What Are NSF Payments? NSF Re-Presentment Basics

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Handling returned non-sufficient funds (NSF) automated clearing house (ACH) payments accurately and efficiently helps businesses protect themselves from financial losses by minimizing the impact of unpaid transactions. Promptly addressing NSF returns through clear communication, compliant follow-up procedures and a timely resolution enables merchants to recover funds and prevent further losses. Streamlined handling can also help businesses maintain strong customer relationships, reducing the likelihood of service disruptions due to unsuccessful payments.

At CSG Forte, our recovery solutions can help equip your business to handle NSF returns effectively. Our re-presentment options enable you to recover the funds for each NSF payment at no charge to you. More importantly, these automated solutions save significant time and resources, allowing you to focus more on the responsibilities that matter most for your business.

What Is an NSF Return?

An NSF return in banking stands for non-sufficient funds, otherwise known as an ACH network payment that was returned due to its inability to be completed. This means the bank has refused to honor the payment because there isn’t enough money in the account to cover it. Having a check returned due to NSF is often referred to as having a “bad” or “bounced” check.

When the merchant processes the payment and the receiving bank returns it due to non-sufficient funds in the account, this situation can result in fees for both the payer and the recipient trying to collect the funds. These fees are known as NSF fees or returned item fees, which are charged to the account that lacks the funds to cover the payment.

How NSF Fees Work

NSF fees can occur as a result of a customer writing a check or making an ACH payment believing they have ample funds available for a transaction. For instance, let’s say a customer has $2,200 in their checking account and makes a purchase of $2,000 for your product or service. However, it turns out that customer had recently withdrawn $300 from an ATM and forgot to account for it.

Because of this oversight, let’s say the customer makes an online ACH payment for $2,000 when their bank balance is only $1,900. Their payment is $100 more than what they currently have available. It’s possible this payment could be returned due to NSF and incur a fee to the customer’s bank account.

FAQs About an NSF Return

A returned NSF payment can be complex to navigate and remedy. Here are some commonly asked questions about what to do when you receive an NSF return and how to avoid them in the future.

1. Are NSF Fees the Same as Overdraft Fees?

Anyone who has tried spending more money than what’s available in their bank account has likely been issued an overdraft charge or an NSF fee. Although many believe the two terms are interchangeable, there are some critical differences between them:

  • Overdraft fee: Banks typically charge overdraft fees when they allow a transaction to process that would have otherwise overdrawn an account. Customers can view an overdraft as a temporary loan from the bank, and they can expect to pay back the amount the bank covered plus an overdraft fee. For example, if you have $200 in your checking account and initiate an electronic check payment for a purchase of $230, the bank may accept the check. However, your account balance will be in the red by $30, incurring an overdraft fee. Overdraft fees have typically been around $35 per transaction for most large banks.
  • NSF fee: Banks commonly charge an NSF fee when an account lacks the funds required to cover a transaction and the bank doesn’t permit the transaction to process, resulting in a bounced check or denied electronic bill payment.

2. What Happens When an NSF Payment Is Returned?

When an NSF return occurs, a number of consequences may follow. The payor’s bank makes one of two choices:

Allow the Payment

The bank may decide to let the ACH payment or check post. This, however, would put the account holder into an overdrawn status. For some banks, this means the bank will charge a fee for overdrawing the account. The bank may continue to charge for each day or it can charge a specific flat fee to cover the amount that the account is overdrawn. These charges can end up burning quite a hole in the wallet.

Refuse the Payment

The bank may refuse to honor the payment. The bank will not allow the funds to be processed, and the account holder will likely be charged a fee just for issuing the payment without having funds available.

If a check is returned due to NSF, it could potentially sink the depositor’s account into overdrawn status, also initiating an overdraft fee.

3. What Do I Do When I Get a Check Returned Due to NSF?

Consumers who get charged an NSF fee will have to pay the fee as outlined in their bank’s policy. The merchant will likely try to contact the customer about the returned payment. This is an important step because an NSF payment isn’t always intentional.

