Direct Deposit Payments Made in Error
Policy on Letters of Indemnification
When a paying agency issues an erroneous direct deposit payment, and the four banking-day reversal period set by the National Automated Clearing House Association (NACHA) has expired, there is no NACHA-approved alternative for the Comptroller’s office to attempt to recover the funds. When the reversal period has expired, resolution may only be achieved by direct communication with the payees to recover the funds.
An attempt to recover the funds from the payee’s account after the allowed reversal period may result in the payee’s receiving depository financial institution (RDFI) requesting a letter of indemnification from the Comptroller’s originating depository financial institution (ODFI).
State agencies, as well as the Comptroller’s office, are prohibited from providing LOIs to the RDFIs or the state’s ODFI. This policy conforms to attorney general opinion MW-475 (1982) PDF and the Texas Constitution, Article III, Section 49, which states that no debt may be created by or on behalf of the state.
Violations of this policy will result in a notification from the Comptroller’s office to the agency’s chief fiscal officer and a post-audit finding. Any potential repercussions from an unauthorized LOI are the sole responsibility of the agency that initiates the LOI.