ACH Return Codes: The Complete Guide

This guide is jam-packed with everything you need to know about ACH Return Codes.

We’ll cover everything from what ACH Return Codes are, why they’re important, how to use them correctly, and more.

Without further ado let’s dive into the world of ACH Return Codes.

 

Key Takeaways

• ACH return codes help businesses identify transaction issues, improve payment processing, enhance customer service, ensure compliance, reduce costs, and strengthen financial management.
• These codes impact error detection, communication, resolution, record-keeping/reporting, and performance analysis in the payment process.
• Familiarize yourself with key terms like ACH, ODFI/RDFI, return reason codes, NACHA’s Operating Rules, ACH Operators, and SEC codes.

 

What are ACH Return Codes?

ACH return codes are three-digit error messages financial institutions generate when there’s an issue with an electronic transaction. These codes help identify specific problems, enabling businesses and banks to address them promptly.

Why ACH Return Codes Matter for Your Business

Knowing about ACH return codes can benefit your business in several ways:

1. Quick error resolution: ACH return codes pinpoint transaction issues, like incorrect account numbers or insufficient funds, helping you efficiently address and fix problems.
2. Better payment processing: By recognizing ACH return code patterns, businesses can take preventive measures, minimize errors, and ensure smoother transactions.
3. Top-notch customer service: Knowing ACH return codes lets you communicate clearly with customers about transaction issues, maintaining trust and satisfaction.
4. Compliance made easy: Familiarity with return codes helps you follow NACHA’s Operating Rules, avoiding potential fines or penalties.
5. Cost reduction: Promptly resolving ACH return issues minimizes fees related to returned transactions and late payments.
6. Strong financial management: Understanding ACH return codes enables effective cash flow monitoring and helps avoid disruptions caused by unresolved transaction problems.

 

 

Role of ACH Return Codes in the Payment Process

ACH return codes play a crucial role in the payment process by identifying and communicating issues that may have occurred during an ACH transaction.

These codes are used by financial institutions to communicate the reasons for returned or rejected ACH entries between the Originating Depository Financial Institution (ODFI) and the Receiving Depository Financial Institution (RDFI).

Here’s how ACH return codes impact different stages of the payment process:

1. Error detection: RDFIs use ACH return codes to identify issues, such as incorrect account numbers or insufficient funds, streamlining error detection.
2. Communication: As a common language among ODFIs, RDFIs, and businesses, return codes enable clear communication about transaction errors and prompt action.
3. Resolution: Return codes help ODFIs and originators address issues, correct errors, and possibly resubmit transactions for processing payment, sometimes requiring receiver contact.
4. Record-keeping & reporting: ODFIs and RDFIs record and report ACH return codes to track transaction volumes/types and monitor compliance with rules/regulations.
5. Performance analysis: Businesses can analyze data on ACH return codes to identify areas for improvement in payment processes and implement strategies to enhance efficiency.

 

Related post: Payment Processing: What is it, and how does it work?

 

Key Terms to Know About ACH Return Reason Codes

When discussing ACH return reason codes, it is essential to understand some key terms that are frequently used. Here are the main terms to know:

1. Automated Clearing House (ACH): An electronic funds transfer system in the US for processing financial transactions between banks and other institutions.
2. Originating Depository Financial Institution (ODFI): The institution initiating an ACH transaction on behalf of its customer, responsible for ensuring data accuracy and validity.
3. Receiving Depository Financial Institution (RDFI): The institution receiving the ACH transaction for its customer, responsible for completing it according to ACH rules and regulations.
4. ACH Return Reason Codes: Standardized codes assigned by RDFIs to indicate reasons a transaction cannot be processed, helping identify errors or issues.
5. National Automated Clearing House Association (NACHA): The organization responsible for establishing and maintaining rules and regulations governing the US ACH network.
6. ACH Operator: Central clearing facilities that receive, sort, route, and settle ACH transactions; in the US, these are the Federal Reserve Banks (FedACH) and The Clearing House (EPN).
7. ACH Transaction Types: Direct Deposits (credits) transfer funds into a receiver’s account, while Direct Payments (debits) withdraw funds from a receiver’s account.
8. Standard Entry Class (SEC) Codes: Three-letter codes identifying the type and format of an ACH transaction with specific rules governed by NACHA’s Operating Rules.

 

 

Complete List of ACH Return Codes

There are numerous ACH return codes, each indicating a specific issue with a transaction.

