A TEL entry allows a merchant to debit a customer’s bank account after receiving the customer’s consent verbally over the telephone.
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!
In this article, you will learn:
What must be included in a TEL Authorization?
The Best Practices for obtaining a TEL Authorization
Sample TEL Authorization Scripts
What to do after collecting TEL Authorization?
Other important things you should know about TEL Authorization
What is a TEL Authorization?
A TEL entry allows you (the merchant) to debit a customer's account after receiving the customer's consent verbally 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).
You must collect authorization from your customers before processing an ACH debit transaction.
- The authorization you collect from your customer orally on the phone is known as TEL authorization. This type of authorization is only valid for individual customers and not businesses. (For business customers, see CCD authorization)
- The authorization you collect over the phone must be oral/spoken. Authorization collected via touch-tone or dial-pad inputs, such as "Pressing '1' on their phone to confirm the order," is invalid.
- A TEL authorization is valid only when you have an existing relationship with the customer and if the customer initiates the call with you. (You cannot collect authorization from a customer on the first call from your end).
- After the explicit oral authorization, you must validate the customer's identity with commercially reasonable procedures such as verifying their customer account number, PIN, mother's maiden name, etc.
- Before processing the transaction, you must verify the customer's routing number (this is handled automatically by iCG in the Online Terminal).
What must be included in a TEL Authorization?
Every TEL authorization must contain the following pieces of information:
- Your company name
- Date the customer gave the authorization
- Date on or after which the transaction will be processed
- Amount of transaction
- Customer’s name
- Customer’s bank account information
- Telephone number that the customer can call with questions during regular business hours
- Instructions on how a customer can revoke the authorization
A one-time TEL entry authorization must also include:
- Statement from the merchant that this authorization is for a single, one-time ACH transaction
- Amount of the transactions or a method to determine for debits (ex: the merchant should be able to debit not more than $400 for every month)
- Start date and end date (for a limited fixed number of transactions) and frequency of such transactions (monthly, weekly, on a recurring fixed schedule)
The Best Practices for obtaining a TEL Authorization:
- It's important to note that when dealing with recurring TEL transactions, you are required to both record the verbal authorization AND send a written notice (paper or email).
- For one-time, single TEL transactions, you are only required to send a written notice (paper or email) prior to the payment post date. While not required by Nacha, audio recordings of the verbal authorization for a single transaction are preferred for a stronger proof of authorization.
- Make certain that you hear the customer say "I Agree" or "Yes". Silence does not constitute authorization.
- Use a script similar to the following samples to be sure all of the required information is included:
ONE TIME AUTHORIZATION
“Customer Name, [MERCHANT NAME] is requesting your authorization to initiate a single, one-time ACH debit from your checking/savings account in the amount of $ amount on or after date of ACH debit. The account information you have provided is as follows:
- Name of Customer Bank or Routing Number
- Customer Bank Account Number (minimum last 4 digits)
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?”
RECURRING AUTHORIZATION
“Customer Name, [MERCHANT NAME] is requesting your authorization to initiate a recurring ACH debit from your checking/savings account in the amount of $ [enter amount or how amount is to be calculated] on or after [schedule frequency, i.e. the 15th of each month] starting on [Start Date] and ending on [End Date or "when you notify us to terminate the schedule"]. The account information you have provided is as follows:
- Name of Customer Bank or Routing Number
- Customer Bank Account Number (minimum last 4 digits)
If you have any questions about this schedule, or if you would like to cancel or change the schedule, you can reach us by calling our customer service department at [###-###-####]. Do I have your authorization today, today’s date, to process this transaction?”
What to do after collecting TEL 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 script that your company uses
- A copy of the written notification you sent to your customer (either paper or email)
- A copy of the recorded audio file
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 (including the audio file) 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 TEL 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.