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Debt Collection Firm and ACH Loss-Liability

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An employee in a company's accounting department pays a personal debt by ACH using the company's business checking account information. The employee is authorized to make ACH's for the company for business purposes only. The debt collection firm accepted the information and originated the ACH to be paid from the business account to the debt collection firm's account. The debt collection firm did not know, nor had they any reason to know, that the account was a business account. The debt collection firm believed the account was the employee's personal account. Who is responsible for the loss if the employee/wrongdoer cannot be located?

This looks like a case in which the bank has no liability to the business because it would be unaware of the nature of the debt being paid. Further, even if the employee's name appears in the ACH record, ACH rules state that the bank can post the ACH entry based on the account number in that record notwithstanding the mismatch of name and account number.

The debt collection firm is innocent of the mismatch as well. That leaves the company holding the proverbial bag unless it is able to successfully reach the dishonest employee (presumably with aid from law enforcement) and obtain reimbursement from that source.

First published on 12/5/11

First published on 12/05/2011

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