Guides For Merchants

2024 Mcardit ACH Authorization Guide


2024 Mcardit ACH Authorization Guide

Table of Contents

Obtaining Proper Authorization

Obtaining the proper authorization for ACH transactions is the most important step you can take to protect against disputes, return fees, and reversed transactions.

According to NACHA (the organization that oversees the Automated Clearing House (ACH) network) rules, there are only three reasons people can dispute ACH charges to their account:

  • If it was never authorized by the account holder or the authorization was revoked;
  • If it was processed on a date earlier than authorized; or
  • If it is for an amount different than authorized

That’s it. And, disputing an ACH charge requires that the account holder provide notice to the bank in writing (or the electronic equivalent) that one of those three conditions exists. (Note that this is significantly different from credit card transactions where a customer can have a charge reversed simply by claiming that the product or service received was not what they expected.)

The key word is Authorized—which according to NACHA means something very specific depending on the SEC Codes provided when submitting the transaction via the ACHQ API

As part of the authorization process, we recommend collecting and storing digitally or in paper form for two years the following information from your customers (note this is not an exhaustive list):

Clear, Legible Consent

Your authorization page or consent checkbox must plainly state that you are obtaining consent to debit your customer’s bank account for a specific transaction or set of recurring transactions.

One way to achieve this is for the authorization form to have express language such as:

I authorize (your company) to electronically debit my account and, if necessary, electronically credit my account to correct erroneous debits.

Transaction Specific Details

  • Date
  • Time of transaction
  • Debiting account info (bank name and last 4 digits of the bank account at minimum,)
  • Item purchased
  • IP address
  • Email
  • Phone),
  • Frequency (annual, monthly, weekly, daily, etc) for a recurring payment

Client Account Information

The name on the account, shipping information and any other information used to verify the identity of the customer.

Additional or Transaction Information

Prior transaction history, particularly for recurring payments (e.g. IP information, other logins, other purchases)

Transaction Receipt

Prompt your customer to print the authorization and retain a hard copy or electronic copy, and send an e-mail receipt of the processed transaction to your customer

Process For Revocation of Authorization

Your authorization flow must provide your customer with a method to revoke authorization by notifying you, so be sure to include a telephone number and/or e-mail address where your customer can contact you. You should display this information on the authorization page and receipt/confirmation sent to the customer after the transaction has been completed.

SEC Codes

An SEC code is a three letter code that describes how a payment was authorized by the consumer or business receiving an ACH transaction.

Prearranged Payment & Deposit (PPD)

Oral or written authorization required.
Debits and Credits.
Consumer to Business (C2B).

Corporate Credit or Debit (CCD)

Written, signed or similarly authenticated.
Debits and Credits.
Business to Business (B2B).

Internet or Mobile Initiated (WEB)

Similarly authenticated authorization required due to the nature of the internet
Debits and Credits.
Consumer to Business (C2B).

Point of Sale (POS)

Written and signed or Similarly authenticated.
Debits and Credits.

GMB Guide Appendix

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