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Correction Method for ACH Refund Error

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Question: 
A loan customer gave us permission to originate ACH transactions to pay his loan payments. I originated a payment on the 30th of the month and a payment was posted to his loan. He then paid the loan in full. In error, I originated an ACH to refund the loan payment. Then I received a return of the payment on the 30th from his bank for a closed account. But they did not return my refund origination for account closed. The bank confirmed to me on the phone that the account is closed so I asked why they didn't return the refund for account closed, I was told they could not discuss the transaction. What is the proper 'correction' method and wouldn't the bank have some sort of responsibility to return ALL transactions on a closed account?
Answer: 

You post or un-post the payments as they happened. Re -apply the auto payment to the loan and reverse the pay-off. It is too late for the other bank to return the ACH payment - what they do with it now is their problem and not yours.

First published on 10/13/2019

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