ACH - Returned Item Recourse

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Question:

A business customer closed her checking account in March. On 4/29, an ACH debit came in and we did not return it until 5/1. It was then refused by the ODFI as a late return. The customer tells me that she terminated the ACH debits from our bank on 3/12. I have since spoken to the account rep from the payroll servicing company who informed me that the ACH debits were not terminated until May and that the funds were issued to an employee of our business customer in the form of a check. I have informed the customer of this discovery and now she has stopped replying to my e-mails and is not returning my phone calls. Do I have any recourse for recovering these funds?

Answer:

It's really a matter of contract and state law. Your customer received the benefit of paying an employee using the old ACH authorization, and your bank had to pay for the debit. That probably creates an enforceable obligation under state law.

The trick, of course, is to collect the obligation. You may want to try sending a request for the funds by mail -- certified and regular, and if that doesn't work, decide if it's worth the cost and effort to open a small claims case. Whether or not you're successful, I hope you have already initiated a review of your back-office ACH handling procedures to determine why the rejected debit was allowed to sit an extra day, and to tighten things up to prevent a recurrence.

First published on BankersOnline.com 12/07/09