Can An ACH Payment Be Reversed?
Out of the many forms of payment, the ACH network is a secure and efficient way to make payments. Account-holders can stop or reverse an automated clearing house payment if they encounter any issues, unlike wire transfers which are usually irreversible.
ACH payments can process both direct deposit of your paycheck and monthly bill payments. These payments are made possible by the Automated Clearing House (ACH): a system that makes it easy for money to move from one entity to another. There is a brief processing time, but payments are generally simple to manage. While most transfers go smoothly, mistakes do happen. It is possible to reverse an ACH payment, and it’s helpful to know if and when you can stop, reverse, or cancel a payment in those situations.
How Do You Reverse an ACH Payment?
The modern treasury supports the reversal of ACH Payment Orders, which is beneficial if a payment is sent to the bank in error.
National Automated Clearing House Association (NACHA) rules cover if and when a simple reversal is allowed. Your bank can only reverse an exact payment from your account if the conditions satisfy NACHA reversal rules. The NACHA rules dictate a payment may be reversed for the following reasons:
- Duplicate payment
- Incorrect payment recipient
- Incorrect payment amount or wrong dollar
- Payment date earlier than intended (ACH debit only)
- Payment date later than intended (ACH credit only)
If payment is reversible, it must follow specific NACHA guidelines. After discovering the error, you have five banking days to send the reversal back to the bank/financial institution. A reversal is in progress, and the payment originator must contact the payment recipient to let them know. Finally, the reversal should have a good reason behind it.
ACH Reversal Requirements
- A reversal can only be processed if an entry or file was processed in error.
- The reversing entry must be transmitted to the bank within five banking days after the settlement date of the erroneous file.
- If it is past the five banking-day time frame, a reversal cannot be processed.
- Transmit the reversing file within 24 hours of discovering the error.
- Make a reasonable attempt to notify the receiver of the reversing entry and the reason for the reversing entry no later than the settlement date of the reversing entry.
- Reverse the entire amount of the entry. No partial amount reversals are allowed.
- Initiate a correcting file if you are reversing an entire file that includes errors.
How Do You Stop an ACH Payment?
If you’ve authorized ACH payments that you want to stop, you have a legal right to revoke your authorization. To do so, call or write the biller to request that they stop making automatic payments. Let your bank or credit union know, too, by writing a letter.
If a company continues to charge your bank account, it may be possible to stop payment like you would with a check. To prevent your bank from allowing funds to leave your account, contact the bank at least three business days before the payment date.
Stopping an ACH payment will cost you a small fee and will not be canceled because of a stop-payment order from your bank. You must still contact the company to have your contract canceled, and billing stopped. Regularly verify that your accounts and notify your bank if any unauthorized transfers occur.
How do you adjust ACH payments?
You may want to adjust, change, or delay an ACH payment that would otherwise go through on its own if you pay bills through ACH. If this occurs, get in touch with the business that initiated the electronic payments:
- Your biller (such as a utility company), if the funds are automatically pulled from your account each month.
- Your bank, if you set up the direct payment category through your bank’s online bill payment system to send funds from your account.
How do you change direct deposit?
If you receive a direct deposit payment each month and need to switch account information, contact the business and provide your new bank account details, including the bank routing number, as soon as possible.
Guarding against errors and fraud
The federal law protects you from most errors. But you might need to act quickly for total protection and correction of payment errors. Notifying your bank as soon as you discover a problem—within two days is ideal. If you wait more than 60 days after your bank creates a statement, you might be responsible for any losses. Instead of having the payment reversed, you’ll have to get those funds back some other way.
BNG Payments is payment processing made easy. Whatever your processing needs, we make it easy for merchants to accept credit and debit cards, mobile payments, e-commerce, and more. Contact us to find out more about what BNG Payments can do for your business.