Authorize.Net Fund Hold Recovery: Legal Guide & Action Plan

Introduction: Why Authorize.Net Fund Holds are a Big Problem

Imagine the shock of having your business’s cash flow suddenly frozen by your payment processor. What starts as a routine relationship with Authorize.Net’s eCheck.Net® service can quickly turn into a nightmare when your hard-earned revenue is held hostage, sometimes for months or even years, with only vague references to “risk” or “business model issues” as explanation. As a business attorney experienced in payment disputes, I’ve seen how devastating these holds can be to startups and small businesses—and how the right legal approach can get your money released.

In this guide, we’ll break down common patterns in Authorize.Net fund hold complaints, the key terms of Authorize.Net’s eCheck.Net Service Agreement, and the legal strategies you can use to challenge unlawful holds. You’ll also find practical steps – from demand letters to regulatory complaints – and even template documents (a demand letter and a draft arbitration filing) to help you take action.

(Disclaimer: Any user complaints quoted below are public allegations from forums/BBB and not verified facts. They illustrate common issues but represent only one side of the story.)

Common Complaints About Authorize.Net Fund Holds

Sudden Account Termination with Lengthy Holds: A frequent scenario is Authorize.Net abruptly terminating a merchant’s eCheck.Net account and freezing the remaining funds for an extended period. Merchants report being promised that funds would be released after 90 days or 180 days, only to have those deadlines come and go with no payout. For example, one Reddit user shared an email from Authorize.Net’s risk department stating: “a business decision has been made to close your eCheck.Net account immediately… all processed funds may remain on hold for a minimum of 90 days”reddit.com. In that case, about $5,000 was frozen. When the merchant requested an early release after 30 days, the request was “Declined – Due to business model concerns… You may request another early release of funds in 30 days.”reddit.com. This pattern—instant closure and a perfunctory 90-day hold—mirrors many others’ experiences.

Even more alarming are reports of holds far exceeding 90 days. In a BBB complaint filed in late 2024, a merchant described that after 60 days (the standard ACH dispute window) passed with no chargebacks, they contacted Authorize.Net about their funds—only to be told “they were holding it for 2 YEARS! ARE YOU SERIOUS! SURELY THIS HAS TO BE ILLEGAL”bbb.org. (Again, this is an allegation from a customer complaint, not a confirmed fact, but it underscores the level of frustration.) This individual demanded immediate release, feeling essentially robbed of their revenue.

“Business Model” as a Catch-All Justification: Many merchants are left baffled by the reason given for the termination or hold. Authorize.Net often cites unspecified “business model concerns” as the rationale for shutting down eCheck.Net services and freezing funds. In one BBB complaint, a sole proprietor who had zero chargebacks in two years recounted that Authorize.Net invited them to add ACH (eCheck) processing, only to abruptly shut it down after the first ACH payment. The only explanation was that “my business model didn’t fulfill their criteria” – despite this being a longstanding account with consistent activitybbb.orgbbb.org. According to that complaint, “they closed my account and seized the funds on account… put on hold by the risk team for 90 days… despite there being no chargeback or dispute on the payment. They did this on the grounds of ‘business model concerns’. They refuse to communicate what concerns they have…”bbb.org. In other words, the merchant felt blindsided – their perfectly normal business was suddenly labeled unacceptable with no prior warning.

This retroactive risk assessment (shutting you down after a transaction, rather than vetting you beforehand) is disturbingly common. Merchants have reported that even after providing documentation to prove legitimacy (e.g. invoices, customer authorization for the ACH), Authorize.Net’s risk team simply sticks to a decision to hold funds for the full term with minimal explanationreddit.comreddit.com. One user angrily wondered if the risk department were “just a bunch of power tripping a-holes” after their good-faith efforts to resolve concerns were ignoredreddit.com. (That colorful language comes from the user’s post; the sentiment reflects the frustration, not any verified attribute of Authorize.Net’s team.)

Lack of Communication and Support: A nearly universal gripe is the difficulty in getting answers once funds are frozen. Merchants say that front-line customer support can’t do anything, and the risk team is virtually unreachable – often only an email address that responds (if at all) with form-letter denials. In the Reddit story above, the user noted “You can’t talk to these risk people… just via email and hiding behind customer service”reddit.com. Similarly, others describe a Kafkaesque support experience: “the system is … designed to confuse and deflect rather than help find a resolution”bbb.org. This communication blackout leaves merchants feeling helpless. Some have resorted to filing complaints with regulators or posting on public forums out of desperationbbb.orgbbb.org.

Suspicion of Profit Motive: Adding insult to injury, merchants often suspect that while their money sits in limbo, Authorize.Net (or its affiliates) may benefit from the float (interest or other use of the funds). One user complained that Authorize.Net is likely “profiting off of [our money] with interest” during the hold periodreddit.com. Another online review alleged “without any legitimate reason, they withdrew nearly $8,000 from our checking account. Additionally, they’ve unjustly held over $50,000 of our funds… continuously request documents from us, seemingly without end.”cardpaymentoptions.com. This paints a picture (albeit one-sided) of a company potentially enriching itself by holding merchants’ money and dragging out the process.

