I took a call today from a member who had the following scenario:

An account holder discovered that his account had received unauthorized debits every month for almost a year. The financial institution (RDFI) asked me if they could place a STOP PAY on these WEB transactions in order to prevent any further loss to the account holder.

The problem with taking this action is that it sends the wrong message to the ODFI. An ACH return for Stop Pay says, "I now want to stop the transaction I authorized ,"which is not the case in this situation - the account holder didn't authorize these transactions. This is a case of unauthorized transactions, not a stop payment situation.

What can the RDFI do?
There are two considerations: 1. Reg E Error Resolution and 2. Remedy through the ACH payment system.

Reg E Resolution:
Financial institutions should have written procedures for responding to a consumer's notice of unauthorized transactions. Reg E dictates that upon notice of any unauthorized debits the financial institution should investigate the transactions. The account holder must report the unauthorized transactions within 60 days from receipt of the statement that contained the first unauthorized transaction, in order to limit their liability.

ACH Remedy
The ACH Rules allow for consumer debits that the account holder claims are unauthorized to be returned up to 60 days from settlement date as R10 - Unauthorized.

In this case, since the unauthorized transactions are ACH, part of the investigation could include requesting a copy of the authorization from the financial institution that originated the transactions (ODFI). The ODFI has 10 days to fulfill this request.

If the RDFI discovers upon investigation that all the debits were truly unauthorized, they can call the ODFI and ask them to accept the transactions back as a warranty claim. If they do not willingly agree, it is within the rights of the RDFI to file a Rules Violation against the ODFI with NACHA. The threat of a fine may encourage the ODFI to cooperate. For more information on Fines and Enforcement see page OR 197 in the ACH Rules.

How can we prevent future unauthorized debits if we can't use the Stop Pay?
The ACH rules require that transactions returned as unauthorized not be reinitiated. If a company initiates another transaction a second Rules Violation could be filed.