How to Protect Your Account from Unauthorized Debits
Businesses of all sizes, and especially those with high revenue, should take measures to protect themselves from unauthorized debits. It is easier than most realize for fraudsters to gain access to your funds through automatic debits, and fortunately, there are proven methods for preventing unnoticed, unauthorized debits on your accounts.
Two of the most commonly-implemented tools for blocking unauthorized debits are:
- ACH (automatic clearing house) debit block
- Positive pay file
Option A: ACH Debit Block
ACH (automatic clearing house) debit block is an anti-fraud service provided by many banks that you can use in addition to high-security checks to protect your assets. ACH stands for automatic clearing house, and an ACH debit block allows you to specify which companies can and cannot post ACH debits to your account. The service automatically blocks any authorized attempts to debit your account.
Automatic clearing houses play a central role in the digital age. They administer countless digital payments each year, from direct deposits to e-bills and much in between. They have also become the target of fraudsters, and ACH debit block services have become a necessity as a result.
How ACH Debit Block Works
Most ACH debit block services are customizable. You can, for example, set specific dollar limits on ACH debits or block debits completely.
ACH debits work like this:
- You provide a list of approved vendors to your bank who may complete ACH debits from your account
- Whenever somebody attempts to debit your account, the bank compares the incoming company identification number (ID) with the list of approved company IDs you’ve already provided
- If the incoming company ID matches an approved vendor (and any additional specifications), the transaction is approved
- If the incoming number does not match your list, the request is returned without your account being debited
This service is straightforward, and is even simpler should you choose to “block all” ACH debits. Though simple, ACH debit blocks are an invaluable tool in an age where ACH fraud is increasingly prevalent.
How Do I Get An ACH Company ID?
ACH company IDs are unique, ten-digit identifiers used to identify each entity (also known as an originator) that uses ACH debits to collect payment. A bank will provide this number to you, simply call customer service and inquire about obtaining an ACH company ID. This number is integral to the function of the entire ACH debit system, including ACH debit blocks.
Option B: Positive Pay File
What Positive Pay File Is
Positive pay is an extra safeguard in preventing check fraud. When you set up a positive pay file with the cash management department of your bank, they will ensure that every check being cashed against your account matches a check in the file that you have on record.
How Positive Pay File Works
Your bank will prevent fraudulent or otherwise unauthorized debits from your account by comparing three components of the check being deposited with your records of issued checks. These components are:
- Check number
- Account number
- The dollar amount of the check being deposited
Some positive pay services require the payee to be included on a list provider by the payer, though this is not a requirement of all positive pay services.
If one or more of these components on the check being deposited do not match the records of the issuer, then the bank will return the check unpaid. Some banks offer positive pay services for free, while others may charge a fee.
If an instance arises where a check is deposited and does not match the issuer’s records, the bank will contact the issuer and ask how they want to proceed. During this time, the bank will withhold payment on that check until you respond whether to accept or reject that check.
Some banks may reject the payment outright, as policies may vary from bank-to-bank. It is up to the issuer whether to allow the check to be cashed or, if the check is not one that they have truly written, to uphold the rejection of the deposit attempt.
Positive Pay is a simple service that can be a rigid wall between fraudsters and your business accounts. Banks are well-versed in positive pay services and make the service readily available, so you should take advantage of positive pay security if you are not doing so already.
Contact your bank today to set up a positive pay file and prevent fraudsters from drafting funds from your account using unauthorized access.
