What is an ACH authorization form? A complete guide

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In this guide, we’ll break down the must-have components of an ACH authorization form, how to fill one out, and why it’s the go-to method for businesses embracing secure, efficient payments.

What is an ACH authorization form?

An ACH authorization form is an agreement that allows a party to initiate a bank-to-bank transaction over the Automated Clearing House (ACH) network. It establishes terms between businesses and customers, ensuring secure and compliant electronic payments.

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ACH authorization forms allow you to process one-time or recurring ACH payments, and transactions can either pull (debit) or push (credit) funds to accounts. Because they serve as a legally binding contract, ACH authorization forms must follow the rules and regulations laid out by Nacha, the regulatory body that oversees the ACH network.

Is there a difference between ACH debit and credit authorization forms?

Yes, the difference between ACH debit and ACH credit forms lies in the type of transaction and the direction of the funds:

• ACH debit authorization form: Permits you to pull funds directly from a customer’s bank account. It’s often used for recurring bill payments like SaaS subscriptions or membership fees.
• ACH credit authorization form: Permits you to send money to your customer’s bank account. It’s commonly used for payroll direct deposits or to issue refunds.

Both forms are key for making ACH transactions secure and straightforward. Choosing the right one depends on whether you’re sending or receiving payments.

How to fill out an ACH authorization form

To properly complete an ACH authorization form, you must have the account holder’s contact information, bank account details, transaction specifics, authorization statement, and signature and date of consent. Here’s a list of the key information:

1. Account holder details

Identifying the payer is essential for financial institutions to verify the transaction and ensure authorization is legitimate. These details include:

• Full name: The full legal name of the account holder, as registered with the bank
• Phone number: A valid phone number for communication regarding the transaction or authorization
• Email address: An active email address for notifications or updates about the transaction

2. Bank account details

This section ensures the ACH transfer is directed to the correct account. Providing accurate details helps avoid errors in the payment process:

• Bank name: The name of the bank where the account is held
• Routing number: A 9-digit code used to identify the financial institution
• Account number: The bank account number associated with the transaction

3. Transaction details

This section defines the scope of the authorization. Clearly specifying the type of transaction, amount, frequency, and due date ensures both parties know what they’re agreeing to:

• Transaction type: Specify whether the transaction is a debit (payment made from the account) or credit (deposit into the account)
• Transaction amount: The exact amount to be debited or credited, along with an amount not to be exceeded (where applicable)
• Transaction frequency: Indicate whether the transaction is a one-time or recurring expense (e.g., weekly, monthly, etc.)
• Due dates: The dates on which the payment is due or will be processed

4. Authorization statement

The authorization statement explicitly permits the payer to approve the transaction and includes a disclaimer about revocation.

• Authorization: A clear statement permitting the transaction, whether it’s a debit or credit.
• Revocation disclaimer: A clause that explains how the payer can revoke the authorization if necessary, ensuring they understand their rights.

5. Signature and date of consent

The payer’s signature and date ensure the authorization is given willingly and that there’s a record of the agreed-upon transaction.

• Signature: The account holder's signature to confirm they grant authorization
• Date: The date on which the authorization was signed

Optional fields

• Customer support contact info: Include contact details in case of disputes or questions
• Cancellation or amendment instructions: Provide clear guidance on how the account holder can cancel or modify the authorization

Different ACH authorization formats

ACH authorization forms are collected through three primary methods: paper, online, or over the phone.

Paper forms

This is a traditional, written document physically filled out and signed by account holders. It acts as evidence for the sender, receiver, and payment processor, helping resolve financial disputes during a transaction.

• Compliance requirements: Paper forms must include all mandatory fields, such as the account holder’s details, bank information, and authorization statements, as outlined by Nacha compliance rules
• Best practices: Securely store completed forms to protect customer data and have them available during audits or disputes

Electronic authorization forms

Electronic forms are a modern and convenient solution for ACH authorization. They’re fast, efficient, and work seamlessly with accounts payable (AP) automation software.