Note: The above accounts are drawn from Reddit posts, BBB complaints, and review sites. They reflect allegations by users. Authorize.Net, for its part, often responds that funds are held due to risk of chargebacks or fraud investigationsbbb.org. For example, in the case of the 2-year hold complaint, Authorize.Net’s BBB response cited an unauthorized ACH chargeback and said those deposits needed to be held for investigationbbb.org. So, there are two sides to every story. Still, the consistency of merchants’ complaints suggests a systematic issue worth examining.

What Authorize.Net’s eCheck.Net Service Agreement Says

To assess whether these fund holds are wrongful, we must start with Authorize.Net’s eCheck.Net Service Agreement – the contract that governs the ACH/eCheck service. The latest version (last revised Sept. 19, 2022) contains critical sections on reserves, termination, and dispute resolution. Here are the key provisions (with emphasis added):

• Reserve Account (Section 5.4): Authorize.Net has the right to require a reserve to cover chargebacks or other liabilities. Section 5.4.1 explicitly gives Authorize.Net “the right to retain as collateral money payable to Merchant in a Reserve Account to ensure recovery of any liabilities… The Reserve Account may be established, with or without prior notice to Merchant, at any time… whenever Authorize.Net, in its sole discretion, believes recovery of such liabilities may be in jeopardy. Once established, Authorize.Net shall promptly send Merchant notice of the amount held in the Reserve Account.”. In short, they can set aside your funds as a reserve if they anticipate risk, even after your account is terminated, but they are supposed to notify you of the hold amount once it’s set up. Section 5.4.2 further provides that the merchant “grants Authorize.Net a possessory security interest in any money held as a Reserve Account… Authorize.Net’s rights… shall survive the termination of this Agreement. The Reserve Account may be held by Authorize.Net for up to six (6) months after the later of the last transaction, Chargeback or other liability….” (emphasis added). In plain English: the contract sets a six-month limit on how long funds can be held in reserve after your last transaction or chargeback, and any money in reserve should be used only to cover chargebacks or fees. Holding beyond 6 months is not contemplated as per the written terms.
• Termination Provisions (Section 10): The agreement differentiates between ordinary termination and termination “for cause.” Section 10.1 is “Termination At Will,” and it says either party may terminate the agreement at any time with 30 days’ written notice. However, it immediately adds that Authorize.Net may terminate immediately (without the 30 days notice) under certain conditions: “if it has reasonable evidence of Merchant’s fraudulent or illegal use of the Services; (ii) as required by legal or regulatory authority; (iii) as a result of Merchant’s breach of any representations or warranties…; (iv) if, in its sole opinion, any information contained in the application is found or believed to be inaccurate or false; or (v) as a result of a Force Majeure event.”. These five categories are essentially the “for cause” scenarios justifying an immediate shutdown. General “risk” or “business model” issues are not explicitly listed unless they rise to the level of suspected fraud/illegality or a misrepresentation in your application. Additionally, Section 10.2 allows termination on 10 days’ notice if you materially breach the agreement and fail to cure it, and it permits immediate suspension or termination if you have “excessive Chargebacks” or “returned items” or if you fail to pay fees due. Again, these are specific, objective triggers (e.g. too many ACH returns or chargebacks). Section 10.3 (“Effect of Termination”) is very telling: upon any termination, Authorize.Net may withhold payment to the Merchant for the time necessary to establish a Reserve Account to cover potential Chargebacks, refunds, or fees. In other words, when your account is closed, the contract lets them hold back some money temporarily to make sure any straggling refunds or disputes can be covered – but only as needed, and subject to that six-month cap on reserves in Section 5.4.
• Discretion vs. Good Faith: You probably noticed the agreement gives Authorize.Net a lot of discretion – e.g. deciding what is “excessive,” or terminating if they “believe” something is risky. However, under California law (which governs the agreement, see below), every contract carries an implied covenant of good faith and fair dealing. Even when a contract grants broad power, the implied covenant prevents a party from exercising that discretion in a manner that frustrates the other party’s reasonable expectations or deprives them of the benefits of the agreement. In this context, that means Authorize.Net shouldn’t use its discretionary powers (to hold funds or terminate accounts) in a way that’s arbitrary or lacks good faith—such as imposing a 2-year hold with no sound reason. We’ll discuss this more in the legal claims section, but keep in mind: discretion is not unlimited.
• Governing Law and Arbitration: The eCheck.Net agreement states it’s governed by California law (Authorize.Net is a Visa solution and part of Cybersource, whose operations are in California). It also contains an arbitration clause: “Any dispute arising out of or relating to this Agreement… shall be finally resolved by arbitration.” The seat of arbitration is San Francisco, CA. This means if you have a legal dispute, you generally must arbitrate rather than sue in court, and California laws will apply. The arbitration clause is quite detailed (it references rules of the CPR Institute), but for our purposes, know that you can demand arbitration to challenge holds – a step we’ll cover in our action plan. (Important: While the contract also mentions California courts having jurisdiction, that’s likely a carve-out for certain court actions. The main path for a monetary dispute over held funds will be arbitration.)

Bottom Line: The written contract does not explicitly authorize indefinite or multi-year fund holds. It contemplates at most a six-month reserve hold, and only to cover genuine risk exposure (like chargebacks). It also limits immediate terminations to genuine cause. If Authorize.Net is freezing funds for a year or more, or terminating accounts on a whim without cause, they may well be acting outside the bounds of their own agreement. This sets the stage for potential legal claims.

Legal Analysis: Is Authorize.Net Breaching Its Contract by Holding Funds Indefinitely?

