Customer has a loan with us. She signed an auto debit authorization to have the payments automatically drafted out of her account at another bank. The authorization states that it remains in effect until she notifies us in writing that she wishes to revoke. Today, we received a ACH return notice from her bank stating she revoked the authorization and wants payment returned for Dec, Jan, and Feb. I don't think we have to send those back since she never notified us. Do we? I do agree that since we now have notice, we can't take anymore payments going forward. Plus, we have the added issue that if we return them, the loan then becomes 60 days past due.

I don't think it makes a difference in whether we return the funds or not, but note that the person stated above is not the borrower. We have two borrowers, then we have this 3rd person who is the one who authorized that payments come from her account. Don't even get me started on why the loan officer allowed this in the first place.

Revocation is supposed to be filed with you, the party originating the transfers, not with the receiving depository financial institution (the one holding the deposit account). If she revoked the authorization properly, you should refund her money. If she did not, you don't have to. Now you have notice, you can't send any more debits.

Our SWACHA rep told us there was nothing we could do other than to now go after the borrowers for the money, or take legal action action the person whose account the monies were supposed to be taken out of - the one who signed the debit authorization. She said it's part of the risk that we agree to. She said we could contact the other bank to see if the customer signed an affidavit and request a copy - the other bank would be in violation if they can't provide it, and if she signed it, then we could use that in court. Well, the amount is only about $400, so it's not worth it to go to court over it.

There really isn't much difference between your situation and if this person disputed authorizing the checks. You'd lose then too. I suppose you can play hardball and make them TAKE the money from you, if you want. But I assure you that in the end you will be out the three payments. Good luck.