What happens if a payer disputes a check draft?

Why do check drafts get returned?

• Insufficient funds, or a closed or frozen account.
• A stop payment from the account holder.
• A claim that the draft wasn't authorized.
• A Positive Pay exception the payer didn't approve.
• A MICR line or image the bank couldn't read.

How does an unauthorized claim work?

Under Regulation CC, a bank that transfers or presents a remotely created check warrants that the account holder authorized it, for that amount and to that payee. If the account holder says they didn't, their bank can claim against the bank that took the deposit. That bank's account agreement with you usually passes the loss on to you.

So the question in any dispute is simple: can you show the account holder authorized this draft? The rules in more detail.

How do you prevent disputes in the first place?

• Get approval of the exact amount, or a clear cap for ongoing drafts.
• Tell the payer about every draft. DraftPay emails a notice for each draft under an ongoing authorization.
• Make it easy to stop. Every confirmation and notice has a revoke link.
• Draft only within the authorized amounts and dates.
• Have a second person approve large drafts.
• Send approval requests to the payer's own email. DraftPay won't send them to an address on your own team or domain.

What records settle a dispute?

For every draft, DraftPay keeps a sealed authorization record: the signer's name and title, their verified email, the exact amount or cap, the time, their IP address, and the full terms text and version they agreed to. For authorizations recorded on file, it keeps your business's confirmation and any document you attached.

The record is sealed with a SHA-256 hash and checked every time it's opened, so you can show it hasn't been edited.

What should you do when a draft comes back?

• Read the return reason from your bank.
• Call your customer. Most returns are funds or Positive Pay issues, not fraud.
• For insufficient funds, ask whether to draft again once funds are there, with a fresh approval if needed.
• For an unauthorized claim, send your bank the authorization record.
• Pause drafting on that customer until it's resolved.