Account Holder Refunds

When an account is closed, and the account has funds remaining in it, you need a way to return the funds to the account holder. At Galileo, you set up a refund product so that you can issue refund checks for the outstanding balance. This guide explains what the account holder refund product is and how to use an automated process to issue refund checks to an account holder once their account is closed. After the refund product has been configured, the check can be issued via the automated process outlined in this guide, or you can self-issue a check through the CST.

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Note

To close a secured credit account, see Account closure status reporting in the Setup for Galileo Secured Credit guide. Credit account closures do not involve the refund product.

The account holder refund process can be initiated by the account holder or by the program manager. This guide contains the parameters to set during product configuration to optimize the experience for program managers and their account holders.

Decisions to make

As you set up your refund process, you will need to make these decisions:

  • Under which conditions you close an account with a refund as opposed to without refund. See Account closure types for details.
  • Which methods to offer to the account holder to retrieve the balance of the account before it is closed. These options must be included in the Terms and Conditions for the account:
    • Spend remaining funds
    • ATM withdrawal
    • ACH transfer
  • Whether the card (if any) must be mailed back before a refund check can be issued.
  • The maximum amount for a refund check.
    • If you permit or require customers to deposit funds before passing KYC/CIP, determine the maximum amount of a refund check when the customer fails KYC/CIP.
  • The number of days after an account has been canceled ("waiting period") to issue a refund check. Galileo recommends choosing an interval based on your standard authorization expiration times and any potential payment-hold activity the client may initiate such as an ACH transfer. This waiting period gives the account holder time to retrieve the remaining funds using methods other than a refund check, if they prefer.

Refund product process

The refund product process has five basic steps:

  1. You or the account holder decide to close an open account that contains a positive balance.
    • If you are initiating the account closure as part of a program shutdown, or if you are moving the accounts elsewhere, you should follow procedures that are specific to that use case instead of following this procedure. Galileo can help you devise those procedures.
  2. You present options to the account holder to retrieve the balance. See Recommended sequence to refund closed accounts.
    • When the account holder has withdrawn the funds, you should provide a way for the account holder to notify you that they've withdrawn the funds, such as a control on your interface or a customer service phone number.
  3. You close the account using the Program API or the CST. If there are still funds in the account, the waiting period begins.
  4. After the waiting period expires, any remaining balance is automatically transferred to a Galileo-hosted refund account.
  5. Galileo issues and mails a paper check for the refund amount to the former account holder. The refund check includes:
    • The program name
    • The name the account holder
    • The full refund amount
    • Instructions for the account holder to cash the check within 180 days
    • Envelope with Galileo return address

Recommended sequence to refund closed accounts

Before an account is closed, Galileo recommends that you present the following options to the account holder, in this order, according to the options that you have outlined in the Terms and Conditions for this account:

  1. Allow/encourage the account holder to spend the remaining funds.
  2. Allow the account holder to withdraw the funds via ATM. Keep in mind that the machine will only provide whole dollars, not cents, and the bill denominations may be $20 or $10 bills, which could cause the account holder to incur a loss.
  3. Initiate an ACH transfer of the remaining funds to the account holder’s designated financial institution. The account holder might need to create an ACH account for this transfer.
  4. Use the refund product to send the account holder a paper check via the refund process, if the funds are not otherwise withdrawn.

Account closure types

These are the account-closure options that you have. Use the Modify Status endpoint or go to the Account Info > Account Info screen in the CST.

Canceled with refund

Account status: C

  • Modify Statustype: 13
  • CST — Cancel w/ Refund

If the account holder initiates the closure of an account with a positive balance, follow the steps in Refund product process to help the account holder retrieve the remaining funds before closing the account.

  • This type changes both the account and associated cards to status: C.
  • The type does not close related savings accounts. If you need to close other accounts that the account holder owns, you must close them separately.

Canceled without refund

Account status: Z

  • Modify Statustype: 20
  • CST — Cancel w/o Refund

You can close an account without a refund as the result of a zero balance on the account, fraudulent activity on the card, or government seizure of the individual account holder’s assets. None of these scenarios require the use of Galileo’s refund product, because no refund will be issued back to the account holder.

  • This type changes both the account and associated cards to status: Z.
  • All other accounts and cards associated with the same customer record, including secondaries, are changed to status: Z.
  • Any remaining funds remain in the closed account indefinitely until you manually move them. Create procedures in cooperation with your bank for handling these funds according to the reason the account was closed.

