ACH Stop Payment and WSUD Procedures for Unauthorized Debits

The Automated Clearing House (ACH) network moves trillions of dollars annually, yet for the average account holder, the distinction between “stopping” a payment and “disputing” one remains dangerously blurred. When an unwanted debit hits a checking account—whether from a forgotten subscription, a utility bill, or a fraudulent actor—the immediate reaction is to demand the bank “reverse it.” However, in the eyes of compliance officers and banking regulators, the mechanism chosen to halt the flow of funds determines the burden of proof, the liability for fees, and the finality of the credit.

The friction arises because financial institutions often default to the path of least resistance. A customer service representative might process a “Stop Payment” for a transaction that legally requires a “Written Statement of Unauthorized Debit” (WSUD), or vice versa. This misclassification can have severe financial consequences. A Stop Payment is a temporary, fee-based block on a future event based on revoked authorization. A WSUD is a sworn legal affidavit declaring that a past event was never authorized in the first place. Confusing the two can lead to the return of funds being rejected, account closures for “friendly fraud,” or the loss of consumer protections under federal Regulation E.

This article dissects the procedural and legal differences between ACH Stop Payments and Unauthorized Debit disputes. We will analyze the strict timeline requirements for Delaware account holders (governed by federal NACHA rules), the specific NACHA Return Reason Codes that banks use to adjudicate these claims, and the documentation workflow required to ensure a claim is honored. The focus is on selecting the correct instrument to permanently resolve the billing issue without exposing the depositor to counter-claims.

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Quick guide to Stopping and Disputing ACH

• Pre-Posting Defense (Stop Payment): Use this when you know a charge is coming (e.g., gym membership) that you have cancelled, but you don’t trust the merchant to stop billing. It is a filter, not a refund.
• Post-Posting Remedy (WSUD): Use this when money has already left the account and you did not authorize it, or the amount is different than authorized, or the date is earlier than authorized.
• The “Revocation” Distinction: If you authorized a recurring payment but subsequently cancelled the contract, this is “Revoked Authorization” (R07), not “Unauthorized” (R10). Both use the WSUD form but require different boxes to be checked.
• The Fee Factor: Banks typically charge for Stop Payments. Disputes based on fraud/unauthorized use are generally processed without fees to the consumer, as they fall under error resolution statutes.
• Verification: For a Stop Payment to work, the amount and the payee name must match exactly. A range (e.g., $49.00 to $51.00) is safer than an exact figure.

Understanding the Workflow in Practice

To navigate the ACH system effectively, one must understand that the system favors the “Originator” (the entity billing you) unless specific, formatted objections are raised by the “Receiver” (you). When a Stop Payment is placed, the bank’s computer creates a “trap” on the account. This trap looks for specific data points: the Company ID, the Company Name, and the Amount. If the merchant changes their billing name slightly (e.g., “GYM SVC 1” becomes “GYM SERVICE INC”) or alters the amount by a penny, the Stop Payment trap may fail. This is why Stop Payments are often considered “best effort” services rather than guarantees.

The Written Statement of Unauthorized Debit (WSUD) acts differently. It is a retroactive reversal tool. Under NACHA rules and Regulation E, when a consumer signs a WSUD, the bank (Receiving Depository Financial Institution or RDFI) is mandated to return the debit to the Originating bank (ODFI). The ODFI must then debit the merchant’s account and return the funds to the consumer’s bank. This process is powerful because it bypasses the merchant’s consent. The merchant’s only recourse is to prove outside of the banking system (e.g., in small claims court) that the authorization was valid.

However, the power of the WSUD comes with strict boundaries. It is not a tool for “buyer’s remorse.” If a consumer bought a product, received it, but is unhappy with the quality, that is a contract dispute, not an unauthorized debit. Using a WSUD in this scenario allows the merchant to produce the signed contract or IP logs of the purchase. If the merchant proves valid authorization, the bank can reverse the credit given to the consumer and may close the account for abuse. Correctly categorizing the dispute—Unauthorized vs. Revoked vs. Non-conforming—is the primary duty of the account holder.

Legal and practical angles that change the outcome

In Delaware, where many entities are incorporated, the distinction between “Consumer” and “Non-Consumer” accounts is litigated frequently. A “Consumer” account is defined by its primary purpose (personal, family, household). A freelancer using a personal checking account for business expenses generally retains Reg E protections. However, a clearly designated “Business Checking” account falls under the Uniform Commercial Code (UCC) Article 4A. For these accounts, the bank’s liability ends if the customer does not report the fraud by the “Midnight Deadline” of the banking day following settlement. This means a business that checks its accounts only weekly creates a massive vulnerability window where ACH fraud becomes irreversible.

Another practical angle is the “Notice of Revocation.” For a WSUD based on revocation (R07) to hold up, the consumer must prove they instructed the merchant to stop billing before the charge occurred. NACHA rules require the consumer to revoke authorization “in the manner specified in the contract.” If the contract says “cancellation must be via certified mail 30 days in advance,” and the consumer sends an email 2 days before, the merchant can legally argue the authorization was still active. Banks often side with the consumer initially, but a sophisticated merchant will fight back with the contract terms.

Workable paths parties actually use to resolve this

The most effective path for resolving recurring billing disputes is a “One-Two Punch.” First, send a clear, written revocation of authorization to the merchant via a traceable method (email or certified mail). Second, explicitly instruct the bank to place a Stop Payment on all future debits from that originator. While the Stop Payment costs a fee, it acts as an insurance policy against the merchant ignoring the cancellation request.

