An Electronic Funds Transfer (EFT) Authorization is the formal permission you provide to a company or individual to electronically transfer money to or from your bank account. This authorization is crucial for everyday automatic transactions such as receiving your paycheck via direct deposit or making recurring bill payments.
The authorization acts like a digital agreement permitting the transfer of funds according to the terms you approve—such as the amount, frequency, and schedule. Without it, companies cannot legally initiate recurring transfers from your account.
These transactions commonly use the Automated Clearing House (ACH) network, a secure electronic payment system that banks use to process transfers efficiently and safely.
How EFT Authorization Works:
- You Grant Permission: You complete a form (online or paper) providing your account and routing numbers along with details on transfer amounts and schedules.
- Company Processes Authorization: The company registers your consent and uses ACH to schedule transactions accordingly.
- Automatic Transfers Occur: Funds are moved automatically on approved dates without further action needed.
Common Examples Include:
- Direct deposits of paychecks
- Automatic utility or loan payments
- Regular contributions to retirement accounts
- One-time payments like online tax payments
| Feature | Recurring EFT Authorization | One-Time EFT Authorization |
|---|---|---|
| Purpose | Ongoing scheduled payments/deposits | Single specific payment or deposit |
| Example | Monthly rent, biweekly paycheck | One-time IRS tax payment |
| Control | Can revoke for future transfers | Complete after single transaction |
| Cancellation Process | Notify company and bank in advance | Not applicable post-processing |
Your Rights Under Federal Law (EFTA and CFPB enforcement):
- You must receive a copy of your authorization.
- You can stop a single payment by notifying both the company and your bank at least three business days in advance.
- You can revoke your authorization at any time by following the cancellation instructions.
- You have 60 days after receiving your bank statement to dispute unauthorized or incorrect transfers.
Important Clarifications:
- Stopping a company alone doesn’t stop the payment; you must also contact your bank.
- You are not “locked in” once you authorize; federal law protects your right to revoke.
- EFT authorizations differ from debit card payments since they operate through bank account and routing numbers rather than card networks.
For more detailed information, you can visit the Consumer Financial Protection Bureau’s page on Electronic Fund Transfers.
Understanding your EFT Authorization ensures you maintain control and security over your electronic payments and deposits.