Understanding the Cancellation of High Risk eCheck Services

Your eCheck services may be cancelled if your business is deemed to be high risk, as per the eCheck service agreement (paragraph 4, section D). This agreement stipulates:

"that merchant is not using the Authorize.net ACH transaction Processing Services provided under this Agreement to provide or promote any of the following goods or services: Audiotext; Business Opportunity Sales; Card registration organizations; Check cashing establishments; Collection Agencies; Companies promoting lotteries or raffles; Computer sales; Credit restoration or repair agencies; Debt consolidation; Drug paraphernalia; Employment agencies; Gambling; Third party hotel reservation services; Illegal products; Import/Export; Investment Opportunities; Magazine subscriptions; Mortgage broker; Mortgage reduction services; Outbound telemarketing: Precious metal/stamp collections; Pre-paid phone cards; Pornography or adult-oriented material; Pyramid sales programs; Telephone consultation services; Timeshare organizations; Travel certificates or sales or any other business type or industry that Authorize.net, at its sole discretion, determines to possess excessive risk."

For additional details regarding the Terms of Service / Acceptable Use Guidelines, please review our Terms of Use.

How eCheck functions?

eCheck operates in the following sequence:

1. A customer provides their bank account information, specifically the ABA routing number and their bank account number.
2. An electronic request is made to Authorize.net using the customer's bank account information to charge or refund the customer for the purchase. This occurs via your website or the Virtual Terminal.
3. Authorize.net receives the electronic request and stores the transaction in the daily "batch".
4. At the end of each business day, a request is submitted to the customer's bank through the Automated Clearing House (ACH) to charge or refund that particular customer. This process is known as "settlement" or "settling your batch."
5. The eCheck system waits for the bank's response to the transaction. Since there is still manual intervention by the bank, electronic checks are not considered "real-time." This process typically takes two to three (2-3) business days, but can take up to five (5) business days.
6. If sufficient funds are available in the customer's account, the funds will be deposited into your bank account on file by eCheck after a seven (7) day clearing phase. If funds are not available, the customer's bank will send back a response through the ACH to Authorize.net, and the item will be posted as a return to your settlement statement. Amounts less than $1.00 will be funded with the next funding event.
7. Your eCheck account balance will be updated depending on the results of the transactions.

Authorization to ACH: Required Information

Merchants must obtain authorization from their customer prior to charging the customer's bank account. This involves:

1. Obtaining payment authorization, in written hard copy or electronic format, from the bank account holder.
2. Authenticating the customer's identity.

Payment authorization must include:

• Clear and conspicuous statement of the terms of the transaction, including amount.
• Written language displayed to the customer that is readily identifiable as an authorization by the customer to the transaction (i.e. "I authorize [Merchant] to charge my bank account"), and that can be reproduced.
• Evidence of the customer's identity.
• The date the authorization was granted and the effective date of the transaction (the transaction may not be processed before the effective date).
• The bank account number to be charged.
• The nine-digit ABA routing number of the customer's bank.

Minimum Required Information for eCheck Transaction

When initiating an eCheck transaction, you need the following information:

• Nine-digit ABA routing number.
• Bank account number.
• Bank account type (checking, business checking, or savings).
• eCheck type.
• The name on the bank account.
• The transaction amount.

When initiating an eCheck refund, you need the following information:

• The valid gateway-assigned Transaction ID of the original transaction.
• Last four digits of the routing number.
• Last four digits of the bank account number.
• Amount.
• Bank account type.
• eCheck type (PPD or CCD).

To avoid transactions from being placed into an "Under Review" state and potentially failing review, we recommend that you supply as much information about the customer and their bank account as possible. This includes the customer's bank account address, which can assist our Underwriting team with validating transactions flagged by the OFAC sanctions list. Doing so will help your transactions transition from "Under Review" to "Approved Review" or "Failed Review" faster.

For more information on eCheck please see: eCheck Operating Procedures and User Guide.

Authorize.net ACH Authorization and Retention Policy

As per Regulation E, NACHA regulations, and paragraph 12 of the eCheck Merchant Agreement, you are required to obtain proper authorization from the customer prior to initiating ACH debit or credit entries to the customer's account at any financial institution.