The merchant can send a new bill for the original item the customer purchased, the NSF returned check fees and any fees received for trying to deposit an NSF payment. If possible, the merchant can try to deposit the payment again manually. However, this step should be taken with caution as there’s always a chance the check could bounce again and incur another fee. This is also can be a manual process for a merchant to manage.

Businesses that still do not receive payment may send a demand letter, hand the payment over to a collection agency or initiate legal actions in a small claims court.

Working with a trusted payments partner like CSG Forte can help merchants navigate arduous NSF payments and automate the process to make recovery simple.

5. How do You Protect Your Business From NSF Payments?

NSF payments can be very frustrating and costly to businesses that need to process the transactions. Some businesses decide not to accept ACH payments or checks at all as a last resort. For example, debit card payments are authorized in real time, enabling you to confirm that the customer has enough funds for the purchase. However, this choice limits payment options for your customers.

For many businesses, accepting paper and eChecks is a wise decision. This practice gives customers the flexibility of selecting a payment option that works for them—and many people want to simply have a payment come right out of their bank account.

But how can businesses handle NSF payments? It’s wise to have a plan in place so that when NSF payments appear, they aren’t a complete disaster. NSF re-presentment is your best option, as it allows you to recover the funds for each unsuccessful ACH transaction.

Some other tips for protecting your business against NSF checks include:

  • Create a check acceptance policy and ensure employees follow it.
  • Train staff on red flags to look for, such as missing the preprinted name and address or having a fake routing number.
  • Require ID verification when accepting a check in person.
  • Use a verification service like CSG Forte Validate+ before accepting payment.

6. Can I Redeposit an NSF Check?

Yes. It’s possible to recover the funds by attempting to re-deposit the payment once it is returned, also known as NSF re-presentment.

7. What Is NSF Re-Presentment?

When an NSF payment occurs, re-presentment will strategically re-present the payment at a later date. This way, the payment has another chance to clear. CSG Forte’s NSF re-presentment option lets you select the date you wish to re-present payments that are returned, enabling you to choose a time when you think there is a stronger likelihood that the funds are available with your customer base.

You may know, for instance, when your customer gets their paycheck. Scheduling NSF re-presentment on or directly after this date increases your chances of accessing the funds and clearing the payment.

The Benefits of Using CSG Forte’s Recovery Solutions

Whatever the causes, NSF payments cost your business valuable time and money. At CSG Forte, it’s our goal to help streamline payment processing and protect your business from potentially nefarious actors. Our recovery solutions allow businesses to automate the process of recovering NSF payments. We will attempt to re-collect NSF payments up to two times on your behalf for ACH payments, saving you significant time and hassle. Benefits you’ll enjoy with this service include:

  • Improved payment recovery: Our smart re-presentment functionality allows companies to re-present payment when they will most likely receive a recovered payment.
  • Boosted revenue: Besides receiving the complete value of recovered payment, your business will receive part of the collected NSF fee and experience a revenue share.
  • Nacha compliance: Recover NSF payments with peace of mind. Our recovery solutions meet Nacha regulations.
  • Reduce service disruptions: Enhance customer satisfaction by reducing service disruptions due to incomplete or returned payments.

How It Works

At CSG Forte, we make collecting NSF payments simple. When you’re hit with an NSF payment, our solutions will automatically attempt to recollect the ACH or eCheck payment up to two times. Here’s how it works:

  • Returned NSF payment: Our recovery solution automatically queues the payment for strategic re-presentment.
  • Automated re-presentment: Using our advanced re-presentment technology, we strategically reattempt payment.
  • Successful collection: If the collection is successful, your business will receive 100% of the face value of payment.
  • Unsuccessful returns: If we cannot successfully recover the payment for you, we’ll return the check to you so you can move into collections and get your funds back. With a 60% average recovery rate, we’re confident we can help your business collect payments and avoid returned payments in the future.

Get in Touch With Us Today

When a customer’s payment is returned, it results in frustrating service disruptions and cash flow issues. At CSG Forte, we’ve developed a solution to automate the process of reattempting and collecting payments lost to NSF checks at no cost to you. With our recovery solutions, you can minimize the risk of time-consuming recovery processes and focus on driving business growth. Contact us today to learn how one large enterprise organization recovered $78 million through CSG Forte’s recovery solutions.