• E-signature guidelines: Nacha permits electronic signatures, such as digital signatures or checkbox agreements, so long as they meet the requirements of the E-Sign Act
• Authentication methods: Businesses should verify the payer’s identity through email confirmations, PIN codes, or multi-factor authentication

Verbal authorization

Phone authorizations are another option, especially for one-time payments. While convenient, they come with strict requirements to ensure compliance.

• Documentation requirements: Nacha mandates that verbal authorizations must be recorded or documented in writing, including all transaction details and the payer’s explicit consent
• Best practices: Clearly communicate the transaction terms during the call and provide the customer with a confirmation receipt to minimize disputes

Compliance and best practices

To properly handle ACH authorization forms, follow these key compliance and best practices:

• Ensure all ACH authorization formats meet Nacha guidelines to maintain clarity and legal compliance
• Use digital platforms to track, retrieve, and store electronic forms securely, reducing administrative burden and safeguarding sensitive data
• Record verbal authorizations carefully to validate transactions and reduce the risk of disputes and unforeseen holds
• Store all authorization forms in a secure location to protect customer information and enable quick access for audits or resolving disputes
• Maintain transparent processes to build trust with customers and ensure smooth payment workflows

How to create an ACH authorization form

An ACH authorization form requires fields for essential information like the account holder’s information, transaction details, and more. It also needs to comply with Nacha’s guidelines.

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Starting with a Nacha-compliant template can save time, and it’s important to have the form reviewed by a legal expert to minimize risk and ensure full compliance. Here are the key factors to keep in mind as you create an ACH authorization form:

• Language: Use clear, legally compliant language to avoid misunderstandings and meet Nacha regulations
• Mandatory fields: Ensure mandatory fields like the account holder’s information, bank details, and transaction terms are included to enable validation
• Add recurring payment and cancellation fields: If applicable, include fields for payment frequency, maximum amounts, and cancellation instructions to keep customers informed
• Customize for your business needs: Adapt the form to suit your specific payment processes, ensuring it aligns with your business requirements
• Use templates: Start with a Nacha-compliant template to save time and ensure accuracy, then customize it to fit your needs
• Seek legal review: Have the form reviewed by a legal expert to ensure compliance, reduce liability risks, and prevent potential disputes

Canceling an ACH authorization

Canceling an ACH authorization revokes permission for future payments from your account. This applies to both one-time and recurring charges.

How do cancellations work?

To cancel an ACH authorization, you need to notify the other party and keep proper documentation. Follow Nacha’s guidelines and inform the bank if the cancellation affects recurring payments. Always get written or electronic confirmation to prevent future disputes or unauthorized transactions.

Steps for cancellation

1. Submit written notice: Submit a written cancellation request to the business, either by email or mail, at least 15 days before the next scheduled payment (the notice period may vary depending on the processor).
2. Review the authorization terms: Double-check the original ACH authorization form to verify whether there are any specific cancellation terms, such as a required notice period or other conditions.
3. Confirm the cancellation: Request a written confirmation from the business that your cancellation has been processed.
4. Monitor future transactions: Monitor your account for a few billing cycles to ensure no further payments are processed. Report any unauthorized transactions immediately.

Streamline ACH authorizations with Ramp

Handling ACH authorizations at scale can be a major headache without the right tools and processes in place. Ramp’s accounts payable automation software can help you collect ACH authorization forms during vendor onboarding with zero manual input.

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Ramp simplifies all your vendor transactions by integrating seamlessly into your existing AP workflow:

• Save time: Automate approval workflows and match documents with AI to reduce processing time by up to 10x per invoice
• Streamline vendor setup: Centralize vendor onboarding and securely verify bank account details at scale
• Multiple payment methods: Pay vendors via ACH, credit card, check, or wire transfer, offering flexibility to meet varied needs
• Save money: Zero processing fees for domestic bill payments, lowering your transaction costs

Learn more about how Ramp’s AP automation software and other finance operations tooling help save customers an average of 5% a year.