Fighting Back – Beyond 60 days

Fighting back starts earlier than you think.

I’ve already told you about what can happen during those first 60 calendar days in But I Have the Authorization!.  How a customer can make a claim and return a transaction as Authorization Revoked (R07) or Unauthorized (R10) without notice to the Originator/Merchant.

Now let’s talk about after those 60 calendar days.  What happens and what can/should you do.  How you can fight back.

One of the many things I do around here is field requests for Proofs of Authorization.  These are generally requests made by an RDFI in relation to a query about, or a challenge to a transaction, by a Receiver.

These requests generally only come about when we are past that 60 calendar day timeframe.

Let me give you a bit of background; Regulation E says, essentially, that a consumer may challenge any debit transaction posting to their account for up to 60 calendar days from the date information relating to the transaction is made available to them.  Traditionally, we use the Statement Date. 

As you know, ACH Operating Rules say 60 calendar days from the Settlement Date.  This could potentially add as many as 30 calendar days to a dispute time frame.  Beyond the 60 calendar days, an RDFI cannot just return the transaction in question.  They do have a couple of options however;

1)  Take a hit.  Depending on the value of the transaction in question and the value of the customer as well as whether we’re talking about a single entry vs. a recurring transaction, many RDFIs will simply credit the customer/Receiver, write it off and be done with it.

2)  Initiate a Regulation E investigation.  This means that among other things, the RDFI may request a copy of the authorization from the ODFI, who makes the request to the Third Party Service Provider (if there is one) who in turn makes the request to the Originator.

That being said, it is important to know that Regulation E only exists between the Receiver and the RDFI.  It does not extend to the other parties of the ACH transaction.  However, per the ACH Operating Rules, the RDFI has the right to a copy of any authorization relating to any transaction posting to any account in their service.

You should also know, if the RDFI is challenging a recurring transaction, the legitimacy of all related transactions could be brought into question.

You, the Originator, are required by the ACH Operating Rules to respond to such requests for Proof of Authorization.  This is your chance to fight back…

Options:

1)  Provide a copy of the requested authorization by the deadline in the request

2)  Offer to just credit the Receiver

3)  Contact the Receiver immediately and work it out before the deadline in the request

4)  Do nothing/don’t respond.  After the deadline, the transaction(s) will be returned

Obviously, option #1 is the best way to go.  You’re protecting your company and your company’s reputation by showing that you indeed have an authorization for any challenged transaction(s).  Options 2 and 3 are good, but you should be sure to respond to the request so the RDFI can be informed about what you’re going to do.  I don’t recommend #4.  The bottom line is this; I may be a graduate of the Dionne Warwick School of Mindreading, but my skills are rusty and I won’t necessarily know what you want to do unless you tell me.  And I don’t like accepting returns unless I have to.  Communication is a good thing.  And if you’re not sure what to do – Ask!

Finally!  Fighting Back.

Some of you might think that fighting back starts when you see a return or with the authorization itself.  I would argue that it starts before the authorization is even written.

Fighting back starts with ensuring that you have a workable revocation process and procedure in place and continues with ensuring that you have a process and procedure in place, to quickly and easily access those soon to be written authorizations.

Fighting back includes having a well written authorization that meets all the requirements of an authorization based on the type(s) of transactions you will be initiating (see my individual SEC Code posts or check out the ACH Operating Rules or talk to your local Regional Payments Association (click here to find one near you).  It is in your best interest to have your compliance person and/or your legal counsel either help you or at least review any authorization before you roll it out for general use.  There are lots of really good sample authorizations out there that will give you a good start, but there is nothing better than having someone in the know with your company’s best interests in mind write or review.

Further, fighting back includes ensuring that your authorization is clear and readily understandable – I mention that separate from the general authorization requirements because it’s that important.  Nothing causes problems faster than ambiguity or fine print.

Fighting back includes ensuring that when the transaction posts to your customers’ account it correctly reflects your company’s name as they know it.  If your company name is ABC Company, but the transaction shows your parent company’s name Brand X Company, there could be issues.  If the transaction shows an odd abbreviation or just your phone number, there could be issues.  Talk to your Third Party Processor or ODFI to ensure that what shows to the Receiver will be recognizable to the Receiver.

Fighting back includes making sure your Third Party Processor or ODFI have updated contact information.  You can take all the precautionary measures in the world, but if I have an old, invalid, unused or unchecked e-mail address  and/or phone number, my request will go unanswered and you’ve just defeated yourself.

Fighting back includes using the Company Entry Description field.  It’s 10 characters long and will appear on the Receiver’s monthly statement.  Use it to state the purpose of the transaction.

And last, but not least.  I cannot stress enough the power of communication.  I’m not suggesting that you have to notify your customers every time you’re getting ready to send them a debit, but a heads up reminder couldn’t hurt.  Communicate your revocation process in easy to understand terms.  Return customer phone calls in a timely manner.  Respond to e-mail queries in a timely manner.  Remember what your grandmother always told you about wearing clean underwear…I mean about catching more flies with honey.  A courteous, friendly, responsive, knowledgeable and empowered Customer Service person(s) will go a long way.

To me, fighting back is mostly about planning ahead.  What is it they say?; the best defense is a good offense?

And to make sure our legal folks don’t get upset with me:

Disclaimer:  The information provided does not constitute legal advice.  For any specific legal questions, you are advised to seek the counsel of an attorney.

– ACHGuy