ACH Reversal Rules
How to Fix Problems with ACH Payments
ACH payments are used for everything from direct deposit of your paycheck to electronic monthly bill payment. They are processed by the Automated Clearing House (ACH), a network that ensures the smooth movement of money from one entity to another.
This electronic system allows for a seamless transfer of funds, but transactions usually take a few days to process. While the majority of these transfers are problem-free, it helps to know if and when you can reverse, stop or cancel a payment.
Reversing an ACH Payment
Occasionally, an ACH payment that has gone through may need to be reversed.
National Automated Clearing House Association (NACHA) rules cover if and when a simple reversal is allowed. Your bank can only reverse payment for one of the following reasons:
- Wrong dollar amount: If the wrong amount was transferred (for example, $200 instead of $150).
- Wrong account number: If a transfer had the wrong account number and the sender or recipient was not the right account.
- Duplicate transaction: If a transfer goes through more than once, the duplicates would be reversed.
In the situations above, the reversal must take place within five days, and the affected bank account owner must be notified that her account was debited.
Those three situations are fairly limited, so what if you need to make other types of changes to an ACH payment?
Stopping an ACH Payment
If you’ve previously authorized ACH payments, you can revoke your authorization. Call or write the company to tell them you're taking away permission to take automatic payments. Let your bank or credit union know, too, by writing a letter.
Even if you haven't revoked authorization yet, it's possible to stop payment like you would with a check. To prevent your bank from allowing funds to leave your account, notify your bank at least three business days before the payment is scheduled. You can do it over the phone or in person, but make sure you get it in writing, too, within 14 days.
Expect to pay a modest fee, and know that a stop-payment order with your bank doesn't cancel your contract with the company. You still need to contact the company, cancel your contract, and tell them to stop the payments. Monitor your account to make sure they're following your wishes, and dispute any transfers you did not authorize with your bank.
Adjusting Online Bill Payments
If you pay bills by ACH, there may be times when you want to adjust, change, or delay a payment that would otherwise go through. In those cases, contact whoever is initiating the payment:
- Your biller, (such as your utility company) if the funds are automatically pulled from your account each month.
- Your bank, if the payment was set up through your bank’s online bill payment system to push funds from your account.
Be sure to request any changes as soon as possible. If you’re not confident that your biller will honor your request (as is the case with some unscrupulous billers), you can also ask your bank to help.
Changing Direct Deposit
If you receive a direct-deposit payment each month and need to switch which account it goes into, contact the company that initiates the deposit as soon as possible. Give them your new banking account details, including the bank routing number, and ask them to delete your old account information. A bank switch of this type can take anywhere from two weeks to a month to fully complete, so be sure not to close any accounts until the process is completed.
Noting Fraud and Errors
Consumers (but not businesses) are generally protected from errors and fraudulent electronic transfers under federal law. However, depending on the circumstances, you might need to act quickly for full protection (things can get tricky if you've used an online payment service or app, for example). Notify your bank as soon as possible after you discover that something is wrong—within two days is ideal. If you wait more than 60 days after your bank generates a statement, you might be responsible for any losses; instead of having the payment reversed, you’ll have to recover funds some other way.
Businesses need to be especially careful about ACH transfers out of accounts because federal consumer protection laws don’t cover business accounts. To prevent problems, ask your bank about solutions that block unauthorized transfers (such as ACH Block and ACH Filter services).
Reversing Wire Transfers
Wire transfers are different from ACH payments, and they generally cannot be reversed. Wire transfers happen more or less immediately, with the funds leaving your account and arriving at their destination on the same day. They are often available for withdrawal immediately, which can make it even harder to recover funds.