Revocation of ACH Credit and Debit Authorization: Understanding Your Rights as a Consumer

The recent trend of debt consolidation companies faxing ACH revocation letters on behalf of consumers has raised concerns about the effectiveness of such revocation processes. In this article, we will delve into the legal implications of ACH revocation and explore whether banks are justified in rejecting such letters.

ACH Revocation: What Does it Mean?

An ACH (Automated Clearing House) credit or debit authorization is a type of electronic payment instruction that allows one party to withdraw funds from another party's account. When an individual enters into a debt consolidation agreement, they may authorize the debt consolidation company to revoke any existing ACH debit authorizations on their behalf.

Revocation of ACH Authorization: Is it Enough?

The bank's stance on revocation letters is that they are essentially worthless and do not recognize the fact that the companies in question had their ACH debit authorizations revoked. From a legal standpoint, this raises questions about whether banks are justified in rejecting such letters.

Limited Power of Attorney: What Does it Mean?

When an individual signs an 'Authorization to Settle Debt' agreement with a debt consolidation company, they grant the company limited power of attorney to act on their behalf. This includes revoking any existing ACH debit authorizations and negotiating settlements with creditors.

Can Banks Refuse to Honor Revocation Letters?

From a legal standpoint, it is unclear whether banks are required to honor revocation letters sent by debt consolidation companies on behalf of consumers. The letter in question bears the company's name, but it is faxed directly to the bank. The consumer has given limited power of attorney to the company to act on their behalf.

What Happens if a Bank Refuses to Honor the Revocation Letter?

If a bank refuses to honor the revocation letter and continues to process ACH debits from companies that have had their authorizations revoked, what are the consequences for the consumer? Can they dispute these charges as unauthorized, or will they be held responsible for the transactions?

The revocation of ACH credit and debit authorizations is a complex issue that requires careful consideration. While debt consolidation companies may fax ACH revocation letters on behalf of consumers, it is unclear whether banks are required to honor such letters. As a consumer, it is essential to understand your rights and obligations under the agreement and to seek legal advice if you have any concerns about the validity of the revocation letter.