What does the term “re-authorization” mean in the context of ACH transactions?

The term “re-authorization” in the context of ACH transactions specifically refers to the requirement for a new approval when there is a change in the transaction amounts. In other words, if the amount of a recurring ACH payment increases or decreases, the original authorization from the account holder is no longer valid, and a new agreement or approval must be obtained to continue processing the payments.

This process is essential to ensure that the account holder is fully aware and agrees to the new amount, maintaining the integrity and trust of the payment process. Without this re-authorization, the transaction could be considered unauthorized, which may lead to disputes or compliance issues. The need for re-authorization helps protect consumers and uphold the standards of the ACH network.

Understanding this concept is crucial for anyone involved in managing ACH transactions, as it supports compliance with regulatory requirements and safeguards against unauthorized withdrawals.