ACH Stop Payments – So Many Questions!

Amy Donaghue

By: Jennifer Kline, AAP, NCP, APRP, Director, Audit Services

ACH stop payments can be troublesome for RDFIs. I don’t think this is news to anyone who handles stop payments daily. However, stop payments are a necessary tool for consumers to safeguard their accounts, making it critical for them to be handled appropriately by financial institutions. Below are some helpful questions to ask your account holders to ensure you process your consumer account holders’ stop payment requests correctly.

When an RDFI accepts a stop payment request from a Receiver, many additional questions need to be asked to understand the Receiver’s true intent for stopping the Entry. Examples of questions could include:

  • “Is this for a personal account or a business account?”
  • “Did you write a check or is it an ACH Entry?”
  • “Is this a one-time-only or recurring ACH Entry?”
  • “How and when did you contact the Originator to revoke future Entries?”

But the questions shouldn’t stop there. Other ideas and tips to consider may include:

  • What do your financial institution’s policies and procedures say regarding how to handle requests for stop payment?
  • Did the account holders fill out a stop payment form or is the request in verbal form only?
  • If the stop payment request is received only verbally, does your financial institution’s policies instruct you to follow up within 14 days for a signature?
  • What expiration date does your core processing system code for the stop payment?
  • What do the ACH Rules say about consumer stop payment orders?

All RDFIs are encouraged to review their processes for setting the expiration period on ACH Entries. Nacha Rule: Subsection Effective Period of Stop Payment Orders states ‘A stop payment order will remain in effect until the earlier of:

(a)the withdrawal of the stop payment order by the Receiver; or

(b) the return of the debit Entry, or, where a stop payment order applies to more than one debit Entry relating to a specific authorization involving a specific Originator, the return of all such debit Entries.’

So, this begs the question: what expiration date should be entered in your system to stop future Entries? Some core processing systems automatically, or default, set the stop payment order to expire in six months. However, the six-month expiration date applies for checks and non-consumer ACH Entries, not consumer ACH Entries. A six-month default date is not sufficient for ACH Entries, nor does it comply with the ACH Rules. Every RDFI should ensure the coding of the expiration date is extended beyond six months to ensure that the entry has truly been stopped. Expiration dates need to exceed six months to ensure proper monitoring of recurring ACH entries.

As you can see, stop payments are a complex process to apply to real-life situations, but that doesn’t mean they have to continue to be troublesome to your organization. Making sure to ask your account holders all the right questions up front will help to make it a better experience for both you and your account holders. Still not quite sure if your stop payment policies, procedures and processes are the best they can be? Reach out to us at audit@epcor.org to schedule an ACH Audit. Our team will look with fresh eyes to give you objective feedback about ways to ensure your stop payment processes (along with all of your other ACH processes!) comply with the ACH Rules. Or even better still, find out if your processes align with industry best practices by scheduling a Policy and Procedure Review for any or all of your payments-related programs by emailing advisoryservices@epcor.org! Our team would be honored to help in any way we can.