Given the contract terms above, there are a few ways Authorize.Net’s conduct in these scenarios might amount to a breach of contract or other legal violations:

• Holding Funds Past 6 Months: If your funds have been held beyond ~180 days without any chargebacks or outstanding customer disputes, this likely violates Section 5.4.2’s six-month cap on reserve accounts. Even if chargebacks occurred, holding everything for two years is far beyond what the agreement permits. (Remember, even PayPal and Stripe – known for holds – typically cite a 180-day limit for final release of reserves. Authorize.Net’s own contract aligns with that general industry standard of 6 months.) An open-ended hold with no end in sight is not supported by the contract language.
• No Notice or No Formal “Reserve” Established: Section 5.4.1 requires that if a reserve hold is established, Authorize.Net “shall promptly send Merchant notice of the amount held”. In many complaints, merchants say they were never informed of any formal reserve – they were just told verbally or by email that funds are being held. If Authorize.Net didn’t designate the withheld funds as a “Reserve Account” and didn’t give notice of the amount, that could be another breach of the agreement’s procedures.
• Lack of Cause for Immediate Termination: If Authorize.Net closed your eCheck.Net account without giving 30 days notice and without a valid cause under Section 10.1 or 10.2, that may violate the contract. For instance, terminating “due to business model” concerns (with no fraud, no illegal activity, and no misrepresentation on your part) is arguably not one of the allowed immediate-termination causes. Unless they can point to something like suspected fraud or excessive returns, they should either (a) give you 30 days notice to wind down, or (b) keep the gateway open but perhaps impose transaction limits or a reserve. Cutting you off overnight for an arbitrary risk reason could be an overreach of their contractual rights. (At the very least, it’s bad faith – more on that below.)
• Failure to Release Funds After Risk Period Ends: Some merchants report that even after the stated hold period (90 days, 120 days, 180 days) passed and no chargebacks surfaced, Authorize.Net still refused to release the moneybbb.org. If the risk that justified the hold never materialized, continuing to withhold the funds may lack any contractual basis. Section 10.3 allows holding funds only as long as necessary to cover potential liabilities. Once that time has passed (e.g. once the window for ACH returns/chargebacks is over), Authorize.Net should release the remaining balance. Not doing so could be deemed an unreasonable failure to perform their obligation to pay you.
• Implied Covenant of Good Faith and Fair Dealing: Under California law, Authorize.Net must exercise any discretion under the contract in good faith. If they are invoking “sole discretion” to declare your business model too risky (despite no evidence of issues), or continually extending holds with shifting explanations, a strong argument can be made that they are violating the implied covenant of good faith. As noted, this covenant “prevents a party from exercising discretion in a manner that frustrates the other party’s rights or the benefits of the agreement.” Indefinitely withholding funds – effectively depriving you of the core benefit of the contract (getting paid for transactions) – is likely a breach of that covenant, even if the contract doesn’t spell out a specific limit in every scenario. Courts have held that where one party has discretionary power affecting the other’s money, that power must be exercised reasonably and with proper motive. Holding funds “just because we can” or to pressure merchants is not a proper motive.
• Unfair Business Practice Concerns: Beyond the contract itself, California’s broad Unfair Competition Law (Business & Professions Code §17200) comes into play. This law forbids any “unlawful, unfair or fraudulent business act or practice.”codes.findlaw.com A strong case can be made that unreasonably holding a merchant’s funds for prolonged periods (especially if done systematically to many merchants) is an “unfair” business practice. It harms businesses, goes against what the merchants were led to expect, and may violate public policy (since payment processors shouldn’t just freeze money without cause). If Authorize.Net’s conduct violates its own contracts or NACHA rules, it could also be “unlawful” under §17200. While §17200 is typically enforced by regulatory authorities or through lawsuits (often class actions), you can invoke it in an arbitration demand as a claim as well. At the very least, mentioning it increases pressure, because a pattern of such behavior could attract regulators’ attention.

Now that we’ve identified how Authorize.Net’s extended fund holds might be legally improper, let’s outline the specific legal causes of action an affected merchant could assert.

Legal Grounds for Recovering Your Funds

When seeking to get your money back, it’s important to frame your case in legal terms. Here are the main causes of action that often apply in fund-hold disputes, and how they relate to Authorize.Net:

Breach of Contract

If Authorize.Net violated any of the express terms of the eCheck.Net Service Agreement, you have a claim for breach of contract. Potential breaches include: (1) failure to follow the reserve terms (e.g. holding beyond 6 months or not providing notice of a reserve); (2) improper termination (e.g. immediately shutting you down without valid cause or notice, contrary to Section 10); and (3) failure to remit funds owed to you (after the hold period elapsed or in absence of any chargebacks). In a breach of contract claim, you’d argue that you did your part (processed transactions, delivered products/services to your customers), but Authorize.Net did not perform their duty to pay you per the agreement’s terms. The remedy would be payment of the withheld funds, plus any proven damages (for example, if the hold caused additional losses). Note: The contract likely limits liability for indirect damages, but the value of the withheld funds themselves is recoverable.

