Are your Recurring ACH Payments Compliant?

Are Your Recurring ACH Payments Compliant?

Updated June 2020

Many consumers prefer to pay large bills in installments. Offering this option in your accounts receivable business will decrease consumer complaints and increase your overall receivables. But just as with credit cards, it’s important to ensure the recurring ACH payments you accept are compliant.

Comprehending Collections Compliance

Complying with every regulation that applies to your business can get tricky. Some come from governing bodies, some from self-regulated industry groups. Most of the rules that come to mind for collectors are legal regulations created for the collections industry

However, it’s just as important to comply with payment regulations as it is to adhere to FDCPA compliance. After all, these rules are created to keep consumers safe during business transactions. Neglecting to comply opens your agency to liability, consumer complaints and account shut offs – all outcomes that could negatively impact your business.

The two main origins of compliance guidance for recurring ACH payments are NACHA and Regulation E.  

NACHA is a self-regulating entity that connects all U.S. banks. It is through this network funds are transferred between financial institutions. NACHA is also responsible for many rules of conduct for using the automated clearing house network.

Regulation E
Regulation E is a portion of the Electronic Funds Transfer Act (EFTA). ACH payments are considered Electronic Funds Transfers (EFTs). So any business that accepts these payments is responsible for following Regulation E guidelines.

Are Your Recurring ACH Payments Compliant?

The main reasons payment regulations exist are to protect consumers. As a business, it’s your job to ensure consumers understand what they are paying for and that they understand their rights. Most all components of ACH compliance revolve around these goals.

Basic Components Of Compliance
  • Call authorization scripts - Create call authorization scripts for agents to use when setting up schedules by telephone. Following these scripts will ensure compliance on every transaction.
  • Revocation language - Provide revocation language for consumers, so they can understand the rights they have to revoke recurring ACH payment authorization for a payment schedule.
  • Call recording ability - Depending upon the transaction type used for the ACH payment, you will need a recording of the authorization.
  • Consumer identity verification - you must be able verify the consumer for their protection and security.
  • Ability for consumers to receive a receipt - you must be able to provide consumers with a receipt of the transaction.
  • Written authorization/wet signature - for many transaction types, a signed authorization of the recurring payment schedule is required to maintain compliance. 
Sample Revocation Language in Are your Recurring ACH Payments Compliant?

Payment Coverage: Channels And Methods

Whether a consumer pays by phone or online shouldn’t be the only consideration you take into account. Debit and credit card payments come with different compliance concerns than ACH but standardizing your practice across payment methods can benefit your business.

Debit Card - Debit card payments, or cards that are linked to checking accounts, are required to have signed payment authorization when withdrawing money on a recurring basis to pay off a debt.

Credit Card - Credit card payments with a signature authorization are not required, but are recommended for large transactions.

Because there are so many different considerations when taking a payment, you may find it’s easier (for training purposes and for peace of mind) to standardize the payment authorization practice in your agency. Meaning, create a workflow that will fulfill compliance – usually by requiring signatures before payment – and perform every payment this same way.

This will make the process easier and more automatic for front-line agents, decreasing the chance of human error. Accepting a signature for every payment also decreases chargebacks and creates greater consumer trust in your business.


How PDCflow Can Help

We’ve developed our software specifically to help accounts receivable teams adhere to regulations as easily as possible. We offer:

  • revocation language directly on payment pages

  • dual authentication measures to verify consumer identity

  • the ability to automatically send receipts to consumers 

PDCflow’s FLOW Technology makes payment security and compliance quick and easy. Sending ACH recurring payment schedules and receiving authorizations in the same work flow cuts down on time between schedule creation and the time of the first payment, getting revenue into your business as fast as possible. 

Want to learn more about proof of authorization requirements? Download our ACH & Debit Card Authorization Requirements eBook.

  • Know the language NACHA expects on a voice recorded call

  • Review the required revocation language for online payment acceptance

Download the EFT Authorization Guide:
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Hannah Huerta - PDCflow Marketing Specialist
Hannah Huerta, Marketing Specialist

Hannah Huerta is a Marketing Specialist at PDCflow. She creates content for the accounts receivable and payment industry.

LinkedIn - Hannah Huerta

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