Direct Deposit Payments Made in Error
A reversal request may be made by the paying agency for an erroneous direct deposit payment that has been transmitted to the automated clearing house (ACH) network. A reversal is an attempt to retrieve the funds; it is not a guarantee the funds will be recovered. Submit reversal requests on Direct Deposit Reversal Request form (74-191).
The reversal process depends on the type of payment that was issued. Vendor/travel reversals and payroll/annuity reversals have different procedures and timelines. The National Automated Clearing House Association (NACHA) establishes the rules, deadlines and criteria for a reversal:
- The reversal request must be processed no later than four banking days from the settlement date of the payment.
- The reasons for a reversal are limited to:
- Incorrect payee.
- Incorrect payment amount.
- Duplicate payment.
- Incorrect payment date.
- The paying agency must provide its payees with notification of a reversal no later than the reversal settlement date. This notification is not asking for the payee’s permission to reverse the erroneous payment. When payees sign the Direct Deposit Authorization form (74-176) or the paying agency’s authorization form or self-service portal, their signature attests to their understanding that the Comptroller will reverse any payments made in error on behalf of the paying agency.
- Reversals must be submitted by the originator of the direct deposit payment. If the direct deposit payment was issued through the Comptroller’s office, only the Comptroller is authorized to transmit reversal requests for those payments.
Agencies may not contact a payee’s receiving depository financial institution (RDFI) to request the return of an erroneous direct deposit payment. The NACHA rules require electronic reversals, which must be processed through the ACH network by the originator of the payment (the Comptroller’s office), and only as allowed by the NACHA rules.
The agency may contact an RDFI to assist its payees in tracking their payments if the payees report their payments have not been posted to their accounts by the settlement date.
- The paying agency should determine the exact settlement date of the payment(s) in question before contacting the payee’s RDFI to confirm receipt.
- If the payee’s RDFI is unable to locate the payment and requests an ACH trace number, the agency must complete and submit the Direct Deposit Payment Trace Number Request form (74-229) to Payment Services. A separate form is required for each payment.
When funds are returned by the payee’s RDFI in response to a reversal request, the paying agency can download a report that lists its payees whose funds were received and credited back to the agency. See Reversal/Reclamation Reports.
Funds received for payments issued via the Uniform Statewide Accounting System (USAS) are deposited into USAS Fund 0980, which includes:
- Vendor payment reversals.
- Travel payment reversals.
- Annuity payment reversals and reclamations.
Agencies have the option to request funds to be deposited using the payment’s original coding block, which eliminates the need for the agency to use a journal voucher to transfer funds from Fund 0980 to the original fund the payment was issued from. To select this option, submit an email to email@example.com. Be sure the email subject line includes the phrase “Change Option for DDEP Funds – XXX,” with the three-digit agency number in the XXX position.
Funds received for payroll direct deposit payments will continue to be deposited into USAS Fund 9014.
When an RDFI rejects a reversal request, agencies receive notification via a report that can be downloaded with their daily bundle of reports. See Reversal/Reclamation Reports. If a reversal request is rejected, the paying agency must contact the payee directly to recover an erroneous direct deposit payment. NACHA requires the entire amount to be reversed and prohibits the return of partial payments.
An agency that is unable to recover the funds from the payee must report the payee as being indebted to the state, as required by Texas Government Code, Section 403.055. See Warrant Hold for more information and instructions for reporting state debts.