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.
   • See Creating an ACH transaction in ACH Endpoints for instructions.
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 Status — type: 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 Status — type: 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.

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. Close the account using one of the methods in Account closure types.
3. Galileo sends the NOTE: note event message with the text you provide in the text field, indicating that the account was closed.
   • 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.
4. For an account canceled with a refund, the waiting period starts. The configurable waiting period is set by the MDAYC parameter.
   • If the account is canceled without a 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 a Galileo-hosted refund account using a "canceled account refund" adjustment, transaction code ADv.
   • Galileo sends the BADJ: adj event for the customer account.
6. Galileo determines whether to issue a refund check by comparing the refund amount with the MCOTB parameter.
   • If the amount exceeds the limit in MCOTB, a check is not automatically issued, and the funds remain in the refund account. You can use the CST to manually issue the check.
   • If the amount does not exceed the limit, Galileo mails a paper check for the amount. Galileo sends the BPCM: billpay_check_mailed event.
7. The account holder should receive the check after about 10 days from the time the check is issued.
   • If the check is returned in the mail, the Galileo mail room marks the check as void in the system, and Galileo sends the BPCR: billpay_request_returned event message. 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 the check.
     • Alternatively, you can use the Update Account endpoint to update the address, but only if the UPDCZ parameter is set at the provider level. This parameter permits you to update account information with that endpoint for accounts that are in statuses C and Z.
   • If you put a stop payment on a refund check in the CST, the funds are returned to your refund account in 24–48 hours. Galileo sends BADJ adj event message when the funds are posted. As desired, you can manually reissue the check.
8. The account holder must cash the check within 180 days (six months) of the check's issue date.
   • If the check is cashed, Galileo sends the BPCC: billpay_check_cleared event message.
   • If the check is not cashed, the check is voided and the funds are automatically returned first to the refund account and then to the account-holder account. Galileo sends the BPEX: billpay_expired event message when the check expires, and as the funds are moved, Galileo sends BADJ: adj event messages for the account-holder account as well as the refund account, if you have events set up for the refund product.

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Important

The funds are automatically returned back to the individual account only if the check expired, and an automated process voided the check. The BPEX: billpay_expired event plus the BADJ: adj event notify you that the funds have been returned to the individual account.

In all other circumstances, the funds are returned only to the refund account, where they stay until you manually move them.

Reissuing refund checks

Before you can reissue a check, the original check must be manually canceled and the funds moved from the refund account to the account-holder account. Follow these instructions in the CST to reissue a check.

1. Cancel the original check

1. Open the product refund account by selecting the program and selecting Name (First / Last) as the search criteria. Input the term "refund" in the last-name field and search.
2. Navigate to Account Info > Bill Payments.
3. On this page, locate the refund check that needs to be canceled. (If it is already canceled, skip this step.)
4. Next to the check, click Cancel Check.
   • The check status will update to Check Cancellation Requested.
5. Wait for the check funds to return to the refund account before continuing. This process typically occurs overnight but can take up to 48 hours (exceptions include weekends and holidays).
   • When the funds have been returned, the check status updates to Check Canceled.

2. Remove the check funds from the refund account

Perform this step only when the original check status is Check Canceled.

1. Open the product refund account.
2. Click the Finance tab and select Insert Adjustment.
3. In the Amount field, insert the amount of the refund check. Input a negative amount to remove funds.
4. Set the adjustment type to v (lowercase v).
5. Click Insert Adjustment and follow the prompts to complete the adjustment.

3. Add the check funds to the individual card-holder account

1. Open the individual account-holder account.
2. Click the Finance tab and select Insert Adjustment.
3. In the Amount field, insert the amount of the refund check. Input a positive amount to add funds.
4. Set the adjustment type to v (lowercase v).
5. Click Insert Adjustment and follow the prompts to complete the adjustment.

4. Reissue the refund check

1. While in the individual account-holder account, navigate to Account Info > Account Info.
2. On this page, select the option to manually issue a refund check.
3. Follow the prompts to issue the check.

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Note

When you 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.

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.