Account holder refund workflow

This is the sequence of events when closing an account using the Program API. For clarity, this flowchart does not show the billpay-related event messages.

  1. You or the account holder decide to close an account with a positive balance. The account holder has already been given options to move the funds elsewhere, but there are still funds remaining.
  2. Using one of the methods in Account closure types, close the account.
    • If the CAN fee (account closure) is configured, Galileo assesses that fee and sends the BFEE: fee event message. See Pending fees in the case that there are insufficient funds for the fee.
  3. Galileo sends the NOTE: note event message. The text field has a message to indicate that the account was closed.
  4. For an account closed with refund, the waiting period starts. The configurable waiting period is set by the MDAYC parameter.
    • If the account is closed without refund, the remaining funds remain in the closed account until manually moved out.
  5. At the end of the waiting period, if there are still funds in the account, Galileo automatically moves the funds out of the customer account and into your refund account using a "canceled account refund" adjustment, transaction code ADv.
    • Galileo sends the BADJ: adj event for the customer account.
  6. Galileo issues and mails a paper check for the amount. At this point, the refund check goes through the same processing flow as billpay checks.
  7. The account holder receives the check after about 10 days from the time the check is issued.
    • If you put a stop payment on a refund check, the funds are returned to your refund account in 24–48 hours.
  8. The account holder must cash the check within 180 days (six months) of the check's date.
    • If the check is not cashed within 180 days, the check is voided and the funds are immediately transferred back to the refund account.
    • If you have an updated address for the account holder, you can update the address in the CST or via batch file and then manually reissue a check.
    • After the funds are posted back into the refund account, they will remain there indefinitely until you manually move them.
    • If you decide to transfer the amount back into the closed customer account, it constitutes a transaction on the account, and the last transaction date is thereby changed. This changed date affects the escheatment process.

Events API

You can arrange with Galileo to receive some or all of these events related to refund checks. Some of the events have billpay_ in the name because refund checks enter the same workflow as billpay checks.

EventDescription
NOTE: noteA note was added to the customer account. The closure is noted in the text field.
BADJ: adjAn adjustment was posted to the customer account, funds moving in or moving out.
BFEE: feeA fee was assessed to the customer account.
BLVF: billpay_limit_violationA refund check violated the velocity limit in MTOTB (canceled account) or MCOTB (failed CIP/KYC).
BPCM: billpay_check_mailedA refund check order was created.
BPCC: billpay_check_clearedA refund check was cashed, and the payment has cleared.
BPEX: billpay_expiredA refund check did not clear 180 days after the check's date, and the check has been canceled.
BPCR: billpay_request_returnedThe refund check was returned to Galileo.

Galileo setup

These parameters are required to allow Galileo to process refunds for your customers and customize the experience to your program’s needs. All parameters are set at the product level.

ParameterDescription
CRCHKControls whether a card must be mailed back before a refund check is issued. This parameter is required when there is a refund product set up for this product. When this parameter is not set, accounts will not be refunded. This parameter is required when OGRAC is set. When this parameter is set to Y, MCTOB and MDAYC are required.
MCOTBContains the maximum amount for a refund check issued when an account is canceled. This parameter is required when there is a refund product set up for this product. When this parameter is not set, attempts to issue a refund are denied. Example: $5,000
MDAYCSpecifies the number of days after an account has been canceled to issue a refund. This parameter is required when there is a refund product configured for this product. When this parameter is not set, attempts to issue a refund are denied.
MDAYPSpecifies the number of days after the last payment to issue a refund on an account that fails KYC/CIP. This parameter is required when OGRAC is set. When this parameter is set, MTOTB must also be set.
MTOTBContains the maximum amount for a refund check that is issued when an account fails Galileo’s integrated KYC/CIP process. When MDAYP is set, this parameter is required.
OGRACSpecifies the refund account to debit when paying out a refund for this product. This parameter is required when a refund product exists for this product. When this parameter is set, RANAM is required on the refund account.
RANAMContains the name of the refund account that is specified in OGRAC. This parameter is set on the refund account, and it is required when OGRAC is populated on the product that uses the refund account. When this parameter is not populated and OGRAC is set, refunds are not processed.