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Telephone-initiated Entries (TEL)

What is TEL?

The Standard Entry Class code for Telephone-initiated ACH entries is TEL.  TEL is used when a company obtains authorization via the phone from a consumer to create an ACH debit. The TEL code applies to only single-entry payments.  TEL transactions must be drawn on a consumer account and be payable in U.S. currency.  Additionally, TEL may only be used when:
  • A relationship already exists between the company and the consumer, OR
  • In the case where there is not an existing relationship, the consumer initiates the contact with the company
What types of businesses benefit from offering TEL?

A wide variety of industries benefit by offering TEL as a payment option to their customers. Billers such as credit card companies, utility companies and mortgage companies enjoy widespread consumer acceptance of TEL payments. Catalog retailers, government agencies, educational institutions, health care providers and not-for-profit organizations also enjoy the following benefits of using TEL:
  • ACH offers reduced cost of processing transactions versus credit cards
  • Increased customer loyalty by offering a convenient payment option
  • By offering a payment option for those who don’t have or choose to use credit/debit cards, additional sales can be generated through an expanded customer base
  • Enhanced customer satisfaction by creating a secure, convenient payment option for customers making last-minute payments
Compliance Considerations

As established by the NACHA Operating Rules, there are a number of compliance requirements for companies that accept TEL transactions.  Each TEL authorization must contain confirmation of six specific pieces of information, and the recorded version of the authorization or written follow-up notice must also contain this information.

Compliance Checklist for TEL Transactions

Authentication Requirements
  • Companies are required to employ commercially reasonable authentication methods to verify the identity of the consumer.  Companies need to establish a method to verify the consumer’s name, address and telephone number.
Authorization Requirements
  • The company must obtain verbal authorization from the consumer prior to initiating a TEL debit to the consumer’s account.
  • The authorization must be readily identifiable as an ACH debit transaction, as well as conspicuously state the terms of the transaction:
    • The date on or after which the consumer’s bank account will be debited
    • The dollar amount of the debit
    • The consumer’s name
    • The company’s customer service telephone number
    • The date of the consumer’s authorization
  • The consumer must unambiguously express consent to the terms of the authorization
  • The company must either tape record the consumer’s oral authorization; or provide a written notice confirming the terms of the authorization prior to the Settlement Date of the entry
  • The company is required to store an original recording or a copy of the authorization for two years from the date of authorization, and be able to produce a copy upon request.
Sample TEL Authorization Script:

[Name of Consumer], [Merchant Name] is requesting your authorization to electronically debit your checking account, in the amount of [$ amount] on or about [date of ACH debit]. At any time prior to processing, you may revoke this authorization by calling our customer service department at [merchant phone number]. Do I have your authorization today [today’s date] to process this transaction?

Risk Management Considerations
  • Companies are required to employ “commercially reasonable” procedures to verify the validity of the routing and transit number provided by the consumer. (EZCheck includes routing and account number validation for all TEL transactions as a value-added service.)
  • Key entry responses for authorization purposes, via a system such as a voice response unit, do not qualify as an oral authorization under the NACHA Rules.
Collection of Fees

TEL entries must accurately reflect the verbal authorization.  The dollar amount, routing and account numbers and serial number must be the same as the information that appears in the recording. Fees for returned checks may not be added to a TEL transaction.  

If a company wants to collect a returned transaction fee via the ACH Network, a separate PPD entry must be originated, and the NACHA authorization requirements for PPD must be met.
 
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