For more information on eCheck please see: eCheck Operating Procedures and User Guide.

Retention Period for ACH Authorization

All authorizations must be retained by the merchant for two years after the completion of a transaction, the completion of a final recurring transaction, or after the revocation of payment authorization. This includes paper authorizations, telephone or internet authentications, and transactions involving a paper check. Merchants must be capable of providing a copy of authorization to the customer upon request. Note that while NACHA and Authorize.Net require record retention for customer authorization records for a period of two years, the statute of limitations for state laws governing transaction disputes may dictate a period anywhere between two to seven years. We recommend that you familiarize yourself with these laws.

Charging a Customer's Account Prior to ACH Authorization

You can only submit an ACH charge through the Authorize.net Payment Gateway after you have received the completed authorization document.

Why is customer approval required for eCheck transactions?

According to Regulation E of the NACHA regulations, and paragraph 12 of the eCheck Merchant Agreement, merchants must obtain proper authorization from the customer prior to initiation of ACH debit or credit entries to the customer's account at any financial institution. Proper authorization includes:

1. Written language readily identifiable as an authorization, that clearly and conspicuously states the terms of the transaction.
2. The date the authorization was granted and the effective date of the transaction (the date before which the debit transaction may not be processed).
3. The account number to be debited.
4. The name and nine-digit ABA/Routing number of the Customer's financial institution.
5. Written language indicating that the Customer may revoke the authorization by notifying the Merchant in the manner specified in the authorization.

The authorization elements listed above must appear together and be provided in electronic or hard copy format to the customer for each ACH debit entry initiated to the customer's account, with the exception of recurring transactions. For recurring transactions, the merchant need only provide one copy for the first transaction.

The customer must sign in writing to complete the authorization and then send the completed document to the merchant by postal mail or fax; delivery of the document to the Merchant by any other electronic means is not permitted. At this time, no allowance is made for granting authorization to initiate an ACH debit by use of a digital signature, any other electronic code, or by verbal means.

Pursuant to the eCheck Merchant Agreement, the merchant must retain possession of every authorization for which a corresponding transaction has been submitted for processing to Authorize.net for a period of three years and make said authorization available to Authorize.net on demand.

Given these requirements, the eCheck payment service is best utilized for recurring transactions, such as monthly payment of ISP charges or periodic payment for subscription-based services. One-time transactions, however, do constitute valid opportunities to utilize the eCheck payment service, provided merchant and customer are willing to incur the additional costs, in terms of convenience and maintenance of authorization records, inherent with eCheck ACH.

For more information on eCheck please see: eCheck Operating Procedures and User Guide.

Shipping Goods and ACH Payment Processing Time

ACH payments are not processed in real time and they are not guaranteed. The funds from ACH payments are typically considered collected after 7 business days. Therefore, Authorize.net recommends that you wait for at least this period before shipping or giving access to the merchandise purchased via eCheck.

eCheck Returns, Chargebacks and Notice of Change (NOC)

Returns and Chargebacks

Return or Chargeback transactions can occur when transactions submitted successfully to the Automated Clearing House (ACH) Network are later rejected. Understanding the types of returns can help you address and resolve issues effectively. It's important to note that even after the 7-day period and after you have received the funds for an eCheck transaction, a return is still possible. While returns typically occur within a few days after settlement, they can occur for up to 120 days after settlement.

There are three types of returns:

• Insufficient Funds Returns: These occur when the customer’s bank account does not have sufficient funds to cover the eCheck transaction.
• Unauthorized Returns (Chargebacks): These occur under the following conditions:
  • The customer did not authorize the eCheck transaction or had revoked the authorization. This can also happen in cases of identity theft.
  • The transaction was for a different dollar amount than originally authorized.
  • The transaction was settled before the date of the customer’s authorization.
• Administrative Returns (Returned Items):
  • These include all other reasons for a return, such as:
    • Account closed
    • Account number invalid
    • Non-transaction account
    • Account frozen

Notice of Change (NOC)

A Notification of Change (NOC) is an ACH notice from a customer’s bank indicating that an eCheck transaction included incorrect customer or payment information. The bank will correct the information, post the transaction to the customer’s bank account, and notify you that payment information needs to be updated.