Conversion (Wrongful Retention of Funds)

Conversion is a tort (a wrongful act) whereby someone takes or retains possession of your property without consent or legal justification. In California, money can be the subject of a conversion claim if it’s a specific, identifiable sum belonging to you. Here, the money from your transactions – once the payments clear – belongs to you, not Authorize.Net. If they refuse to release it, that’s essentially “wrongfully exercising dominion over your property (the withheld funds)”. To prove conversion, you show: you have a right to the funds, you demanded their return, and Authorize.Net refused to return them. The beauty of a conversion claim is that it doesn’t depend on the contract; even if Authorize.Net argues the contract gives them leeway, you can assert that holding beyond a reasonable time is a wrongful act. Conversion also opens the door to punitive damages if you can show the withholding was done with malice or fraud (e.g. deliberately holding your money without basis). At a minimum, you can claim interest or the benefit Authorize.Net derived from your money during the hold, as part of conversion damages. For example, California law allows prejudgment interest on liquidated sums owed (Civil Code §3287(a)), meaning you could ask for interest from the date the funds should have been paid.

Breach of Implied Covenant of Good Faith & Fair Dealing

As discussed, the implied covenant requires each party to act in good faith and not to deprive the other of contract benefits. Your claim here would be that Authorize.Net technically might argue some contractual discretion to hold funds or terminate accounts, but they exercised that discretion unreasonably or dishonestly. Specific breaches of the covenant could include: holding funds “indefinitely” (far beyond what’s reasonable to cover risk) with no legitimate justification, or terminating your account in bad faith (for a pretextual reason) to hold your money. Notably, even if Authorize.Net didn’t explicitly breach a written term, their bad faith conduct can breach the covenant. For instance, if the contract doesn’t specify a maximum hold but they hold for 2 years with no cause, that violates the spirit of the deal. California law implies this covenant into the agreement, so you’d cite that and argue their conduct frustrated your primary benefit (receiving timely payment). The remedy can be similar to breach of contract (release of funds, possible interest or consequential damages), though punitive damages usually aren’t available for covenant breach unless tied to an independent tort.

Unjust Enrichment (Restitution)

In the alternative to contract claims, you can assert unjust enrichment – essentially that it is unfair for Authorize.Net to keep a benefit (your money, or interest earned on it) without paying you. Unjust enrichment is not always a standalone cause of action in California (courts often treat it as part of restitution), but you can plead it as a quasi-contract claim: if for some reason the contract is deemed inapplicable or not breached, it’s unjust for Authorize.Net to retain your funds. The elements are that they received a benefit at your expense, and it would be inequitable for them to keep it. Here, the benefit is the interest income or use of your $50,000 (for example) for two years, while you got nothing. One scathing customer review described this dynamic: “they’ve unjustly held over $50,000 of our funds”cardpaymentoptions.com. In an arbitration or court, you’d ask that Authorize.Net be ordered to disgorge any enrichment (i.e. pay you the money and possibly the interest on it). Unjust enrichment is especially useful if Authorize.Net tries to argue that the contract allowed their behavior; you can say, “even if it did, it’s unconscionable and they shouldn’t be allowed to profit from it.”

Violation of California Business & Professions Code § 17200 (Unfair Business Practices)

Finally, you can claim that Authorize.Net’s conduct amounts to an “unfair business practice” under California’s UCL (Section 17200). The UCL is very broad – it forbids any business act that is unlawful, unfair or fraudulent. Holding customer funds for excessively long periods could be argued to be unfair (causing substantial harm to merchants that outweighs any utility, and contrary to established public policies in finance). It could also be unlawful if it violates regulations or the contract (a breach of contract can sometimes underpin a UCL claim as an “unlawful” act). The remedies under §17200 are primarily equitable – e.g. restitution (return of money) and injunctive relief to stop the unfair practice. In an individual arbitration, you’d focus on restitution (getting your money back). Importantly, a 17200 claim lets you frame the issue as part of a broader pattern – you can cite other complaints as evidence that this is Authorize.Net’s modus operandi, not a one-off mistake. That can put extra pressure on them, as such claims invoke consumer protection concerns. (If this were to go beyond arbitration, a successful UCL claim could even lead to court orders affecting their practices generally.)

Summary of Your Legal Arsenal: In most cases, a demand for your funds will include breach of contract, conversion, breach of implied covenant, unjust enrichment, and §17200. These claims often overlap, but together they cover all bases. You are saying: “Authorize.Net, you broke our agreement and you’re holding my property without justification. You’ve acted unfairly and in bad faith. Give me my money or face legal consequences.”

Next, we’ll discuss practical strategies for using these legal rights to actually get paid, including how to escalate the issue and whom to contact. Then, we’ll provide a template demand letter that puts all of the above into a format that gets Authorize.Net’s attention, and a sample arbitration demand to show you’re prepared to go the distance.

