ACH return codes and Nacha thresholds

What are ACH returns?

An ACH return is a message that lets Straddle know the ACH Network couldn’t collect funds from or deposit funds into a Receiver’s account. Typically, an ACH return comes from the RDFI (customer’s bank), but in some instances the ODFI (your bank) or even the ACH Operator itself might send such a message. You can think of a return being similar to a chargeback for credit cards - it is something that as a business you hope to avoid, but at times can be unavoidable. Returns being initiated by the RDFI can only be initiated during specific timeframes, due to rules set by the Nacha operating guidelines.

Why do ACH returns happen?

ACH returns typically occur in two main scenarios: Immediate identification by RDFI The RDFI can quickly identify when a return needs to be initiated in situations such as:

Insufficient funds in the receiving party’s account
Legal name on the account doesn’t match the legal name included within a payment

The RDFI will act quickly to ensure these returns are highlighted and sent to Straddle to handle accordingly. Receiver-initiated returns The receiving party can reach out to their bank to request a return on a payment. This scenario might include times when the receiving party alerts the RDFI that they had not initially provided permission for a payment to occur on their account.

There are approximately 70 unique return codes that help the Originator identify the reason for a return. Each return code is specific to certain entry types and has specific time frames for return.

ACH return thresholds

Nacha rules require that each account maintain a percentage of ACH debit returns under specific thresholds:

Administrative Returns must stay below 3%. This percentage is calculated based on ACH debit returns for the preceding 60 days on return reason codes: R02, R03 and R04.

Unauthorized Returns must stay below 0.5%. This percentage is calculated based on ACH debit returns for the preceding 60 days on return reason codes: R05, R07, R10, R29 and R51.

Overall Returns must stay below 15%. This percentage is calculated based on ACH debit returns for the preceding 60 days and includes all return reason codes. This includes NSF (non-sufficient funds) returns (reason codes R01 and R09).

Common return codes

Reason	Return Code	SEC Code	Action
Insufficient Funds - Available balance not sufficient to cover amount of debit entry	R01	ALL	May initiate a new ACH entry; must remain within reinitiation limits outlined in Article 2 of the ACH Rules and be reinitiated within 180 days of the Settlement Date of the original entry
Account Closed - Previously active account has been closed	R02	ALL	Stop initiation of entries. Contact customer to obtain authorization for another account
No Account - Account number structure is valid, but doesn’t match individual or open account	R03	ALL	Stop initiation of entries. Customer should be contacted for correct account information
Invalid Account - Account number structure not valid; edit of check digit or number failed	R04	ALL	Stop initiation of entries until account number/structure is corrected
Payment Stopped - The customer has requested the stop payment of a specific ACH debit entry	R08	ALL	Contact the customer to identify the reason for the stop payment and obtain authorization before reinitiating the entry
Uncollected Funds - Sufficient ledger balance exists, but value of uncollected items brings available balance below amount of debit entry	R09	ALL	May initiate a new ACH entry; must remain within limits for reinitiating entries outlined in Article 2 of the ACH Rules and be reinitiated within 180 days of the Settlement Date of the original entry
Account Frozen/Entry Returned Per OFAC Instruction - Access to the account is restricted due to action by RDFI or by legal action	R16	ALL	Stop initiation of entries. Terms of authorization may offer recourse outside the ACH Network. OFAC may have instructed the payment be returned
File Edit Record Criteria/Entry with Invalid Account Number Initiated Under Questionable Circumstances - Fields edited by the RDFI cannot be processed or RDFI suspects payment may be fraudulent	R17	ALL	Identify and correct errors prior to initiation of further entries. Errors are identified in the Addenda Information field of the Addenda Record. If this field contains ‘QUESTIONABLE,’ investigate validity of transaction
Non-Transaction Account - RDFI policies or regulations restrict activity to account indicated	R20	ALL	Stop initiation of entries. Contact customer for new account information
Duplicate Entry - Entry is a duplication. The trace number, date, dollar amount, etc. match another entry	R24	ALL	If entry is a duplication, accept the return. If the entry has already been reversed, your company should work with your ODFI to contact the RDFI to determine a solution

Unauthorized returns

An unauthorized return occurs when the RDFI asks for the amount debited from the bank account of the Receiver to be returned to the account from which it was withdrawn. In most situations, the return is initiated when the Receiver submits a signed statement to their bank claiming that the transaction is not authorized. These returns have a far longer “return window” - the Nacha rules allow for automatic reversal of unauthorized transactions for up to 60 days.

If a consumer completes a Written Statement of Unauthorized Debit, the RDFI will return the debit entry as Unauthorized. If you can prove that there is, in fact, valid authorization to debit the account, you should pursue the issue outside of the ACH Network. This could include requesting a copy of the signed statement from the RDFI and seeking legal advice on how to handle the collection of authorized funds from the consumer.

Unauthorized return codes

Reason for Return	Return Code	SEC Code	Action by Originator
Unauthorized Debit to Consumer Account Using Corporate SEC Code - A debit entry that uses a corporate SEC code was transmitted to a consumer account but was not authorized by the consumer	R05	CCD	Stop initiation of entries
Authorization Revoked - Customer who previously authorized an entry claims authorization has been revoked	R07	PPD, WEB	Stop initiation of entries until new consumer authorization is obtained. Depending upon the terms of the original authorization, your company may have recourse for collection outside the ACH Network
Customer Advises Originator is Not Known to Receiver and/or Originator is Not Authorized by Receiver to Debit Receiver’s Account - Receiver doesn’t know or have a relationship with the Originator. No authorization provided. Signature on source document or written authorization is not authentic, valid or authorized	R10	PPD, WEB	Stop initiation of entries
Customer Advises Entry Not in Accordance with Terms of the Authorization - Authorization obtained, but error in payment (e.g. wrong amount; debit date before authorized; incomplete transaction; improper source document or exceeds reinitiation attempts)	R11	PPD, WEB	Your company may initiate a new entry to correct the underlying error without obtaining a new authorization. Corrected entry must be originated within 60 days of the Settlement Date of the R11 return entry
Credit Entry Refused by Receiver - Customer declines transaction because amount is inaccurate, results in overpayment, account is in litigation or Originator is not known to the Receiver	R23	ALL CREDIT ENTRIES	Obtain customer authorization prior to reinitiating the entry
Corporate Customer Advises Not Authorized - Corporate customer has notified RDFI that a specific entry is not authorized	R29	CCD	Stop initiation of entries until subsequent authorization has been obtained. If a valid authorization exists, your company may have recourse outside the ACH Network

ACH Fundamentals

Payment Compliance

NACHA Rules

Reference Materials

ACH return codes and Nacha thresholds

What are ACH returns?

Why do ACH returns happen?

ACH return thresholds

Common return codes

Unauthorized returns

Unauthorized return codes

​What are ACH returns?

​Why do ACH returns happen?

​ACH return thresholds

​Common return codes

​Unauthorized returns

​Unauthorized return codes

What are ACH returns?

Why do ACH returns happen?

ACH return thresholds

Common return codes

Unauthorized returns

Unauthorized return codes