If the charge posts despite these steps, the WSUD becomes the remedy. The account holder files the WSUD citing “Authorization Revoked.” The bank reverses the charge. If the merchant re-presents the item (tries to charge it again), they are in violation of NACHA rules unless they have obtained a new authorization. Persistent re-presentment of revoked entries can lead to the merchant losing their ability to process ACH payments entirely, a penalty that motivates compliance far more than consumer complaints.

Practical application of Stop Pay & WSUD

Executing a Stop Payment or WSUD requires precision. Banks process millions of these instructions; vague or incomplete forms are the primary cause of failure. The following workflow ensures that the bank has no administrative excuse to deny the request or fail to stop the funds.

1. Identify the Originator Data: Look at the ACH transaction detail on your online banking. Note the exact “Company ID” (usually a 10-digit number starting with 1 or 9) and the “Company Name.”
2. Choose the Instrument:
   • Is the charge pending or future? Use Stop Payment.
   • Has the charge already posted? Use WSUD.
3. File the Stop Payment (If applicable): Provide the exact Company ID. This is more effective than the Name, which can vary. Request the stop for “All future amounts” if it is a recurring subscription, rather than a specific dollar amount.
4. File the WSUD (If applicable): Contact the bank immediately. Request the “Written Statement of Unauthorized Debit.” Do not settle for a phone claim; insist on the form.
5. Select the Correct Reason Code: On the WSUD, do not check “Unauthorized” if you actually “Revoked” it. Check “Authorization Revoked.” This aligns with the evidence (your cancellation email).
6. Monitor for Credits and Re-presentments: Reg E requires provisional credit within 10 business days. Watch the account. If the merchant tries to charge under a slightly different name, file a new dispute immediately.

Technical details and relevant updates

The backbone of the dispute process is the NACHA Operating Rules. Recent updates have tightened the requirements for “WEB” debits (internet-initiated payments). Originators of WEB debits must now conduct “Account Validation” to ensure the account is open and valid before debiting. This rule change provides a new avenue for disputes: if a fraudster used your account number to pay their bill, you can challenge the merchant not just on authorization, but on their failure to validate the account ownership (NACHA Rule Subsection 2.5.17).

For Stop Payments, the technical limitation is often the “single entry” vs. “recurring” indicator. If a consumer places a stop on a “recurring” series, but the merchant codes the next hit as a “single entry” (a common trick by aggressive billers), the bank’s system might miss it. Technically, the bank is liable if they failed to stop the item after a valid order, but proving the merchant’s coding manipulation is difficult. This is why “Revoking Authorization” directly with the merchant is a necessary parallel step.

• The 60-Day Window: This is calculated from the “Settlement Date” of the transaction, not the date the consumer noticed it. However, Reg E extends liability protection to 60 days from the statement date on which the error appeared. NACHA rules (for the bank returning the funds) are tighter (60 days from settlement). If you report late (day 61-90), the bank may have to reimburse you under Reg E but cannot recover the funds from the merchant via ACH return.
• Oral Stop Payments: Under Reg E, an oral stop payment order is binding for 14 days. To remain effective for 6 months, the bank can require written confirmation within that 14-day period. Failing to send the written follow-up causes the stop to expire.
• Corporate R29 Returns: To process an R29, the customer must sign a WSUD-like indemnity document confirming the debit was unauthorized. The bank must transmit this return to the Fed by the opening of business on the second banking day following settlement. Speed is absolute.

Statistics and scenario reads

The data below illustrates the prevalence of ACH disputes and the success rates of different intervention methods. It highlights the critical disparity between consumer and corporate recovery rates due to the timeline differences.

Practical examples of ACH Disputes

Common mistakes in ACH Disputes

FAQ about ACH Stop Payments and WSUD

References and next steps

• Audit Recurring Bills: Review 12 months of statements. Identify “Zombie” subscriptions that reappear after stops expire.
• Download the WSUD Form: Have a blank copy of your bank’s specific Written Statement of Unauthorized Debit form ready. Speed matters.
• Update Corporate Controls: For businesses, implement “ACH Debit Block” or “Positive Pay” services. These filters prevent unauthorized debits automatically, bypassing the 24-hour return panic.

Related reading:

• The 24-Hour Rule: Corporate ACH Fraud Prevention
• Reg E Dispute Timelines Explained
• NACHA Operating Rules for Receivers

Normative and case-law basis

The framework for ACH disputes is a hybrid of federal regulation and private network rules. Regulation E (12 CFR Part 1005) provides the statutory consumer protections, mandating the error resolution procedures, liability limits ($50/$500/Unlimited), and provisional credit requirements. It is the “floor” of protection for consumers.

The NACHA Operating Rules provide the technical mechanism (Reason Codes R10, R07, etc.) and the binding contract between banks that facilitates the return of funds. For corporate accounts, UCC Article 4A governs, which allows banks and businesses to contractually agree on security procedures (like the 24-hour review window), effectively placing the liability on the business if they fail to monitor their accounts.

For authoritative verification, consult the NACHA guidelines for consumers: NACHA Operating Rules.

Final considerations

The difference between a Stop Payment and a WSUD is not merely administrative; it is the difference between a proactive shield and a retroactive sword. Using the wrong tool can result in lost fees, failed returns, and continued liability. For Delaware account holders, understanding these mechanisms is the first line of defense against the “subscription economy” and the rising tide of electronic payment fraud.

Ultimately, the banking system is designed to process payments, not to adjudicate fair business practices. It assumes a debit is valid until you prove otherwise using the specific language of the network (NACHA codes). By aligning your dispute—Revoked vs. Unauthorized—with these codes and strictly adhering to the written timelines, you force the system to work for you rather than against you.

This content is for informational purposes only and does not replace individualized legal analysis by a licensed attorney or qualified professional.