Practical Strategies for Recovering Held Funds

Facing a fund hold, you have two broad paths: informal resolution and formal legal action. It’s wise to try multiple avenues in parallel. Here are steps that have proven effective for other merchants:

• Gather Documentation: First, get your ducks in a row. Compile all communications from Authorize.Net (emails about the hold or termination), your transaction records, proof of delivered products/services, and any evidence that there have been no chargebacks or disputes (or if there were, evidence you resolved them). This factual record will support you in disputes and show you’re a responsible merchant.
• Contact Authorize.Net through multiple channels: Don’t just rely on one support email. Call customer support, open a support ticket, and politely but firmly escalate the issue. Ask to speak to a manager or the risk department directly. While front-line reps often can’t override a hold, you might get valuable information or at least make it known that you’re not going away quietly. Document all interactions (dates, names, what was said).
• Request Early Release in Writing: Authorize.Net’s email to some merchants says you can “request an early release of funds” after a certain period (30 days, etc.)reddit.com. Make sure you formally request that (via email, so it’s in writing) as soon as you’re eligible, and again whenever they allow subsequent requests. Even if they’ve been denying others, it shows you followed their process. Their response (or non-response) will be evidence of their unwillingness to cooperate.
• Leverage Your Merchant Bank or Processor (if applicable): Remember that Authorize.Net is a gateway. In many cases, the actual funds from ACH might be processed by an underlying sponsor bank or payment processor partner. If you know the acquiring bank involved in your eCheck processing, you might try reaching out to them or mentioning to Authorize.Net that you will contact the bank about the situation. Processors and banks have regulatory oversight (NACHA rules for ACH and federal regulators), so this sometimes spooks the gateway into facilitating a resolution. (One BBB complaint indicates Authorize.Net forwarded an application to a partner for underwriting due to risk concernsbbb.org – showing the bank is in the picture.)
• File Regulatory Complaints: Don’t underestimate the power of involving regulators and watchdogs:
  • CFPB (Consumer Financial Protection Bureau): The CFPB takes complaints about payment services and financial companies. If your business is small or individual, a CFPB complaint might be appropriate (especially if you feel the hold is effectively holding consumer payments due to you). The CFPB will forward it to Visa/Authorize.Net for a response. Even the hassle of having to answer a CFPB inquiry can prompt a company to release funds to make the complaint go away.
  • FTC (Federal Trade Commission): The FTC can collect complaints about unfair business practices. While a single complaint may not lead to immediate action, a pattern of complaints could trigger investigation. You can file online at the FTC Complaint Assistant.
  • State Regulators: Since Authorize.Net is governed by CA law, you can complain to the California Department of Financial Protection & Innovation (DFPI). DFPI oversees certain financial services and has an online complaint portal. They take UCL (unfair practice) issues seriously, especially if small businesses are harmed. If you’re outside CA, your own state’s Attorney General’s consumer protection division is another option.
  • Better Business Bureau (BBB): As we saw, many merchants filed BBB complaints. Authorize.Net actually responds to BBB complaints (often with formulaic answers, but sometimes with partial resolutions). A BBB complaint is public, which companies dislike. It’s free and easy to file. At a minimum, you’ll get a formal response from Authorize.Net that might reveal their justification or lack thereof in writing.
  These complaints can be filed concurrently with your direct efforts. They create a record that you object to the hold and are seeking help. Sometimes, just the presence of regulators in the loop motivates a quicker payout.
• Leverage Visa/Mastercard or NACHA: Authorize.Net is a Visa solution (owned by Visa via Cybersource). While it’s not common to directly complain to Visa about a gateway, you might mention in your communications that you’re considering raising the issue with Visa Inc. Similarly, since ACH transactions are governed by NACHA rules, a merchant can technically report violations of ACH rules (for example, if funds aren’t being handled in accordance with NACHA timeframes). NACHA has a compliance program, although it’s often banks that use it, not individual merchants. Still, implying that the situation might be a reportable violation of network rules could add pressure.
• Prepare for Legal Action (Demand Letter & Arbitration): Ultimately, the most effective tool to get your money is often the threat of legal action that Authorize.Net can’t ignore. This means drafting a strong demand letter that outlines your legal claims (as discussed above) and signals that you are ready to file an arbitration if they don’t cooperate. In my experience, a well-crafted demand letter coupled with a draft arbitration demand gets far more attention than endless calls to support. The next sections provide a template for such a letter and a sample arbitration demand.
• Use Time to Your Advantage: Payment processors often hope merchants will give up if they drag things out. Don’t. Mark your calendar for key dates (e.g. when the 90-day or 180-day hold period elapses) and follow up immediately when those pass. If they extend the hold, ask for the specific reason in writing. The longer they hold without cause, the stronger your case becomes. Demonstrating patience and persistence is key – you are willing to negotiate, but not indefinitely.

By combining these strategies, you send a message: “I am not a passive victim. I know my rights, I’ve alerted authorities, and I’m prepared to fight this formally.” Often, Authorize.Net (or any processor) will choose to release the funds rather than engage in a costly legal battle, especially if the amount held isn’t huge on their scale. They’d rather redeploy resources than spend time with lawyers over a $10k or $50k hold.

In fact, many merchants find that the simple act of filing an arbitration demand prompts settlement discussions and releases of funds. Authorize.Net/Cybersource has lawyers, of course, but they also have incentives to avoid drawn-out disputes with small businesses that could attract regulatory scrutiny.

Now, let’s move on to the actionable documents. Below is a Demand Letter Template you can customize and send to Authorize.Net. Following that is a Draft AAA Arbitration Demand that you can include with the letter (as an attachment) or have ready to file. The demand letter cites the contract and legal violations as discussed, and gives Authorize.Net a short window (e.g. 14 days) to pay up or face the next step.

Demand Letter Template: Authorize.Net Fund Release

(Use this template as a starting point. Fill in the details in [brackets] with your information. Send the letter to Authorize.Net’s legal or risk department – check the service agreement for a Notice address, or use their corporate address in California and email a copy to any risk department email you have. Always keep a copy for your records.)

