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How to foolproof your company’s ACH Proof of Authorization forms

ACH Proof of Authorization Form

Regardless of whether your company processes one or 1 million ACH debit transactions during a given year, it’s important that you obtain the proper authorization before sending or drafting any electronic payment.

And, with the Federal Reserve’s recent efforts to curtail the number of unauthorized ACH debits—they recently announced the implementation of a $4.50 unauthorized ACH debit fee—now is a particularly good time for companies to review (or create) their Proof of Authorization (POA) forms.

Why are Proof of Authorization forms so important?

When an accountholder questions the legitimacy of an ACH debit on their account, prior to their bank charging the item back to the originating party, the bank will request a Proof of Authorization Form from the ACH originator. It’s during this process that the originator has a chance to win the dispute, that is, so long as they’re able to produce a valid Proof of Authorization Form that complies with all applicable ACH rules and regulations.

What information do you need to include?

Proof of Authorization forms can be collected in paper or electronic form and (at minimum) should:

  • Give permission to the ACH originator to debit/credit the recipient’s account.
  • Include the dollar amount (or range of amounts) to be debited (or credited). Depending on your circumstances, you may also wish to include language that permits you to correct (or reverse) any accidental over/under payments.
  • Provide a time for when the transactions should be expected. Ex. Monthly, Weekly, Per Invoice, etc.
  • State the terms for the POA to be revoked—verbally or in writing—and the timeframe needed for the originator to act on the notice of revocation.
  • Signature (or electronic signature) of the accountholder that the ACH is being sent to.

How long do you need to retain POA forms?

ACH originators should keep POA forms for two years after the date of the last transaction. It’s up to the company whether they retain the form in paper or scanned/electronic format, but regardless, it’s helpful to develop a retention system whereby you can easily produce all relevant supporting documentation.

Example Forms You Can Customize for Your Company

At Central National Bank, we regularly provide example forms to customers who originate ACH transactions. If you’re looking to get started with ACH, or if you’re simply wanting to compare your current forms to our templates, here are a few forms you can check out:

Lastly, we know that ACH processing can sometimes be a little complex. So, if you have any questions about your company’s unique needs or challenges, please don’t hesitate to call our Treasury Management team at 254.776.3800.

About the Author:

Audrey Cole is the ACH coordinator at Central National Bank.  She enjoys adding color to her Excel spreadsheets, exploring the Texas hill country and spending time with family and friends.

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