Below is a complete list of ACH return codes for both Direct Deposits (credits) and Direct Payments (debits):

 

 

Return Code	Title	Account Type	Timeframe	Description
R01	Insufficient Funds	Consumer or Non-Consumer	2 Banking Days	Insufficient funds in the receiver’s account to cover the transaction.
R02	Account Closed	Consumer or Non-Consumer	2 Banking Days	The receiver’s account has been closed.
R03	No Account / Unable to Locate Account	Consumer or Non-Consumer	2 Banking Days	The account number provided does not correspond to an existing account.
R04	Invalid Account Number	Consumer or Non-Consumer	2 Banking Days	The account number provided is incorrect or improperly formatted.
R05	Unauthorized Debit to Consumer Account	Consumer	60 Calendar Days	A debit entry was initiated without proper authorization.
R06	Returned per ODFI’s Request	Consumer or Non-Consumer	Undefined	The ODFI requested the RDFI to return the transaction.
R07	Authorization Revoked by Customer	Consumer	60 Calendar Days	The receiver revoked their authorization for the transaction.
R08	Payment Stopped	Consumer or Non-Consumer	2 Banking Days	The receiver requested a stop payment on the transaction.
R09	Uncollected Funds	Consumer or Non-Consumer	2 Banking Days	The receiver’s account contains funds that are not yet available.
R10	Customer Advises Not Authorized	Consumer; Non-Consumer for ARC, BOC, IAT, or POP.	60 Calendar Days	The receiver claims the transaction was not properly authorized.
R11	Check Truncation Entry Return	Consumer; Non-Consumer for ARC, BOC, IAT, or POP.	60 Calendar Days	The RDFI determined the transaction is ineligible for check truncation.
R12	Branch Sold to Another DFI	Consumer or Non-Consumer	2 Banking Days	The account-holding branch has been sold to another financial institution.
R13	Invalid ACH Routing Number	Consumer or Non-Consumer	Next File Delivery Time Following Processing	The provided ACH routing number is invalid or incorrect.
R14	Representative Payee Deceased	Consumer or Non-Consumer	2 Banking Days	The representative payee is deceased or unable to continue their duties.
R15	Beneficiary or Account Holder Deceased	Consumer	2 Banking Days	The account holder or beneficiary is deceased.
R16	Account Frozen	Consumer or Non-Consumer	2 Banking Days	The receiver’s account is frozen due to legal action or other reasons.
R17	File Record Edit Criteria	Consumer or Non-Consumer	2 Banking Days	The transaction contains incorrect formatting or data.
R18	Improper Effective Entry Date	Consumer or Non-Consumer	Next File Delivery Time Following Processing	The entry has an incorrect or invalid effective entry date.
R19	Amount Field Error	Consumer or Non-Consumer	Next File Delivery Time Following Processing	The amount field contains an incorrect value or format.
R20	Non-Transaction Account	Consumer or Non-Consumer	2 Banking Days	The account is not authorized for ACH transactions.
R21	Invalid Company Identification	Non-Consumer	2 Banking Days	The company identification number provided is invalid or incorrect.
R22	Invalid Individual ID Number	Consumer or Non-Consumer	2 Banking Days	The individual identification number provided is invalid or incorrect.
R23	Credit Entry Refused by Receiver	Consumer or Non-Consumer	RDFI must transmit Return upon receipt of Refusal	The receiver has refused the credit entry, possibly due to one of the following reasons: incorrect transaction code, incorrect payment amount, or other specific reasons.
R24	Duplicate Entry	Consumer or Non-Consumer	2 Banking Days	The RDFI received a duplicate entry for the same transaction.
R25	Addenda Error	Consumer or Non-Consumer	Next File Delivery Time Following Processing	The addenda record provided is incorrect or improperly formatted.
R26	Mandatory Field Error	Consumer or Non-Consumer	Next File Delivery Time Following Processing	A mandatory field contains an incorrect or improperly formatted value.
R27	Trace Number Error	Consumer or Non-Consumer	Next File Delivery Time Following Processing	The trace number provided is incorrect or improperly formatted.
R28	Routing Number Check Digit Error	Consumer or Non-Consumer	Next File Delivery Time Following Processing	The check digit for the routing number is incorrect.
R29	Corporate Customer Advises Not Authorized	Non-Consumer	2 Banking Days	The corporate receiver claims the transaction was not properly authorized.
R30	RDFI Not Participant in Check Truncation Program	Consumer or Non-Consumer	Next File Delivery Time Following Processi	The RDFI does not participate in the check truncation program.
R31	Permissible Return Entry (CCD and CTX only)	Non-Consumer	Undefined	The corporate receiver authorized the return of the entry.
R32	RDFI Non-Settlement	Consumer or Non-Consumer	Next File Delivery Time Following Processi	The RDFI is not able to settle the transaction.
R33	Return of XCK Entry	Consumer or Non-Consumer	60 Calendar Days	The RDFI is returning an XCK (destroyed check) entry.
R34	Limited Participation DFI	Consumer or Non-Consumer	Next File Delivery Time Following Processing	The RDFI’s participation in the ACH system is limited, affecting the transaction.
R35	Return of Improper Debit Entry	Consumer or Non-Consumer	Next File Delivery Time Following Processing	The transaction is an improper debit entry according to NACHA rules.