[Your Name or Company Name]  
[Your Address]  
[City, State, ZIP]  
[Your Email]  

[Date]

VIA CERTIFIED MAIL and EMAIL  

Authorize.Net (a service of CyberSource, Visa)  
ATTN: Legal Department / Risk Management  
[Address from Authorize.Net’s official contact – e.g., 900 Metro Center Blvd, Foster City, CA, or current HQ address]  
[Email address of risk team, if available]

Re: Demand for Release of Withheld Funds – Merchant [Your Gateway ID or Account Number]

Dear Authorize.Net Risk/Legal Department:

I am writing to formally demand the immediate release of **$[Amount]** in eCheck.Net funds currently being withheld from my merchant account **[Account ID]**. Authorize.Net’s continued hold on these funds is not supported by our agreement and is causing severe harm to my business.

Background: I have been a merchant using Authorize.Net’s eCheck.Net service since [start date]. On [date of hold/termination], Authorize.Net [suspended/terminated] my eCheck.Net processing without prior notice. I was informed by [email from risk team/support rep] that the funds from recent transactions (totaling $[Amount]) would be held for [90 days] due to “[stated reason, e.g., business model/risk]”. To date, no chargebacks or ACH returns have occurred** on my account that would justify a hold. I have complied with all requests for information and there is no legitimate basis to continue withholding my money.

Contractual Violations: Authorize.Net’s actions breach multiple provisions of the governing eCheck.Net Service Agreement (“Agreement”):

- Section 5.4 (Reserve Account) – This section permits Authorize.Net to hold funds in a reserve only to cover anticipated liabilities, and only with prompt notice of the reserve amount. It also states any reserve “may be held… for up to six (6) months after the later of the last transaction, Chargeback or other liability”. In my case, Authorize.Net **never provided notice of any formal Reserve Account being established. More importantly, the funds have now been held for [X months] with no chargebacks at all, far exceeding the reasonable timeframe allowed. Continuing to hold funds beyond 6 months (or even beyond the 60-day ACH dispute window, given no disputes) directly contradicts the Agreement’s intent and express limits.

- Section 10 (Termination) – The Agreement requires 30 days’ notice for termination in ordinary cases, and allows immediate termination only for cause (e.g. fraud, illegal activity, breach of representations, excessive chargebacks). Authorize.Net terminated my eCheck.Net service without cause. The cited reason, “[business model concerns],” does not fall under any permissible immediate-termination cause. I had no fraudulent or prohibited activity. Thus, the sudden termination was contractually improper, and the resulting fund hold is improper as well. Even if termination were valid, Section 10.3 only allows withholding funds for the time necessary to cover chargebacks/refunds—again, a condition not applicable here.

Authorize.Net’s failure to release my funds now that we are well past any reasonable risk period constitutes a material breach of contract. I have upheld my end by delivering goods/services to my customers; Authorize.Net has not delivered payment to me as required.

Legal Violations: In addition to breaching the Agreement, the prolonged hold on my money violates several legal duties Authorize.Net owes me:

- Conversion: Under California law, it is unlawful to intentionally interfere with another’s property without justification. The withheld funds are my property, and your refusal to release them upon demand is **wrongful conversion**. Each day you retain my $[Amount] is an unlawful deprivation of my funds.

- Implied Covenant of Good Faith: Every contract in California includes an implied promise of good faith and fair dealing. Authorize.Net has breached this covenant by exercising its discretionary risk controls unreasonably and depriving me of the fundamental benefit of the bargain (receiving timely payment). Holding funds indefinitely – with no evidence of actual risk – is not a good faith action and frustrates the purpose of our Agreement.

- Unjust Enrichment: Authorize.Net has no legitimate claim to my $[Amount], yet by holding it, the company is benefiting (earning interest or other financial gains) while my business suffers. Retaining this benefit is unjust enrichment. If a court or arbitrator finds the contract does not strictly address this scenario, they will impose an obligation to return the funds in equity.

- Unfair Business Practices (B&P §17200): Authorize.Net’s practice of freezing merchants’ funds without cause or communication, and in contravention of its own terms, is an “unfair business practice” under California’s Unfair Competition Law. It is causing substantial harm to businesses like mine and is contrary to industry norms and legal requirements. I reserve the right to pursue this claim and alert regulators to this behavior.

Demand: I hereby demand that Authorize.Net release the full $[Amount] to me within 14 days** of this letter (i.e. by [date + 14 days]). The funds should be returned via ACH to my linked bank account or by official check. 

If the funds are not received by that date, I will have no choice but to initiate formal legal action. Attached to this letter is a **draft Demand for Arbitration** prepared to be filed with the American Arbitration Association (AAA) pursuant to the Agreement’s dispute resolution clause. In arbitration, I will seek not only the funds and any contract damages, but also tort damages, interest, and all available relief – including punitive damages for conversion and remedies under Business & Professions Code §17200 – as well as recovery of my attorneys’ fees and arbitration costs to the fullest extent permitted.

Opportunity to Resolve: This letter is an attempt to resolve this matter without further legal involvement. I urge Authorize.Net to consider the significant liability exposure and legal costs that continued retention of these funds will lead to, versus the simplicity of releasing the money that rightfully belongs to me. I am willing to discuss a prompt payout and any reasonable terms to conclude this dispute amicably. However, lack of a timely and satisfactory response will result in immediate escalation.