You must make the necessary changes prior to originating the next eCheck transaction for the same customer. If you are using Automated Recurring Billing (ARB) or another recurring billing solution, be sure to update information in your subscription records. Authorize.net maintains a database of all NOC entries. All submitted eCheck transactions are screened against this list. If the data is not corrected, you receive an error when attempting to process a new transaction for the customer. Repeated attempts to submit an uncorrected transaction can result in a fine and possible sanctions from Nacha.

For more information on eCheck please see: eCheck Operating Procedures and User Guide.

eCheck Transaction Types

Transactions via eCheck should be submitted with the Authorize and Capture (authCaptureTransaction) type. There is no need for Authorization Only submissions for eCheck as no real-time validation occurs. Authorize Only eCheck transactions will simply take longer to settle and fund, depending on when they are captured (priorAuthCaptureTransaction).

Refunds via eCheck

Refunds (refundTransaction) may be submitted against successfully settled eCheck transactions. However, for the refund to be successful, the following conditions must be met:

• The original transaction ID for the charge must be entered.
• The original charge must have been processed through your Authorize.Net account.
• The refund amount must be equal to or less than the original dollar amount.
• There must be sufficient funds in your eCheck settlement statement to cover the refund.

Note: Refunds submitted via API are only available for eCheck transactions submitted with the CCD (business checking) or PPD (personal checking or savings) type. Transactions submitted as ARC, BOC, TEL, or WEB cannot be refunded. An error will occur if you attempt to refund these transaction types. Please submit all eCheck refund transactions with the CCD or PPD type.

Understanding eCheck Types

Authorize.net offers a variety of eCheck types, each designed for different business needs:

Internet-Initiated Entry (WEB)

This transaction type charges a customer's checking or savings account. It can be a one-time or recurring transaction originated via the internet. The payment authorization is obtained from the customer online.

Telephone-Initiated Entry (TEL)

TEL is a one-time charge against a customer's checking or savings account. TEL transactions can only be originated when a business relationship already exists between the merchant and the customer or when the customer initiates the telephone call to the merchant. The payment authorization is obtained from the customer via telephone. Note that there is no recurring billing option for TEL.

Cash Concentration or Disbursement (CCD)

This transaction type charges or refunds a business checking account. CCD transactions, which can be one-time or recurring, are fund transfers to or from a corporate entity.

Prearranged Payment and Deposit Entry (PPD)

This transaction type charges or refunds a customer's checking or savings account. PPD transactions can only be originated when payment and deposit terms are prearranged between the merchant and the customer. A written authorization from the customer is required for one-time transactions, and a standing authorization is required for recurring transactions.

Accounts Receivable Conversion (ARC) and Back Office Conversion (BOC)

ARC and BOC are both single-entry debits against a customer's checking account. ARC allows merchants to collect payments received in the mail or left in a drop-box and convert them to an electronic payment later. BOC allows merchants to collect a check written at a point of sale and convert it to an ACH debit during back office processing. Please note that these types are no longer offered.

For more information on eCheck please see: eCheck Operating Procedures and User Guide.

What fees are there for eCheck?

The following are the different types of fees associated with eCheck:

• eCheck Setup Fee: This fee is charged for the setup of eCheck.Net processing for your gateway account.
• eCheck Chargeback Fee: This fee is charged for each chargeback received for a transaction processed through your account.
• eCheck Returned Item Fee: This fee is charged for each returned eCheck.Net transaction.
• eCheck Batch Fee: This fee is assessed per eCheck.Net batch processed for the account.
• eCheck Minimum Monthly Fee: This is the minimum eCheck.Net processing service fee charged per billing cycle.
• eCheck Per-Transaction Fee: This fee is charged for each eCheck.Net transaction processed.
• eCheck Discount Rate: This is a percentage of the total amount of each eCheck.Net transaction submitted.

How to View Your Authorize.net Payment Gateway Service Fees

1. Sign in to the Merchant Interface.
2. Select Account from the main toolbar.
3. Click on Merchant Profile in the main left side menu.
4. Click on Fees to the right of Payment Gateway in the Payment Methods section.