R36	Return of Improper Credit Entry	Consumer or Non-Consumer	Next File Delivery Time Following Processing	The transaction is an improper credit entry according to NACHA rules.
R37	Source Document Presented for Payment	Consumer or Non-Consumer	60 Calendar Days	The source document for the transaction was presented for payment.
R38	A stop payment was placed on the source document of the transaction.	Consumer or Non-Consumer	60 Calendar Days	A stop payment was placed on the source document of the transaction.
R39	Improper Source Document	Consumer or Non-Consumer	2 Banking Days	The source document for the transaction is incorrect or invalid.
R40	Return of ENR Entry	Consumer	2 Banking Days	The ENR (automated enrollment entry) is being returned.
R41	Invalid Transaction Code	N/A	N/A	The transaction code provided is incorrect or invalid.
R42	Routing Number / Account Number Mismatch	N/A	N/A	The DFI account number provided is invalid.
R43	Invalid DFI Account Number	N/A	N/A	The DFI account number provided is invalid.
R44	Invalid Individual Identifier	N/A	N/A	The individual identifier provided is incorrect or invalid.
R45	Invalid Individual Name	N/A	N/A	The individual name provided is incorrect or invalid.
R46	Invalid Representative Payee Indicator	All	1 Banking Day	The representative payee indicator provided is incorrect or invalid.
R47	Duplicate Enrollment	All	1 Banking Day	The RDFI received a duplicate enrollment for the same transaction.
R50	State Law Affecting RCK Acceptance	All	2 Banking Days	State law prohibits the RDFI from accepting RCK entries.
R51	Item is Ineligible, Notice Not Provided	All	2 Banking Days	The item is ineligible for RCK processing; the required notice was not provided.
R52	Stop Payment on Item	Consumer	60 Banking Days	The receiver requested a stop payment on the item.
R53	Item and ACH Entry Presented for Payment	Consumer	60 Calendar Days	Both the item and the ACH entry have been presented for payment.
R61	Misrouted Return	Consumer	60 Calendar Days	The RDFI is returning an entry that was misrouted to them.
R62	Incorrect Trace Number	Consumer	1 Banking Day	The trace number provided is incorrect or improperly formatted.
R63	Incorrect Dollar Amount	All	1 Banking Day	The dollar amount provided is incorrect or improperly formatted.
R64	Incorrect Individual Identification	All	1 Banking Day	The individual identification provided is incorrect or improperly formatted.
R65	Incorrect Transaction Code	All	1 Banking Day	The transaction code provided is incorrect or improperly formatted.
R66	Incorrect Company Identification	All	1 Banking Day	The company identification provided is incorrect or improperly formatted.
R67	Duplicate Return	All	1 Banking Day	The RDFI received a duplicate return for the same transaction.
R68	Untimely Return	Consumer or Non-Consumer	1 Banking Day	The return was received after the deadline.
R69	Multiple Errors	Consumer or Non-Consumer	1 Banking Day	The entry contains multiple errors, making it unprocessable.
R70	Permissible Return Entry Not Accepted / Notice Not Provided	Consumer or Non-Consumer	1 Banking Day	The RDFI chose not to accept a permissible return entry or did not provide the required notice.
R71	Misrouted Dishonored Return	Consumer or Non-Consumer	1 Banking Day	The dishonored return entry was misrouted.
R72	Untimely Dishonored Return	Consumer or Non-Consumer	1 Banking Day	The dishonored return entry was received after the deadline.
R73	Timely Original Return	Consumer or Non-Consumer	1 Banking Day	The RDFI received a timely original return entry.
R74	Corrected Return		1 Banking Day	The RDFI is returning a corrected entry.
R75	Return Not a Duplicate	Consumer or Non-Consumer	1 Banking Day	The return entry is not a duplicate of an earlier return.
R76	No Errors Found	Consumer or Non-Consumer	Contested Return must be transmitted within 2 Banking Days	No errors were found in the return entry.
R77	Non-Acceptance of R62 Dishonored Return	Consumer or Non-Consumer	Contested Return must be transmitted within 2 Banking Days	The RDFI does not accept R62 dishonored return entries.
R78	Non-Acceptance of R68 Dishonored Return	Consumer or Non-Consumer	1 Banking Day	The RDFI does not accept R68 dishonored return entries.
R79	Incorrect Data in Return Entry	Consumer or Non-Consumer	1 Banking Day	The RDFI provided incorrect data in the return entry.
R80	IAT Entry	Consumer or Non-Consumer	Contested Return must be transmitted within 2 Banking Days	An International ACH Transaction (IAT) entry has been identified.
R81	Non-Participant in IAT Program	Consumer or Non-Consumer	Contested Return must be transmitted within 2 Banking Days	The RDFI does not participate in the IAT program.
R82	Invalid Foreign Receiving DFI Identification	Consumer or Non-Consumer	Contested Return must be transmitted within 2 Banking Days	The foreign receiving DFI identification number is incorrect or invalid.
R83	Foreign Receiving DFI Unable to Settle	Consumer or Non-Consumer	Contested Return must be transmitted within 2 Bnkg. Days	The foreign receiving DFI is unable to settle the transaction.
R84	Entry Not Processed by Gateway	N/A	N/A	The gateway operator did not process the transaction.
R85	Incorrectly Coded Outbound International Payment	Consumer or Non-Consumer	2 Banking Days	The outbound international payment was coded incorrectly by the ODFI.

