ACH Authorization Form Template

An ACH authorization template is an agreement that outlines bank-to-bank payment terms between a payor and payee using the ACH network. Get this legal template by Lawrina, fill it out online, and download it in PDF.

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An Automated Clearing House (ACH) form is a legal agreement that authorizes a company (originator) to initiate an electronic funds transfer (EFT) from a payee’s bank to their bank over the ACH network. Customize an ACH agreement form template from Lawrina, fill out your details, download it, and use it according to your needs.

What Is an ACH Authorization Form?

A simple ACH authorization template is an agreement that outlines bank-to-bank payment terms between a payor and payee using the ACH network. Financial institutions process information in batches and not in real time. Therefore, your bank will store ACH instructions throughout the day, group them with other similar transactions, and transmit them to the clearing house. The clearing house then sorts the batch of ACH transactions and sends them to the appropriate receiving banks.

There are two main types of ACH authorization templates: either a single deduction of an agreed amount to be taken from an individual’s bank account (one-time ACH authorization) or multiple payments to be taken on a weekly or monthly basis (recurring ACH authorization).

Parties of the ACH Authorization Form

There are two parties to the automatic payment form template:

The Originator –– The entity responsible for obtaining the authorization of the receiver to initiate an ACH transaction.
The Receiver –– The party responsible for authorizing an ACH transaction and is also the party whose bank account will be debited.

Key Terms

Since not everyone is familiar with the complex terminologies used in ACH form samples, here is a breakdown of the key terms for your information:

Originator –– The institution requesting payment, also known as the payment processor;
Originating Depository Financial Institution (ODFI) –– The originator’s bank;
ACH Operator –– The clearing house responsible for processing the transaction;
Receiver –– The one with the obligation to make payment; and
Receiving Depository Financial Institution (RDFI) –– The receiver’s bank.

What Should Be Included in an ACH Authorization Form?

Forms differ according to the nature of the business or preference. Some sections to include in a standard ACH authorization form sample are the following:

Originator's name and contact information
The contract should contain your business name, contact information, telephone number, email address, and physical address.
Receiver's name and contact information
Provide an area where your client will indicate their name and contact information, such as email and physical address.
Payment details
The payment details are the backbone of your auto debit authorization form template. Payment details include the amount, frequency, and date your bank should debit the client’s account. Provide a section for the client to indicate the number of installments. The number of installments will be the times your bank charges their account on the due date.
Authorization statement
The authorization statement should authorize your company to make ACH debits on the client's account.
Receiver’s/payor’s bank details
The client should also provide their banking information, including their bank institution's name, account name and number, routing number, and an indication if it is a savings or checking account.
Recourse statement
The recourse statement is a general term in the ACH authorization form template that articulates how the client can cancel the agreement and the notice period required before the cancellation takes effect.
Date of agreement and signature
Ask the client to confirm that the information in the ACH authorization template is correct and accurate by providing their name, signature, and date.

How To Fill Out an ACH Authorization Form

The steps for filling out a blank ACH authorization form sample depend on the party. However, to appreciate the steps, it is important to have a detailed understanding of how the process works. Assuming that you own a gym and have convinced your clients to automate their monthly payments, this is how the transaction will unfold:

Ask your bank to activate the direct deposit feature. Once the feature is activated, the bank will give instructions on how to upload a blank ACH authorization form template that enables you to receive ACH payments.

Persuade your customers to complete your business direction to pay form template and sign it. File the completed ACH authorization template with your bank according to the bank instructions. Once the payment is due, your bank (or the ODFI) sends a request to the clearing house. The clearing house processes your bank’s request and sends it to the customer’s bank (or the RDFI).

Your customer’s bank confirms the client's information and that they have enough money to settle the bill.

Once everything checks out, your customer's bank allows your bank to pull the funds into your account.

One thing to note is that financial institutions process information in batches and not in real-time. Therefore, your bank will store ACH instructions throughout the day, group them with other similar transactions, and transmit them to the clearing house. The clearing house then sorts the batch of ACH transactions and sends them to the appropriate receiving banks.

For the Originator

Get the printable ACH form template for your financial institution;

Fill out the form with the relevant information, such as your name or the name of your business, contact information, and your bank account information;

Review, sign, and hand it over to the receiver.

For the Receiver

Get the printable ACH form template from the originator;

Fill out your name or the name of your business, account details, and the frequency and amount of the transactions;

Review all the details to make sure they are accurate;

Sign the form, keep a copy to yourself, and give the originator a copy of the records for them to submit to their bank.

The receiver should understand they must have the money in the account by the due date to avoid paying the penalty for insufficient funds.

To receive an ACH payment, the payee should complete a standard ACH form sample. The purpose of this document is to notify the bank that you have an account holder’s permission to deduct money from the individual’s bank account. The payment should be taken on the agreed upon date (or several dates if the payment is a recurring one).

When Should an ACH Authorization Agreement Be Used?

It’s finally time to retire paper checks.

Your clients need the convenience of automating recurring payments without making trips to the bank to deposit paper checks. Leverage ACH payments, a cost-effective way of moving money between US-based accounts.

With ACH transfers, you no longer have to wait for “checks to clear” once payments are due. Depending on the direction of the transaction, once the receiver gets the information and everything checks out, the banks settle debits in a single day and credits within one to two days.

It is crucial to distinguish ACH authorization form templates from credit card authorization forms. ACH forms permit a direct charge to a bank account, while credit card forms permit a credit card charge.

Further, a sample ACH debit authorization form template transfers differ from wire transfers. While both offer the convenience of sending money electronically, most banks charge for wire transfers but process ACH payments for free. Additionally, for an ACH transfer, sufficient funds must be in the receiver's account; otherwise, the bank will charge them an insufficient funds penalty.

Common Use Cases

You can use an ACH form template for either ACH direct deposit (when a customer is receiving money from a business) or ACH direct payments (when a business or customer is making payments).

Examples of ACH direct deposit payments include:

Direct deposit from an employer (paychecks); Government benefits; Tax refunds; Interest payments; and Receiving payments for the sale of goods.

Examples of when ACH is appropriate for direct payments are:

Paying a recurring bill directly from your bank account, such as membership fees or monthly subscriptions;
Paying for a product or purchase you make repeatedly;
Installment payments for loans or tuition; and
Regular charity donations.

When Not To Use the ACH Authorization Agreement

Though convenient, ACH authorization form sample may not serve purpose in the following instances:

For urgent transactions: ACH transfers can take up to 3 business days to process and reflect on the originators account and may therefore not be effective for urgent transactions.
International transactions: ACH are only suitable for US based transactions.
High value transaction: NATCHA limits ACH transactions to $1,000,000 per day. Therefore, alternative transfer measures are required for sums higher than a million dollars.

As a rule, an ACH authorization form template is valid for up to two years after the last payment. During this period, the document should be kept by both parties as a proof of the consent given by an account holder at the time of the transaction.

State Law

National Automated Clearing House Association (NACHA) is the body that governs the ACH network and requires that ACH forms be written and signed by the receiver. Further, financial institutions require that the originator obtains written instructions from the receiver before they can initiate ACH transactions. However, in some cases, oral instructions are acceptable subject to a financial institution's security measures which may include the use of a special password and a secure telephone line.

The rules also require that the originator maintain a copy of the signed form for at least 5 years after the last transaction and for the receiver for at least 2 years after the last transaction.