Please direct your response to the contact information above. I hope to hear from you well before the expiration of the 14-day period, confirming that the funds are in the process of release.

Sincerely,

[Your Name]  
[Your Title, if applicable]  
[Your Company Name]

(End of Demand Letter)

Using the Demand Letter: Send this letter via a trackable method (e.g., certified mail, FedEx) to ensure it gets attention. Also send by email to any risk department or legal email you have – the faster they see it, the better. Be sure to attach or include the Draft Arbitration Demand (next section) with your letter. The letter references it, signaling you are fully prepared to file.

Including the arbitration draft ups the ante: it shows you’ve done the paperwork and are ready to hit “submit” with AAA. This combination of a detailed demand plus a ready-to-go arbitration filing often motivates a company’s legal department to step in and resolve the issue before things escalate further.

Now, let’s look at the Draft AAA Arbitration Demand itself – what it contains and how to prepare it.

Draft AAA Arbitration Demand – Example

(The following is a sample structure for an arbitration demand concerning held funds. You would file a document like this with the American Arbitration Association if Authorize.Net doesn’t resolve the issue. It should be tailored to your situation, but we provide a template for guidance. In an actual AAA filing, you’d also fill out an official form and pay a filing fee, but the main content would mirror what’s below.)

Claimant: [Your Name or Business Name], located at [Your Address]. (Hereinafter “Claimant.”)

Respondent: Authorize.Net, LLC (a Visa Solution, subsidiary of CyberSource), with a principal place of business at [Authorize.Net’s California address]. (Hereinafter “Respondent.”)

Arbitration Agreement: This dispute is subject to arbitration pursuant to the Authorize.Net eCheck.Net Service Agreement (“Agreement”) accepted by Claimant. The Agreement provides for binding arbitration of disputes and is governed by California law. Claimant has satisfied all conditions precedent (if any) to arbitration. (Note: Claimant provided written notice of this dispute to Respondent on [date of your demand letter], and more than 14 days have passed with no resolution.)

Factual Background: Claimant is a small business that used Respondent’s eCheck.Net payment services to process ACH payments. Claimant’s account (Gateway ID [XXXX]) was in good standing and had processed approximately $[$$$] in ACH transactions. On [Date], Respondent suddenly terminated Claimant’s eCheck.Net service and froze an amount of $[Amount] which had been processed from customers but not yet paid out to Claimant. Respondent stated the account closure was due to “business model concerns” (an undefined term), and that funds would be held for [90] days. No incidents of fraud, illegal activity, chargebacks, or ACH returns occurred on the account to trigger such action. Despite the passage of time and repeated requests, Respondent has failed to release Claimant’s funds. As of the date of this filing, it has been [X months] since the funds were first withheld, exceeding both Respondent’s initially stated hold period and the maximum reserve period allowed under the Agreement.

Throughout this period, Claimant fully cooperated with Respondent, providing documentation and information to address any risk queries. Respondent, however, has given no further justification for the extended hold and has effectively cut off communications (apart from form responses denying early release). Claimant has been deprived of critical operating funds, causing hardship and damage to Claimant’s business.

Claims for Relief: Claimant asserts the following causes of action against Respondent:

1. Breach of Contract: Respondent breached the eCheck.Net Service Agreement by (a) failing to adhere to Section 5.4’s requirements and time limits on reserve holds, and (b) terminating Claimant’s account without cause or proper notice, in violation of Section 10 of the Agreement. Respondent’s continued withholding of $[Amount] long after any reasonable risk period constitutes a material breach of its payment obligations under the Agreement.
2. Conversion: Respondent’s refusal to release Claimant’s property (the $[Amount] in funds) upon demand is an unlawful conversion. Claimant had a right to these specific funds (proceeds from its sales), and Respondent has willfully interfered with that right without lawful justification. This wrongful retention has caused harm and entitles Claimant to recover the funds plus consequential damages. Given the intentional nature of the misconduct, Claimant will also seek punitive damages to deter such bad-faith behavior.
3. Breach of Implied Covenant of Good Faith and Fair Dealing: Respondent breached the implied covenant inherent in the Agreement by exercising its contractual discretion (to hold funds or terminate services) in bad faith. Specifically, Respondent arbitrarily labeled Claimant’s business as high-risk and imposed an indefinite hold, knowing this would destroy Claimant’s benefit of the contract. This lack of good faith and fair dealing is a separate breach, entitling Claimant to damages.
4. Unjust Enrichment (in the alternative): Should Respondent contend that no express contractual breach occurred, Claimant pleads that Respondent has been unjustly enriched by retaining $[Amount] that in equity and good conscience belongs to Claimant. Respondent has enjoyed the benefit of Claimant’s funds (including any interest or earnings thereon) while Claimant received nothing. Equity demands restitution of the full amount, even if a technical reading of the contract might not cover this scenario.
5. Unfair Business Practices (Cal. Bus. & Prof. Code § 17200): Respondent’s conduct constitutes an “unfair” business act or practice under California’s Unfair Competition Law. Freezing Claimant’s funds without contractual or legal justification is immoral, unethical, oppressive, and substantially injurious to consumers/merchants. It offends established public policy reflected in payments law and the Agreement itself. As a result of this unfair practice, Claimant has lost money (the withheld funds and related losses) and seeks restitution. (This claim is asserted to the extent the Arbitrator finds it applicable and within the Arbitrator’s authority to grant relief.)

