Some of you may remember a scam that impacted many merchants and ARM professionals in July of this year. A series of videos and messages across the internet alleged that there is an amount of money set aside for american citizens that they are allowed to use to pay bills. The scam distributed federal reserve routing numbers, and told citizens to use these for online transactions. This claim is completely false. However, many individuals fell for it, and attempted to pay their bills with these routing numbers.

The Outcome

Losing out on consumer payments along with the return fees that can be associated with this type of scam can add up to a significant amount of lost revenue when a payment processor isn't quick to react. If a situation such as the Federal Reserve scam occurs and a processor doesn't take steps to block the routing numbers quickly, the cost of returned payments will add up fast, and your opportunity to collect from those consumers may be gone.


While extra money tacked onto your bill is annoying, it’s nothing compared to the devastation this can cause to your ACH return rates. Merchants who process ACH should know that exceeding a 15 percent overall return rate for your ACH transactions is bad news. Rates above this mark are considered grounds for termination of your ACH processing services, per NACHA regulations.

Keep in mind that unauthorized return rates must remain under a much lower threshold of 0.5 percent, and administrative or account data errors must remain under three percent. While these types of returns wouldn’t apply to the federal reserve scam, there are many unpredictable situations that can cause return rates to rise and cost your business its ACH merchant account. This can have devastating and long-term impacts. Discontinuing an entire payment channel because of a high return rate will reduce revenue and may harm (or even end) a thriving agency.

What merchants need from their processor

Often, merchants don’t spend time thinking about their payment processor unless an issue like this occurs. On the ARM professional’s end of a transaction, receiving an ACH return code won’t tell the full story. This is why a solid relationship with your payment processor is vital to get you the answers you need.

Merchants who trust their payment processor to look into irregularities are in a better position when anomalies like this scam occur. You need a processor that you can easily reach for customer support, with employees who will ask questions if they notice possible issues. It’s also key that they communicate with you in a timely manner.

Signs of a proactive payment processor

A trustworthy payment processor can identify an unusual ACH code and will investigate the cause. In a case such as this scam, your payment processor should have identified all of the invalid routing numbers related to the issue. They should have blocked them from being submitted to prevent unnecessary returns and high return rates, and made your business aware of the possible threat to your profits.

Your processor should keep you in the know with email notifications about news that influences day-to-day business operations. They will be up-to-speed on industry trends, and know about scams that can impact your bottom line. Here are a few ways to check up on your processor to make sure they’re informed:

  • Check out their social media feeds. Do they share relevant and timely information that can help you become a better merchant?

  • Look at their website. Do they have a blog? Does it provide valuable information you can implement into everyday business?

  • Give them a call. Do you know your support staff by name? Can they speak knowledgeably about the issues your business faces? Are they genuinely invested in helping you succeed?

  • Take a look at your emails. Does your processor send you email updates on issues, bank holidays, and other announcements that will impact your day-to-day operations?

PDCflow is a complete Payment Management Solution that is simple, fast, and secure, so businesses get paid faster. The application allows multi-channel payments, payment authorization with eSignatures, and document delivery for small business to enterprise - all from one central platform.

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