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Unauthorized ACH - Who Takes the Loss?

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If an unauthorized ACH (payment out) is discovered by a business by reviewing the bank statement (about 40 to 50 days after the transaction) who is liable for the loss, the bank or the business?

If the business can establish that the transaction was not authorized and notifies the bank within the time limits established for notification in the deposit agreement, the bank would stand the loss, subject to its ability to recover from the Originator under its warranty of authorization. Any recovery would, in most such cases, have to be pursued outside the ACH process and could involve litigation.

First published on 10/08/07

First published on 10/08/2007

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