EFT Reversals Guide

EFT reversals are when a payment is reversed due to issues such as incorrect payment details or customer disputes.

Canadian Electronic Fund Transfers (EFTs) can on occasion require the reversal of a payment. An EFT reversal is when a transaction is reversed or undone due to issues such as incorrect bank account details, wrong amounts, or customer disputes.

EFT reversals can be initiated during the clearing and settlement window, or after the payment has cleared in the receiver's account. In Canada, all EFT payments and reversals are regulated and governed by Payments Canada, also known as the Canadian Payments Association (CPA).

Common EFT Reversal Scenarios

• Duplicate Payments - The same payment has been made more than once in error. Common in manual EFT payments.
• Incorrect Bank Account Information - The funds have been transferred to the wrong account due to errors in the provided account number or routing details.
• Wrong Payment Amount - The transaction amount was incorrectly entered and the payment was either too high or too low.
• Unauthorized Transactions - The initiated transaction was made without the account holder’s consent.
• Fraudulent Transactions - The payment was linked to fraud or scams.
• Customer Disputes - A transaction has been disputed by the sender or receiver.

EFT Reversal Rules

EFT reversals are subject to strict rules and regulations laid down by Payments Canada. These rules include, but are not limited to, the following:

• Valid Reason For EFT Reversal - EFT reversals must have a valid reason, with the most common reversal reasons listed above. Financial Institutions are responsible for ensuring that an EFT reversal meets one of the accepted reasons.
• Timeframes For Reversal Request - Payments Canada states that EFT reversal requests must be within 5 business days from the original transaction settlement date (the date when the funds land in the receiver’s account). There are exceptional circumstances such as fraud and other unauthorized transactions where the EFT reversal window can be extended beyond this timeframe.
• Valid EFT Return Code - All EFT reversals must have a relevant EFT return code attached to it. These return codes must comply with Payments Canada’s code standards.

How EFT Reversals Work

EFT reversals follow these steps:

1. Notice: The sender notifies their Financial institution of an error or issue to start the reversal process.
2. Initiation: The sender’s Financial Institution submits a reversal request to the recipient’s Financial Institution.
3. Validation: The recipient’s Financial Institution verifies the request and checks if the funds are available to complete the reversal.
4. Approval: If the reversal request meets all the requirements, the funds are then returned to the sender.