How to Revoke ACH Authorization from an MCA Funder

The authorization you gave can be taken back. The revocation must be done correctly. An improperly executed revocation is worse than no revocation at all — it gives the funder ammunition without giving you protection.

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When you signed the MCA agreement, you authorized the funder to initiate ACH debits from your bank account. That authorization is not irrevocable. Under federal law and the NACHA operating rules that govern ACH transactions, you have the right to revoke an ACH authorization. But the revocation must be executed properly, through the right channels, with the right documentation, and at the right time.

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The Legal Basis for Revocation

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The Electronic Fund Transfer Act and Regulation E govern electronic fund transfers for consumer accounts. For business accounts, the NACHA operating rules provide the framework. Under NACHA rules, an originator — the MCA funder initiating the debit — must have authorization from the receiver — you — to initiate the transaction. The receiver can revoke the authorization by notifying the originator.

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The MCA agreement may contain language purporting to make the ACH authorization irrevocable. Courts have generally held that such clauses are unenforceable as a matter of public policy and federal banking regulation. You cannot permanently waive the right to control debits from your own bank account. The contract says irrevocable. The law says otherwise. The law prevails.

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How to Revoke: The Funder

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Send a written notice to the funder revoking the ACH authorization. The notice should identify the MCA agreement by its reference number or date, state that you are revoking the ACH debit authorization effective immediately, and demand that the funder cease all future ACH debits against your account. Send the notice by email and by certified mail, return receipt requested. Keep copies of everything. Note the date and time of transmission.

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The funder may argue that the revocation is a breach of the agreement. The funder may be correct — revoking ACH authorization while the agreement is in effect may trigger default provisions. This is why the revocation should be part of a broader legal strategy, not an isolated action. The default triggered by the revocation is the same default that triggers the legal challenge to the agreement.

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How to Revoke: Your Bank

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Separately, notify your bank in writing that you are revoking the ACH authorization for the specific originator — the MCA funder. Provide the bank with the funder’s name, the originator ID if you have it, and the account number being debited. Request that the bank place a stop payment on all future ACH debits from that originator. Most banks will honor this request, though some may charge a stop payment fee.

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The bank notification is critical because even if you notify the funder, the funder may continue to initiate debits. If the funder submits a debit after your revocation, the bank’s stop payment order should block it. If the bank fails to block a debit after receiving your written stop payment request, the bank may be liable for the unauthorized transaction.

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Notify both the funder and the bank simultaneously. The dual notification creates redundancy — if one channel fails, the other provides protection. And the documentation of both notifications creates an evidentiary record that is critical if the funder continues to debit after the revocation.

For more on this topic, see Should You Stop ACH Payments to Your MCA Company?.

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After Revocation

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After the revocation is transmitted, monitor your bank account daily. If the funder continues to initiate debits despite the revocation, each unauthorized debit may constitute a violation of the NACHA operating rules and potentially the Electronic Fund Transfer Act. Document every unauthorized debit — the date, the amount, the originator. This documentation supports a potential counterclaim for unauthorized electronic fund transfers.

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The revocation of ACH authorization will trigger a response from the funder. That response may include a default notice, acceleration of the balance, filing of a confession of judgment, or other collection activity. You should be prepared for this response before you revoke. The revocation is a tactical move within a broader strategy. The broader strategy should already be in place — the legal assessment completed, the attorney engaged, the negotiation or litigation plan established. Revoking ACH authorization without a plan for what comes next is like pulling the pin without knowing where to throw the grenade.

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One additional consideration: if you have multiple MCAs with different funders, each drawing from the same bank account, you may need to revoke authorization for each funder separately. A blanket stop payment instruction to the bank may block all ACH debits, including legitimate ones — payroll services, utility payments, vendor payments. The revocation should be targeted to the specific originator or originators whose debits you are stopping, while preserving the legitimate ACH transactions that the business needs to operate.

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The revocation of ACH authorization is one of the most consequential actions in the MCA dispute process. Done correctly, it preserves cash flow, creates a factual record that supports your legal position, and positions you for effective settlement negotiation. Done incorrectly — without notice to the funder, without a bank stop payment, without a legal strategy in place — it creates chaos without creating leverage. The distinction between the two outcomes is preparation.

For more on this topic, see How Daily/Weekly ACH Withdrawals Drain Your Cash Flow.