We have an account that has been charged off and debit card closed. Each month we are receiving a pre-authorized POS charge. Our Electronic Banking Department says we have no way to deny or return these charges. Is this accurate? How can a company continue to submit charges to a closed account? How long are we responsible for paying them?

How are they preauthorzed if the card has been cancelled?? Something is not right here.

Why aren't you just using an ACH return code R02 - account closed?

You are no longer responsible for paying.

Doug, the OP said these were debit card charges so an ACH return code won't help.

I agree with Randy, if the card has been properly reportes as closed to VISA/MasterCard, the merchant should not be able to obtain valid authorizations. Use MasterCard chargeback code 4808 "Required authorization not obtained" or VISA chargeback code 72 "No authorization."

Thanks all. I hope I am using the correct wording - my area of experience is retail, not operations. Is there a difference between "preauthorized" and "recurring"? This is a similar situation to the one in the Direct TV post, expcept that the checking account is closed and debit card is closed. Dish Network is continuing to submit the monthly fee for service to the debit card each month.

"preauthorized" is a term used in Regulation E. "Recurring" is one characteristic of the "preauthorized electronic fund transfer."

Note Brian's reference to "properly reported as closed to Visa/MasterCard." The fact that the card is closed on your system only makes the incoming item fail to post. You have to complete the needed steps to notify Visa or MasterCard that the account number is no longer valid (because it's closed). Otherwise, there are a lot of merchant transactions that don't require authorizations that will creep under the tent flaps and erode your bank's card program income.

Just to clarify, even if we follow the proper procedures for notifying VISA or MasterCard, there may be timing issues that would allow those transactions that do not require authorization to come through. Are we stuck with paying those?

In recent years, both VISA and MasterCard have changed their operating rules to require that preauthorizations be obtained for all transactions. (The exception to the rule is stand-in processing in the event of a network communications disruption.)

In the event a merchant fails to obtains a preauthorization, or receives a decline response and forces through a transaction resulting in a loss to the bank, you have chargeback rights.

MasterCard 4808 "Requested/Required Authorization not Obtained"
VISA Code 71 "Declined Authorization"
VISA Code 72 "No authorization"