Question:

I have a question for you about misdirected ACH payments.  Our member’s (member #1) employer sent his paycheck to a wrong account because they mistook a #4 for a #9.  The member that mistakenly received the deposit (Member #2) thought this was manna from heaven and spent the funds. The likelihood of recovery from member #2 is small.  Is the credit union liable for this error because the routing and account numbers matched another open account?

Answer:

This is a problem for member #1’s employer and the employer’s bank. NACHA rules permit RDFI’s to post ACH transactions based on account number alone. The RDFI can reject a transaction based on a name mismatch, but it isn’t required to do so. In this specific case, the liability rests solely with the ODFI for sending a transaction with an incorrect account number. The ODFI may request recovery of the misdirected funds, but the RDFI doesn’t have to send anything back – even if there are funds to recover (but it’s a courtesy to so if you can).

The ODFI may have a legal claim against member #2 for unjust enrichment, but it’s not something the credit union needs to or should get involved with.