Unwanted Credits: Is That Really a Thing?!

Amy Donaghue

Karen Sylvester, AAP, APRP, CAMS, CRCM, NCP, Director, Compliance Education

Can you imagine receiving an ACH credit transaction in your account and not wanting it? While instances of unwanted credits do not happen very often, knowing how to apply the ACH Rules when situations arise is essential.

On July 15, many taxpayers began receiving an advance on child tax credits. Did you know account holders have the right to refuse a credit coming into their account? The child tax credits are early payments from the IRS of 50% of the estimated amount of the child tax credit that they may properly claim on their 2021 tax return during the 2022 tax filing season. Eligible Account holders can view and update their child tax credit preferences via the Child Tax Credit Portal.

The real questions in this situation are: what are your account holders’ rights? And, what is your financial institution’s responsibility?

Account Holder Rights
The account holder has the right to refuse an ACH credit to their account at any time. The typical ACH transaction return time frames of two banking days or 60 days from settlement do not apply. The account holder may tell you at any time they do not want a credit posted to their account and you have a responsibility to return the credit as requested.

Financial Institutions Responsibility
The ACH Rules allow for credits to be returned upon the request of the account holder. The return time frame is 24 hours from the time your account holder requests the return. With that being said, the account holder could request the return at any time, and your financial institution needs to honor the request and promptly return the item. The ACH Rules do NOT require the request in writing, but your financial institution could ask the account holder for something in writing (or email). This request for written confirmation of the return request is to provide an additional layer of protection to your organization should there be any question after the return of the item as to why the item was returned. Once the return request has been made, the credit should be returned with an R23 – Credit Entry Refused by Receiver return reason code and the account should be debited.

Though returning credit transactions is not within our normal scope or daily operations, timely handling of your account holder’s request is essential. If you’d like to learn more about handling unwanted credits and so much more, consider joining us for our Quarterly Compliance and Fraud Review webinar on August 11. Learn more or register now by clicking here.