 

 

Most Common ACH Return Reason Codes (R01-R10)

To give you an idea of what these codes look like and how they function, let’s explore some common ones:

 

1. R01 – Insufficient Funds:

This is probably the most common ACH return reason code. It indicates that the account holder doesn’t have enough funds to cover the transaction.

• Common cause: An account holder spends more than their available balance.
• How to address: The originator may attempt to collect funds again or contact the account holder for an alternative payment method.

 

2. R02 – Account Closed:

This code means that the account being debited has been closed by the account holder or their financial institution.

• Common cause: An account holder closes their account but forgets to update their payment information with the originator.
• How to address: The originator should contact the account holder for updated payment information or an alternative payment method.

 

3. R03 – No Account/Unable to Locate Account:

This code is used when the account number provided does not match any existing accounts at the receiving bank.

• Common cause: A typo in the account number provided by the account holder or incorrect information given during enrollment.
• How to address: The originator should verify the correct account information with the account holder and resubmit the transaction with accurate details.

 

4. R04 – Invalid Account Number:

This code indicates that an invalid account number was entered, meaning it does not fit within a specific format required by a particular financial institution.

• Common cause: A typo in the submitted account number or incorrect formatting of an otherwise valid number.
• How to address: The originator must verify and correct any errors in formatting, then resubmit with accurate information.

 

5. R05 – Unauthorized Debit Entry:

This return code is used when a consumer claims they never authorized an ACH debit transaction from their account.

• Common cause: Fraudulent activity or miscommunication between parties regarding authorization for transactions.
• How to address: The originator must provide proof of authorization or resolve any miscommunications with consumers before resubmitting transactions.

 

6. R06 – Returned Per ODFI Request:

The originating depository financial institution (ODFI) requests that a transaction be returned because it contains incomplete, erroneous, or incorrect data. This can also occur if a stop payment order was requested on a recurring debit entry.

• Common cause: Clerical errors in processing transactions or a stop payment order requested by the account holder.
• How to address: The originator should review and correct any errors in the transaction or address stop payment requests with the account holder before resubmitting.

 

7. R07 – Authorization Revoked by Customer:

This code is used when the account holder revokes authorization for a specific ACH debit transaction.

• Common cause: The account holder changes their mind about authorizing a transaction and formally revokes it.
• How to address: The originator must cease any future transactions based on that particular authorization and obtain new authorization if needed.

 

8. R08 – Payment Stopped:

The account holder has requested a stop payment on a specific ACH debit entry.

• Common cause: An account holder may request a stop payment due to disputes, billing errors, or other reasons.
• How to address: The originator should resolve the issue with the account holder and obtain new authorization before resubmitting the transaction, if necessary.

