ACH Reversals and Other Fixes
ACH payments are used for everything from direct deposit of your paycheck to electronic monthly bill payment. The majority of payments are problem-free, but occasionally there’s an issue and a transfer needs to be reversed. To avoid surprises, you’ll want to know when and how that is possible (and when it isn’t).
Keep in mind that if a reversal is not possible, there might be other ways to solve a problem.
National Automated Clearing House Association (NACHA) rules cover if and when a simple reversal is allowed, and there are only three situations that qualify.
- Wrong dollar amount: if the wrong amount was transferred (for example, $200 instead of $150)
- Wrong account number: if a transfer had the wrong account number and the sender or recipient was not the right account. This is why “bank errors in your favor” are so elusive.
- Duplicate transaction: if a transfer goes through more than once, the duplicates would obviously be reversed.
In the situations above, the reversal must take place within 5 days, and the affected bank account owner must be notified that her account was debited.
Those three situations are fairly limited, so what if you need to make other types of changes to an ACH payment?
Online Bill Payment
If you pay bills by ACH, there may be times when you want to adjust, change, or delay a payment that would otherwise go through. In those cases, contact whoever is initiating the payment:
- Your biller, (such as your utility company) if the funds are automatically pulled from your account each month
- Your bank, if the payment was set up through your bank’s online bill payment system
Be sure to request any changes as soon as possible. It may take a day or two for your instructions to be updated, although you should be able to cancel most payments 24 hours before they are scheduled. If you’re not confident that your biller will honor your request (as is the case with some unscrupulous billers), you can also ask your bank to help.
Stopping an ACH Payment
If you’ve previously authorized ACH payments and you’re unable to reverse the payments any other way, it might be possible to stop payment like you would with a check. To prevent your bank from allowing funds to leave your account, notify your bank at least three days before the payment is scheduled. Expect to pay a modest fee, and be aware that future payments might still hit your account. If the problem continues, you may need to change to a new bank account.
Fraud and Errors
Consumers (but not businesses) are generally protected from errors and fraudulent electronic transfers under federal law. However, depending on the circumstances you might need to act quickly for full protection (things can get tricky if you've used an online payment service or app, for example). Notify your bank as soon as possible after you discover that something is wrong -- within 2 days is ideal. If you wait more than 60 days after your bank generates a statement, you might be responsible for any losses – instead of having the payment reversed, you’ll have to recover funds some other way.
Businesses need to be especially careful about ACH transfers out of accounts because federal consumer protection laws don’t cover business accounts. To prevent problems, ask your bank about solutions that block unauthorized transfers (such as ACH Block and ACH Filter services).
Direct Deposit Changes
If you receive a direct-deposit payment each month and need the payment to go into another account, contact the company that initiates the deposit as soon as possible. Give them your new banking account details, including the bank routing number, and ask them to delete your old account information. A bank switch of this type can take anywhere from two weeks to a month to fully complete, so be sure not to close any accounts until the process is completed.
Wire transfers are different from ACH payments, and they generally cannot be reversed. Wire transfers happen more or less immediately, with the funds leaving your account and arriving at their destination on the same day. They are often available for withdrawal immediately, which makes it even harder to recover funds.
Note: This article was updated from the original by Justin Pritchard.