ACH Debit Chargeback

I have a question regarding ACH debit transactions (funds from customer to merchant). I have read that the customer can initiate a chargeback within 60 days of the transaction. It also said that the merchant cannot defend against this. If the chargeback occurs, the merchant account will be debited and the funds returned to the customer. The merchant can then go to dispute resolution (whatever that is) to try to get his funds back.

I am concerned about fraudsters and con artists taking advantage of this. It sounds like a recipe for disaster. Can you comment on this.

Thanks.

Hi Burt!

According to the Nacha rules, and as mentioned in this blog post, as long as the consumer signs a Written Statement of Unauthorized Debit for certain return types, the RDFI must return the item and the ODFI must accept the return.

Dwolla isn’t able to provide any fraud monitoring on your behalf, which is why proper fraud monitoring and knowing your own customer procedures are important. We recommend requiring Customer Identification Program (CIP) either via Dwolla (by creating Verified Customers) or via a third party, and balance check via third party providers to help prevent returns and fraudulent activity.

If you believe the transaction was authorized, we recommend referring to your user agreement to see what recourse you have. At that point, collections must be settled outside of the ACH Network.

I hope that helps!