4. My account was debited for an amount different than I authorized. NOTE: The transaction must be for the exact amount authorized—it cannot be higher or lower. However, you are permitted to have customers authorize payments for variable amounts, and/or not to exceed amounts.

      Based on this statement, the transaction can be returned by the bank as unauthorized.

      What Type of Authorization is needed?

      According to Nacha, the type of authorization you must obtain depends on the type of ACH transaction that is processed. iCG supports the following ACH transaction types:

      • WEB (Internet): The authorization is obtained through the internet. For example, your customer can go to your website to make their payment online. They authorize the payment during the checkout process. 
      • TEL (Telephone Payment): You can take payments over the phone and key them in the online terminal on your customer's behalf. Your customer will need to verbally authorize you to debit their bank account. 
      • CCD (Commercial Contract): You can get a signed authorization from a business and key the transaction in the online terminal. This would apply whenever the customer is using a business bank account.
      • PPD (Personal Contract): You can get a signed authorization from a customer and key the transaction in the online terminal. This would apply whenever the customer is using a personal bank account.

      You must meet the authorization requirements for the ACH type, or your customer can dispute the transaction as unauthorized. For example, if your customer calls to make a payment over the phone, and you process it as a PPD transaction instead of a TEL transaction, your customer can claim that the transaction was not authorized and it may be returned.

      A paper check is NOT acceptable authorization for any of these ACH types. iCG does not support converting paper checks into electronic transactions. If a customer gives you a paper check, you will need to deposit it as usual in your bank. 

      Your responsibility:

      Use the following Authorization Requirements Checklist to make sure you have met all of the Nacha requirements for authorizing the transaction.

      For information regarding Standing Authorizations, please view the information found here: Standing Authorizations

      ONE-TIME TRANSACTION RECURRING TRANSACTION
      TEL 
      • Get verbal permission from customer (see sample script)
      • Record verbal permission (OPTIONAL)
      • Provide customer with written receipt (on paper or by email)
      • Retain a copy of authorization for 2 years from the date of the authorization
      For more detailed information on TEL authorizations: TEL Authorization

      TEL

      • Get verbal permission from customer (see sample script)
      • Record verbal permission (REQUIRED)
      • Provide customer with written receipt (on paper or by email) (REQUIRED)
      • Retain a copy of authorization for 2 years from the last payment date (termination) or from the date the customer cancelled the authorization (revocation of authorization)

      For more detailed information on TEL authorizations: TEL Authorization

      PPD

      • Have the customer sign and date a written authorization form (see sample templates)
      • Provide a copy of the signed form to the customer
      • Retain a copy of authorization for 2 years from the date of the authorization

      For more detailed information on PPD authorizations: PPD Authorization

       

       

      PPD

      • Have the customer sign and date a written authorization form (see sample templates)
      • Provide a copy of the signed form to the customer
      • Retain a copy of authorization for 2 years from the last payment date (termination) or from the date the customer cancelled the authorization (revocation of authorization)

      For more detailed information on PPD authorizations: PPD Authorization

      CCD

      • Have the customer sign and date a written authorization form as a one-time payment  (see sample templates)
      • Confirm the customer agrees to be bound by the Nacha rules
      • Confirm the customer's business bank account has been enabled for ACH
      • Provide a copy of the signed form to the customer
      • Retain a copy of authorization for 2 years from the date of the authorization

      For more detailed information on CCD authorizations: CCD Authorization

       

       

      CCD

      •  Have the customer sign and date a written authorization form as either a recurring payment, or one or more subsequent online payments initiated under the terms of a standing authorization.  (see sample templates)
      • Confirm the customer agrees to be bound by the Nacha rules
      • Confirm the customer's business bank account has been enabled for ACH
      • Provide a copy of the signed form to the customer
      • Retain a copy of authorization for 2 years from the last payment date (termination) or from the date the customer cancelled the authorization (revocation of authorization)

      For more detailed information on CCD authorizations: CCD Authorization

      WEB

      • Have the customer sign or similarly authenticate authorization for a one-time online payment 
      • Provide a copy of the authorization to the customer, either electronically or a hard copy
      • Retain a copy of authorization for 2 years from the date of the authorization

      For more detailed information on WEB authorizations: WEB Authorization

       

       

      WEB

      • Have the customer sign or similarly authenticate authorization for a  recurring online payment, or one or more subsequent online payments initiated under the terms of a standing authorization. 
      • Provide a copy of the authorization to the customer, either electronically or a hard copy
      • Retain a copy of authorization for 2 years from the last payment date (termination) or from the date the customer cancelled the authorization (revocation of authorization)

      For more detailed information on WEB authorizations: WEB Authorization