Preauthorized Payments and Regulatory Compliance

Optimize preauthorized ACH and debit card payments for regulatory compliance

Recently there has been some confusion in the industry about authorizations for Preauthorized ACH and Debit Card payments under Regulation E and NACHA regulations. Some sources are distributing incorrect information. PaymentVision has prepared a detailed analysis of these requirements, relying on and quoting only authoritative sources.

From the report:

Regulation E Requirements

Regulation E includes an authentication requirement for preauthorized electronic funds transfers. The relevant section at 12 CFR 205.10 states:

Preauthorized electronic fund transfers from a consumer’s account may be authorized only by a writing signed or similarly authenticated by the consumer. The person that obtains the authorization shall provide a copy to the consumer.

Regulation E thus allows two forms of authorization. A consumer authorization may be either:

  1. Signed; or
  2. Similarly Authenticated.

The first option, obtaining a physical signature, is logistically more difficult and may delay processing the transaction as agreed. Thus, an electronic or “similarly authenticated” authorization is often desirable. When taking that approach, the payee.

There is much, much more on Reg E as well as E-Sign Act, NACHA Requirements, and Authorization of TEL Entries in the free report.