PPD Transaction Authorization

A PPD entry allows a merchant to debit or credit a customer's bank account after receiving authorization on a signed form.

In this article, you will learn:

What is a PPD Authorization?

What must be included in a PPD Authorization?

The Best Practices for obtaining a PPD Authorization

Sample PPD Authorization forms

What to do after collecting PPD Authorizations?

Other important things you should know about PPD Authorization

What is a PPD Authorization?

A PPD  (Prearranged Payment and Deposit) entry allows you (the merchant) to debit or credit a customer's bank account after receiving the customer's written and signed or similarly authenticated authorization. This type of authorization for payment is only valid for an individual's personal checking or personal savings account and not for business bank accounts. (For business customers, see CCD authorization)

You must collect authorization from your customers before processing an ACH credit/debit transaction.

• "Signed or similarly authenticated" may include an electronic signature as long as it evidences the identity of the customer signing it and their assent to the authorization. Example methods used to similarly authenticate can include the use of digital signatures, codes, PINs, etc.
• Example Signed PPD: Customer signs a written authorization in person or delivers a written authorization by mail for either a one-time or recurring monthly payment to pay a bill or make a donation, etc.
• Example Similarly Authenticated PPD: Customer receives the terms of an ACH authorization in writing in a billing statement and "signs" the authorization to pay the bill (one-time or recurring) by entering a code into the biller's VRU.  (Note: if the customer did not receive written terms of the authorization before initiating a call, is provided the terms of the authorization orally, and verbally authorizes the terms, then this would need to be entered as a TEL transaction - see TEL Authorization for more details).

What must be included in a PPD Authorization?

Every PPD Authorization must contain the following pieces of information:

• Language clearly stating whether the authorization is for a one-time payment, a recurring payment, or for one or more subsequent payments initiated under the terms of a standing authorization.
• Amount of transaction(s) or a reference to the method of determining the amount of the transaction(s)
• Timing of the transactions, including the start date, number of payments, and frequency of transactions
• Customer's name
• Bank account to be debited, including type of account (i.e., checking, savings, etc.)
• Date of the customer's authorization
• Language that instructs the customer on how to revoke the authorization directly with the merchant. This should include the time and manner the customer must communicate the revocation to the merchant. For a one-time payment, the right of the customer to revoke authorization must give the merchant a reasonable opportunity to act on the revocation prior to initiating the transaction.

The Best Practices for obtaining a PPD Authorization:

• According to Nacha, all authorizations must be readily identifiable as an authorization and have clear and readily understandable language for your customers.
• The customer must be provided a copy of the authorization. This can be either a paper copy or an electronic copy.
• You can modify one of the following templates to suit your business needs:
  Sample ACH Authorization - includes Standing Authorization
  Sample PPD Authorization - One-Time Transaction
  Sample PPD Authorization - Recurring Transaction
  Sample PPD Authorization - One-Time Transaction with Separate Fee (CDP Accounts)

What to do after collecting PPD Authorization?

You are required to keep a copy of the authorization you receive and be able to provide it in a timely manner if proof of the authorization is requested by the bank. If asked for proof of authorization, you will need to provide:

• A copy of the signed, written authorization

Single, one-time transactions: Retain a copy of the authorization for 2 years from the date of the authorization.

Recurring transactions: Retain a copy of the authorization for 2 years from the last payment date (termination) or from the date the customer cancelled the authorization (revocation of authorization).

Other important things you should know about PPD Authorization:

• Change in Amount - if the amount differs from the preauthorized amount, even if it is less, you must send the customer written notification at least ten calendar days prior to the date on which a recurring payment is scheduled to process.

• Change in Scheduled Date - if you change the scheduled date on or after which a recurring payment will be processed, you must send the customer written notification at least seven calendar days before the first payment is scheduled to be debited. Variation in debiting customer bank accounts due to weekends or holidays is not considered to be a change to scheduled dates.
• No notice is required to be sent if the customer has agreed to opt out of receiving such notices unless the amount of the recurring payment falls outside of specified range.