Reg E Authorizations Got You Down? Authorization Requirements for TEL Entry Transactions/ACH

Rozanne Andersen

One of the hot topics for the collection industry today is the new found awareness of the requirements the Electronic Funds Transfer Act and Reg E impose on one’s ability to accept and process single and recurring Automated Clearing House Network (ACH) payments or Telephone-Initiated Entries (TEL Entries).

So what exactly is the problem? A telephone-initiated entry or TEL Entry is a specific type of electronic funds transfer. In short, a TEL Entry is an electronic debit of funds from a consumer’s bank account processed through the ACH Network. Single TEL Entry transactions are one-time payments processed through the ACH Network. Recurring TEL Entries are multiple transactions processed through the ACH Network and evidenced by both a voice recording and a written authorization from the consumer.

A simple voice recording is adequate evidence of the consumer’s authorization of a single TEL Entry. But for recurring TEL Entry transactions the law requires you to obtain both a voice recording of the consumer’s authorization as well as a written instrument, signed by or similarly authenticated by the consumer pursuant to the E-Sign Act, authorizing you to process more than one TEL Entry transaction from the consumer’s bank account.

What is the solution? It almost goes without saying, it is extremely costly and inefficient for you to obtain the written authorization from a consumer to process recurring TEL Entry [ACA] transactions. Many agencies have reverted to Preauthorized Demand Drafts. Others have decided to call the consumer every month and seek their verbal permission to process a one-time TEL Entry payment. Still others have created robust website solutions that integrate with their software application to alleviate this problem. To help you manage the authorization requirements, I’ve prepared templates you may use when crafting your authorizations. Keep in mind templates such as these cannot be relied upon without consultation with your independent legal counsel. But I do hope they help you move forward with you compliance initiatives.

Sample written language for a RECURRING ACH debit transaction payment authorization

[Current date]

I, [consumer’s name], authorize [agency’s name] to charge my [bank account type] starting on [month, day, year] and on the [day of the month] of each month following through [month, day, year] for the amount of [$X.XX] for [description of the transaction].

I also authorized this transaction by phone on [date of verbal authorization by phone].

My account information is as follows: Bank Name: [name of the consumer’s bank]

Bank ABA Routing Number: [consumer’s bank’s ABA routing number]

Bank Account Type: [checking, business checking, savings]

Bank Account Number: [the consumer’s bank account number]

This payment authorization is valid and to remain in effect unless I, [consumer’s name], notify [agency’s name] of its cancellation by sending written notice [or other method preferred by agency]. I understand I may call [agency’s name] at [agency’s telephone number] during normal business hours if I have questions.

[consumer’s signature]

[consumer’s name]

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Sample phone script for a SINGLE ACH debit transaction payment authorization

To confirm your payment, I understand that you, [consumer’s name] authorize [agency’s name] to charge your [bank account type] on [month, day, year] for the amount of [$X.XX] for [description of the transaction]. The account information you’ve provided me is as follows:

Bank Name: [name of the consumer’s bank]

Bank ABA Routing Number: [consumer’s bank’s ABA routing number]

Bank Account Type: [checking, business checking, savings]

Bank Account Number: [the consumer’s bank account number]

Is this information correct?

As of today’s date, [month, day, year], this payment authorization is valid and to remain in effect until you, [consumer’s name], notify [agency’s name] of its cancellation by calling [agency’s telephone number].

You understand this is a one-time payment authorization and is valid and to remain in effect unless you [consumer’s name], notify [agency’s name] of its cancellation by calling us at [telephone number of agency for this purpose] [or other method preferred by agency]. You also understand you may call [agency’s name] at [agency’s telephone number] during normal business hours if you have any questions.

This authorization for payment on [insert date transaction will occur] is for a Single-Entry ACH debit, a one-time electronic funds transfer [or other similar reference].

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Sample Web language for a single transaction payment authorization

(Agency’s payment form includes the following consumer payment information as provided by the consumer:

Bank Name: [name of the consumer’s bank]

Consumer’s Bank’s ABA Routing Number: [consumer’s bank’s ABA routing number]

Bank Account Type: [checking, business checking, savings]

Bank Account Number: [the consumer’s bank account number])

By clicking the button below, I authorize [agency’s name] to charge my [bank account type] account on [month, day, year] for the amount of [$X.XX] for [description of the transaction].

I understand this is a one-time payment authorization and is valid and to remain in effect unless I notify [agency’s name] of its cancellation by calling [telephone number of agency for this purpose] [or other method preferred by agency]. I also understand I may call [agency’s name] at [agency’s telephone number] during normal business hours if I have any questions.

This authorization for payment on [insert date transaction will occur] is for a Single-Entry ACH debit, a one-time electronic funds transfer [or other similar reference].

If I would like a copy of this authorization I may print it by clicking here [Print].

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Sample Web language for a recurring transaction payment authorization

(Agency’s payment form includes the following consumer payment information as provided by the consumer:

Bank Name: [name of the consumer’s bank]

Consumer’s Bank’s ABA Routing Number: [consumer’s bank’s ABA routing number]

Bank Account Type: [checking, business checking, savings]

Bank Account Number: [the consumer’s bank account number])

This payment authorization is valid and to remain in effect unless I, [consumer’s name], notify [agency’s name] of its cancellation by sending written notice [or other method preferred by agency]. I understand I may call [agency’s name] at [agency’s telephone number] during normal business hours if I have questions.

By clicking the button below, I authorize [agency’s name] to charge my [bank account type] account starting on [month, day, year] and on the [day of the month] of each month following through [month, day, year] for the amount of [$X.XX] for [description of the transaction].

If I would like a copy of this authorization I may print it by clicking here [Print].

DISCLAIMER
This information is not intended to be legal advice and may not be used as legal advice. Legal advice must be tailored to the specific circumstances of each case. Every effort has been made to assure this information is up-to-date. It is not intended to be a full and exhaustive explanation of the law in any area, however, nor should it be used to replace the advice of your own legal counsel.

Rozanne Andersen, J.D., serves as Ontario Systems’ Vice President of Business Development and Chief Compliance Officer. She is responsible for leading Ontario Systems’ corporate efforts and response to the Consumer financial Protection Bureau’s launch of compliance examinations in the ARM industry. Rozanne also works with the sales and business development teams in developing new revenue. Rozanne is a recognized thought leader in the area of compliance. Her advocacy work on behalf of the credit and collection industry has resulted in landmark legislation and regulation at both the state level and the federal level with regard to the FDCPA, FCRA and HIPAA.