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ACH Rules for Inbound Telemarketing Merchants
TELEPHONE-INITIATED
(TEL) ENTRIES
For single entry debit transactions to a consumer's account
pursuant to an oral authorization obtained from the consumer via
telephone. This type of transaction may only be used when there
is no standing authorization for the origination of ACH entries
to the merchant's account and may only be originated when there
is either (1) an existing relationship between the merchant
and the buyer, or (2) no existing relationship between the
merchant and the buyer, but the buyer has initiated the
telephone call.
The TEL application became effective in September 2001 as a
means to provide a more streamlined method by which consumers
could authorize one-time ACH debit entries. This page is
intended to clarify key rules obligations with respect to proper
authorization and use of the TEL application.
TEL Risk Concerns
While the TEL application was developed to facilitate the use of
automated payments for one-time consumer debit entries,
intentional misuse of the application is resulting in an
increasing number of unauthorized consumer debit entries.
Examples of the
types of complaints that banks have received concerning misuse
of TEL entries are described below:
Merchants
operating with fraudulent intent debit the consumer without
having obtained the consumer's authorization for such a
transaction.
Merchants operating with fraudulent intent violate the rules by
cold calling consumers with whom they have no existing
relationship and subsequently debiting the consumer.
Merchants operating within the boundaries of the TEL rules by
using mail solicitations to instruct the consumer to initiate
the telephone call to the merchant and subsequently attempting
to sell their wares using deceptive marketing practices.
There is a correlation between high return rates relating to
unauthorized debits and merchants that are violating the rules
or that are engaged in fraudulent/deceptive marketing practices.
These merchants are experiencing a volume of unauthorized
returns in excess of the average for other unauthorized debit
entries.
Sponsoring banks recognize that they will be exposed to
substantial risk when offering settlement services on behalf of
merchants that are engaged in fraudulent or deceptive business
practices. To minimize the potential for fraud:
§
Sponsor banks must take steps to ensure that they are familiar
with your business practices.
§
Sponsor banks must ensure that it has entered into contractual
agreements with the ultimate originators of the transactions and
that it is familiar with the business practices and risks
associated with originating entries on behalf of each individual
merchant.
§
Sponsor banks should understand that offering direct access to
the ACH Operator adds risk to the bank. The bank remains
responsible for all transactions originated under its routing
number but may have no knowledge of the types or dollar values
of payments being originated. Banks must ensure that they have
established monitoring capabilities to examine entries entered
into the ACH Network under its routing number and to restrict
the origination of any files that seem questionable.
§
Sponsor banks may choose to exclude certain types of business
activities (such as gambling over the telephone) from use with
the TEL application, as these businesses dealings, by nature,
are likely to be riskier and result in an excessive rate of
returns.
The TEL Entry Application
A Telephone-Initiated (TEL) Entry is a
single entry
(one-time) debit
to a consumer Receiver's account, initiated pursuant to an
authorization that was obtained from the Receiver orally via the
telephone. Originators may use TEL entries only when the
following criteria have been met:
§
There must be an existing relationship between the merchant and
the consumer. That is, there must be a written agreement in
place between the merchant and the consumer for the provision of
goods or services (for example, when the consumer has an
insurance policy with the Originator), or the consumer must have
purchased goods or services from the merchant within the past
two years.
OR
§
When no relationship exists between the merchant and the
consumer, the consumer must be the one to place the telephone
call to the merchant.
TEL entries may not be used in circumstances where:
§
No relationship exists between the merchant and the consumer,
and the merchant has initiated the telephone call (i.e., the
Originator has "cold-called" the consumer). In such cases, the
Originator must provide the consumer with a written
authorization that is signed or similarly authenticated and
initiate a PPD or a WEB entry.
§
There is a standing authorization provided by the consumer to
the merchant for the transmission of multiple but non-recurring
ACH debit entries to the consumer's account, as in the example
when the consumer has provided a written authorization to his
brokerage firm to debit the consumer for occasional securities
purchases. While the written authorization may contain language
permitting the initiation of a debit via a telephone
instruction, this type of entry must be transmitted as a PPD
debit.
Authorization Requirements
Originators of TEL entries must obtain the consumer's explicit
oral authorization, via the telephone, prior to initiating a
debit entry to the consumer's account. Because TEL entries are
single-entry (that is, one-time) debits, a separate and distinct
oral authorization must be obtained from the consumer for each
TEL entry to be initiated to the consumer's account.
The NACHA Operating Rules require that the merchant (1) clearly
state, during the telephone call with the consumer that the
consumer is authorizing an ACH debit to his account, and (2)
express the terms of the authorization in a clear manner.
The authorization must include:
§ The date on or after which the consumer's account will be
debited;
§ The amount of the debit entry to the consumer's account;
§ The consumer's name;
§ A telephone number that is available to the consumer and
answered during normal business hours for customer inquiries;
§ The date of the consumer's oral authorization; and
§ A statement by the merchant that the consumer's authorization
will be used to originate an ACH debit to the consumer's
account.
The Rules further
require the
merchant to tape record the consumer's oral authorization or to
provide written notice to the consumer, prior to the settlement
date of
the TEL entry, confirming the terms of the oral authorization
(including the information specified above). A copy of the
tape-recorded authorization or written notice must be retained
for two years from the date of the authorization.
Voice response units (VRUs) may be used by the merchant during
the telephone call to prompt consumers to key enter data and to
respond to questions. However, key-entry responses by the
consumer do not qualify as an oral authorization for purposes of
TEL entries. Merchants must understand that the actual
authorization by the consumer and disclosure of the information
noted above must be provided orally.
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