All You Need to Know about ACH Authorization Form Requirements

ACH authorization forms allow businesses to collect customer payments through the Automated Clearing House (ACH) network. They provide a secure and efficient way for customers to pay for goods and services and help protect businesses from fraud and chargebacks.

With ACH authorization, funds can be transferred directly from customers’ bank accounts to businesses’ bank accounts, reducing the likelihood of errors or delays common with manual payments. Additionally, ACH authorization saves businesses time and money by eliminating the need to process payments manually and reducing the cost of processing fees. This blog will cover what you need to know about ACH authorization form requirements, including completing them correctly to ensure your payment processes run smoothly.

What Is an ACH Authorization Form?

An ACH authorization form, also known as an ACH payment form or an Automated Clearing House form, is a legally binding agreement that outlines the payment terms between a payor and payee for bank-to-bank payments over the ACH networks set out by the National Automated Clearing House Association (NACHA). The form requires you to provide the third party with your bank account information, including your bank routing number and account number. The third party uses this information to initiate a direct deposit or to debit money from your account. This authorization form is a legally binding contract that allows the third party to access your bank account on an ongoing basis. Unlike other payment methods, ACH debits can be initiated by the payee (the business) after the payor (the customer) has given the necessary authorization. This ensures that businesses receive payment according to the agreed-upon terms without waiting for customers to initiate payments. ACH is an ideal payment method for companies that collect recurring payments.

What Are ACH Authorization Form Requirements?

ach authorization form

The NACHA Operating Rules do not require any specific language or format for ACH agreement requirements, except for “express authorization language” (e.g., “I authorize Company A to debit my account”). However, NACHA authorization requirements stipulate the dollar amount of the transaction; the date(s) and frequency of the transactions; the consumer’s account number; the routing number of the consumer’s bank; and parameters for canceling recurring payments or payments scheduled in advance must be included. Generally, ACH authorization form requirements include the following:

The necessary banking details to collect include the following:

You can view an example of a standard ACH authorization form below.

How to Fill Out ACH Authorization Form

ach payment authorization form

Filling out an ACH authorization form is necessary to transfer funds electronically. It is essential to ensure the accuracy of the information provided. There are three primary ways to fill out an ACH authorization form: paper, phone, or online. Each method offers advantages, and choosing the most convenient approach for the user is essential.

Online

Aside from a signature, all other core requirements remain the same to complete an online ACH authorization form. However, validating the submitted bank information is an extra step to mitigate fraud and the risk of someone entering the wrong account details.

Once a customer has submitted an online ACH payment authorization form, you must provide written notification of the authorization, like paper-based authorizations. You can do this via email.

Here are two of the most popular methods for validating these details online:

Instant Bank Verification

The current trend in ACH payments is to use a third-party verification service to securely validate customers’ banking information by having them input their online banking credentials. Through this process, the third-party payment processor (TPPP) provides the financial institution with “read-only” access to the customer’s account details, which are verified.

Micro Deposits

Another way to verify the ownership of a bank account online is with micro-deposits. When someone completes an authorization online, the payee sends two small deposits to the payor’s bank account. These deposits, typically less than 10 cents, act as a “secret key” that the payor must correctly identify. If the payor identifies the correct deposit amount, they are verified as the owner of the bank account. Unfortunately, it takes one or two days to transfer the deposit.

Paper-Based

If your business interacts with customers in person, collecting paper authorization forms is often the easiest and most efficient way. The layout of these forms can be standardized and must include the requirements we mentioned earlier. After completing the form, the customer should receive a copy, and the business must keep the original form for at least two years after the authorization has ended.

Via Phone

ach authorization

Before taking ACH debit authorization over the phone, you must be aware that this is only allowed when the customer has an existing relationship with you, meaning either a written agreement or the customer has bought goods or services from you in the past two years. This is impossible through “cold calling”; the customer must initiate the call.

While one-time and recurring payments can be authorized over the phone, different requirements apply.

The script you use to obtain authorization must include:

How Originators Prove that an ACH Debit Was Properly Authorized

Under NACHA Operating Rules, originators must retain an original copy or a copy of each consumer’s written authorization “or a readily and accurately reproducible record evidencing any other form of authorization”.

The documentation must show transaction details, such as consumer information and sales documentation that specifies what goods were exchanged or what services were provided to the consumer.

For instance, according to NACHA, some documentation can be captured in the form of a screenshot of the authorization language, along with two other items: a timestamp that indicates what date and time the consumer authorized the ACH debit and evidence of the consumer’s identity and consent to the debit transaction.

Managing ACH Authorization Forms

Managing ACH Authorization Forms

Once authorization is complete, you can manage ACH authorization forms outside the ACH network. To do so, the original authorization form must include instructions on canceling the authorization and the notice period required for cancellation.

Keep a Copy of ACH Authorization Forms for Security Purposes and Debit Changes

An ACH agreement is set up to ensure that both the payor and payee agree. For the agreement to be valid, the payee must provide a copy of the agreement to the payor regardless of the authorization method (paper, online, or phone).

The payee must keep a record of the agreement for two years after it is terminated or revoked. In addition, the payee must give the payor ten days’ notice if the payment frequency or amount changes beyond what was agreed upon in the ACH agreement. If both the payor and payee agree to the change, they can move up the timeline of the following payment.

How to Revoke/Cancel ACH Debit Authorizations

When canceling or revoking ACH debit authorizations, it is essential to remember that legal payor and payee protections must be adhered to, such as cancellation periods (e.g., how many months the customer has to cancel an ongoing ACH payment) and notification periods (e.g., how much notice the customer must provide before canceling the payment).

Your ACH debit authorization form must include details about how the payment can be withdrawn or revoked, such as by phone, form, or written request. If the request is received, you must cancel the ACH payment. You should also contact your bank to ensure the authorization has been canceled/revoked.

Make Your Payments Easier

Digital payment services like ACH (Automated Clearing House) have become commonplace for many companies, and the pandemic has accelerated the shift to digital payments. Online ACH payments are desirable because they are contactless, fast, efficient, and secure.

Business owners, suppliers, and service providers must simplify their payment process to ensure they get more clients, leads, and customers while maintaining security and liability

If you’re looking for state-of-the-art payment software, E-Complish can help. Our payment solutions accept all major card brands and ACH authorizations. Request a consultation to learn more about how E-Complish can save money and make your payment system more efficient.