Relief Requested: Claimant seeks an award in Claimant’s favor as follows:

• Release and Payment of Withheld Funds: An order that Respondent immediately pay Claimant the amount of $[Amount], representing the full balance of funds improperly withheld, plus applicable interest. Claimant calculates prejudgment interest of $[X] (and continuing) is due under Cal. Civil Code §3287 for the period of withholding. In the alternative, interest should be awarded as damages for conversion or under any other applicable law.
• Damages for Breach of Contract / Covenant: Additional damages in an amount to be proven, for losses caused by the unavailability of funds (for example, lost business opportunities or costs of obtaining alternative financing). (Claimant will provide evidence of such damages if this arbitration proceeds to discovery/hearing.)
• Punitive Damages: An award of punitive or exemplary damages in an amount the Arbitrator deems just, to punish and deter Respondent for willful, malicious conduct in wrongfully converting Claimant’s funds (if the Arbitrator finds that standard met).
• Restitution/Disgorgement: An order requiring Respondent to disgorge any profits or benefits obtained from the use of Claimant’s funds during the period of withholding, as a measure of restitution or under the UCL claim.
• Injunctive Relief: If applicable, an injunction prohibiting Respondent from continuing to hold Claimant’s funds and/or from engaging in similar unfair practices against others. (Claimant recognizes an arbitrator’s power to grant public injunctive relief may be limited; this is noted for preservation or referral to court if needed.)
• Costs and Fees: Reimbursement of all arbitration filing fees and arbitrator fees paid by Claimant. Additionally, Claimant seeks an award of reasonable attorneys’ fees if recoverable (under any applicable statute or contract provision, or if Respondent’s bad faith conduct justifies a fee-shifting sanction).
• Any Further Relief the Arbitrator deems just and proper.

Amount in Controversy: $[Amount] (principal withheld) + additional damages and penalties as appropriate. For jurisdictional purposes, Claimant estimates the total amount of relief sought is in the range of $[Amount plus potential damages] (exclusive of punitive damages which are unliquidated).

Venue: Claimant requests the arbitration hearing be held in California (San Francisco Bay Area) consistent with the Agreement’s designation of California as the governing law and arbitration venue. Claimant is willing to appear by video or telephonically as the Forum rules permit, especially if Claimant is located out of state.

Statement of Efforts to Resolve: Claimant made good-faith efforts to resolve this dispute directly. On [date], Claimant sent Respondent a detailed written notice of claims and demand for payment (via certified mail and email). Respondent [failed to respond OR responded on date with insufficient resolution]. Thus, arbitration is now necessary.

Claimant hereby certifies that the foregoing is true and accurate to the best of my knowledge, and that a copy of this Demand is being provided to Respondent.

(Claimant’s Signature or Claimant’s Attorney’s Signature)
[Your Name]
Date: [Date of filing]

++++
How to Use: If Authorize.Net doesn’t comply with your demand letter, you would finalize a document like the above, file it with the **AAA** (assuming AAA is the forum – the contract references CPR rules, but you can attempt AAA unless challenged, as many companies will simply proceed with AAA). Filing can often be done online via AAA’s portal, with a filing fee (which for a consumer or small business case might be a few hundred dollars – sometimes split with the company).

Once filed, you send a copy to Authorize.Net (typically to their registered agent or legal department). Many merchants report that the act of filing gets a quick settlement from Stripe/Authorize.Net before arbitration proceeds. Authorize.Net may reach out to negotiate once they’re served with the demand. You can then insist on full payment plus the filing fee as your condition to dismiss the arbitration.

If they oddly choose to fight, the process moves to arbitrator selection, briefs, and a hearing. Given the clear contract language in your favor (6-month limit, etc.) and the negative optics of holding a small business’s money, Authorize.Net would face an uphill battle justifying its actions.



Conclusion: Taking Back Control of Your Funds


Authorize.Net’s eCheck.Net holds have put many merchants in tough positions, but **you are not powerless**. By understanding your contract rights and the legal principles involved, you can turn the tables and pressure Authorize.Net to do the right thing. Here are the key takeaways and final tips:

- **Know the Rules:** Authorize.Net’s own terms cap reserve holds at 6 months and allow immediate account closure only for serious reasons. Use those provisions to argue your case.


- Apply Pressure Strategically: A combination of a well-founded demand letter, regulatory complaints, and an arbitration threat leverages both legal and reputational pressure. This dual approach often prompts a quick business decision to release funds rather than engage in a protracted fight.

- Stay Professional: In all communications, remain factual and professional. Emotional venting on forums might be cathartic, but when dealing with Authorize.Net’s legal team or arbitrators, a calm, legalistic tone gets better results.

- Consider Help if Needed: If the amount at stake is large or the matter complex, consult an attorney. Many attorneys (like myself) experienced in payment disputes can often write an even more customized demand letter or take over negotiations for a relatively reasonable fee. Sometimes a letter on legal letterhead has added punch. But even without a lawyer, the templates provided here give you a strong starting point.

Facing a fund hold can be stressful and unfair, but merchants who educate themselves and take assertive action often succeed in freeing their money. Authorize.Net, like any payment processor, ultimately doesn’t want protracted disputes or damage to its reputation. By approaching the situation with legal savvy and persistence, you stand a very good chance of recovering your funds and moving on with your business.