How Long Is an ACH Authorization Valid For?
Unlike a credit card, the ACH payment system transfers money from your client’s bank account to your bank account through a network that doesn’t require you to send a physical check to the bank for processing.
For the ACH processing company to access your client’s bank account, you must get the client's signed authorization. An ACH authorization is the permission given by the client to your bank to electronically take funds from their bank account, credit card, or debit card when a payment is due.
Anyone can revoke this permission and stop an ACH payment online. But how and when can a client stop permission for an ACH transfer online?
Merchants looking to implement this payment processing system in their businesses also want to know how long an ACH authorization is valid. It’s important to note that an ACH authorization is irrevocable once it’s sent for processing. However, a customer can issue an ACH stop-payment order requesting the bank not to process payments.
An ACH stop-payment order for consumers doesn’t expire, but for non-consumers, a written stop-payment order expires after six months, starting from the date the order is issued, unless it’s renewed in writing, withdrawn by the customer, or the item is returned.
If the ACH authorization isn’t revoked, it can remain valid for about two years, depending on many other factors–including the type of transactions authorized.
How an ACH Authorization Works
To allow your ACH network to debit their bank account, your client must complete and sign the ACH authorization form. Commonly referred to as the ‘ACH payment form,’ this authorization form is a legally binding agreement that describes the payment terms between you and your client for bank-to-bank payment processing through an ACH network like Seamless Chex.
Seamless Chex is an electronic payment processing system that helps merchants like you clear and settle bank payments quickly and seamlessly without the hassle of taking physical checks to the bank. With this payment process, you can initiate an ACH debit once your client authorizes you.
With Seamless Chex, you’re guaranteed to get paid on time because you don’t have to wait for your clients to send the payments. It’s a perfect payment method, especially when receiving recurring payments.
As the merchant, you must prepare the ACH authorization form and send it to your client for signing.
How Long is an ACH Authorization Valid? Consult The ACAuthorization Form
Because the purpose of the ACH authorization form is to ensure all the payment terms are clearly described, and you and your client are on the same page, your form has to meet all the requirements and have all the necessary fields.
In addition, as you write your terms of payment, you must expressly state the duration within which the ACH authorization will be valid.
You should also ask your client to notify you in writing with the set duration of validity of the authorization if they intend to cancel it. Your recourse statement should provide clear guidelines on when and how your client can cancel an ACH authorization and how far ahead the request to cancel should be made to avoid problems. It should also define the number of times you should retry an ACH payment.
Your client can refuse to sign any ACH authorization form that doesn’t clearly state how to stop or revoke the authorization. Even if they sign such a form, they can still revoke it by contacting the bank.
Although most banks and credit unions allow the non-consumer stop-payment orders to expire after six months, some can extend this duration to twelve months, depending on the prevailing circumstances. For instance, they’ll allow the order to remain valid if the checks are still unsettled.
Reasons Why a Client May Revoke ACH Payment
The ACH scheme has put in place measures to protect customers when making payments. These measures include the ACH rules and the Federal regulations. These rules and regulations allow customers to revoke an ACH authorization and subsequent payments. Here are several reasons why your client may revoke an ACH payment:
- They’ve already revoked the authorization
- They never authorized the payment
- Their account was debited earlier than authorized
- The payment debited is for a larger amount than authorized
Your client is required to notify your bank in writing of their intention to revoke the payment or authorization. Suppose they’re revoking a payment that has already been made. In that case, your bank is obliged by the ACH rules and federal regulations to refund the amount without question, provided the request to revoke is received within sixty days from the day your client receives the notification of the payment. You may be required to prove authorization even if your client revokes the payment past the authorization period.