Rules for ACH Reversal

The Automated Clearing House Network, or ACH, is an electronic system that many banks and businesses use to move money electronically. For example, your employer's bank might use ACH to deposit your paycheck into your account, and your mortgage lender might use to ACH to handle your online payment. Not all ACH transactions go smoothly, and if there's been a mistake, you might need an ACH reversal.

You can have ACH transactions reversed for one of three reasons under the rules: wrong money amount, wrong account or duplicated transactions. For example, if your mortgage bill is for $756.00, but your lender's website messes up and you're charged $856.00, the transaction is reversible it because it's the wrong dollar amount. If the website charges you $756.00 twice, the second duplicated transaction is reversible.

You might have to bring a mistake to the originator's attention to get it fixed. Only the originator, meaning the person or company taking or sending money, the originator's bank or the national ACH network operator can initiate a reversal. The person on the other end or his or her bank generally cannot.

For example, if you have a transaction for a wrong dollar amount from your lender's website, the originator is the lender. An originator is supposed to send the reversal within 24 hours of the error's discovery and within five banking days of the original transaction. When a reversal is required because of a wrong amount or wrong account, the originator must send a correcting entry with the right information.

A bank should honor an ACH reversal, even if it means debiting a customer's account again because of a correcting transaction. However, the bank doesn't have to debit your account if you closed it or the new transaction would overdraw it. Your bank does have to tell you if a correcting entry is going to take money out of your account, but the bank doesn't need your permission to do it.

If you see a fraudulent ACH transaction on your bank or credit account, you need to contact your bank. Your bank will contact the originator and try to resolve the problem. ACH fraud may happen to anyone, but small businesses are common targets for these scams. If you run a small business, you can use a prevention system to stop thieves from running up fake transactions on your business account. If you place a block on all your accounts, for example, you'll have to authorize each ACH transaction.