What happens if an ACH payment is processed to a closed bank account?

Owned by Young White (Deactivated)
May 31, 2017
2 min read

Problem

What happens to the ACH payment that has been recently processed to a closed account? Where will the funds go? Do we wait for the bank to reject the funds saying it is an invalid account, and the payment will then be picked up automatically on the next payment cycle?  Or is that report fully processed now, and we would just need to duplicate the info on another report?  User has entered the correct banking information on their profile now. 

Solution

When a report is extracted for ACH, we initiate a process to pull the amount due on the report to the user from your bank, and transfer that amount to our bank.  Our bank then tries to send the funds to the users bank.  If all is good the user should see funds hit their account in around 3-4 business days from the time of the initial ACH extract. 

If our bank is not able to process the funds to the users account (incorrect/bad account info), the funds will return to our bank and they notify us that the funds failed to process.  We generally get the fail notice a couple of business days from the time of the fail. When we get the email notice from the bank about the failure, we immediately notify the user via email that their payment failed and that they need to update their ACH account and let us know when done so we can re-process their payment with corrected ACH info.  After we reprocess it takes around 3 business days for the funds to hit the users account.

Since the user has already updated their ACH account info, as soon as we get the fail notice and actually see the funds in our bank, we can then reprocess their payment using new/corrected account information.  At that point the user should see the funds hit their account in around 3 business days.



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