 

9. R09 – Uncollected Funds:

This return code indicates insufficient funds in the account to cover the transaction. Still, the funds may become available in the future. It’s similar to R01 but implies a temporary hold on funds rather than an overdraft situation.

• Common cause: A deposit is pending in the account, or there is a temporary hold on certain funds for various reasons (e.g., check holds).
• How to address: The originator may attempt to collect funds again after some time or contact the account holder for an alternative payment method.

 

10. R10 – Customer Advises Not Authorized:

The account holder claims they never authorized an ACH debit entry and requests it be returned. This code is similar to R05 but is often used when there’s suspicion of fraudulent activity or error.

• Common cause: Unauthorized transactions, fraud, or miscommunication about authorizations between parties.
• How to address: The originator must provide proof of authorization, resolve any miscommunications with consumers, or investigate potential fraud before resubmitting transactions.

 

 

And there you have it! These ten ACH return reason codes are among the most common you might encounter when dealing with electronic payments.

Understanding them can help navigate issues and ensure smooth financial transactions for all parties involved.

So next time you come across one of these codes, you’ll know exactly what it means and how to handle it like a pro!

 

Less Common ACH Return Reason Codes (R11+)

While less frequent, these codes still play a crucial role in identifying issues:

1. R11 – Check Truncation Entry Return: This code occurs when an account holder returns a check truncation entry or when a financial institution cannot process the transaction.
2. R12 – Branch Sold to Another DFI: Used when an account holder’s bank branch has been sold to another depository financial institution, resulting in routing number changes.
3. R13 – RDFI Not Qualified to Participate: Indicates that the receiving bank lacks the qualifications to participate in the ACH network.
4. R14 – Representative Payee Deceased or Unable to Continue: This code is used when a representative payee manages funds for another individual, is deceased or unable to continue their duties.
5. R15 – Beneficiary or Account Holder Deceased: Indicates that the account holder or beneficiary of a trust account has passed away.
6. R16 – Account Frozen: This code occurs when the financial institution has frozen an account due to legal issues, fraud investigations, or other reasons.
7. R17 – File Record Edit Criteria: Used when there are formatting errors in the transaction details, requiring corrections before resubmission.
8. R18 – Improper Effective Entry Date: Occurs when the specified effective entry date is incorrect or invalid.
9. R19 – Amount Field Error: Indicates an error in the amount field of a transaction record.
10. R20 – Non-Transaction Account: This code is used when a transaction involves an account not designated for transactions, such as savings accounts with transaction limitations.

 

International ACH Return Reason Codes (R80-R85)

For international transactions, there are specific return codes:

1. R80 – IAT Entry Coding Errors: Utilized when coding errors within an International ACH Transaction (IAT) entry require correction before resubmitting.
2. R81 – Non-Participant in IAT Program: Indicates that the receiving depository financial institution (RDFI) does not participate in the International ACH program and cannot process IAT entries.
3. R82 – Invalid Foreign Receiving DFI Identification: Occurs when the identification number for the foreign receiving bank is incorrect or invalid within an IAT entry.
4. R83 – Foreign Receiving DFI Unable to Settle: Used when a foreign receiving bank cannot settle an IAT transaction due to technical or operational issues.
5. R84 – Entry Not Processed by Gateway Operator: Indicates that the gateway operator responsible for international transactions has not processed a particular IAT entry, possibly due to errors or incomplete information.
6. R85 – Incorrectly Coded Outbound International Payment: When an outbound international payment has been incorrectly coded as domestic, requiring adjustments and resubmission, this code is used.

 

Best Practices for Managing ACH Return Codes

1. Learn ACH return codes: Understand common and lesser-known codes to identify and resolve issues efficiently.
2. Monitor transactions: Spot returns or rejections early to address problems and resubmit with corrected information.
3. Verify account information: Confirm the accuracy of account details before initiating transactions; consider using an account verification system.
4. Obtain authorization: Secure proper authorizations for ACH debits, and maintain clear records of agreements.
5. Communicate with parties: Promptly contact customers or vendors when issues arise during the transaction process.
6. Set up notifications: Receive alerts for returned or rejected transactions to address issues quickly.
7. Follow up on returns: Take prompt action to correct errors or resolve issues, then resubmit accurate transactions.
8. Train staff: Ensure electronic payment employees understand ACH return codes and appropriate actions.
9. Review processes: Regularly evaluate and update internal processes for handling ACH transactions and managing return codes.
10. Stay informed on regulations: Keep updated on ACH-related regulations set by NACHA and other authorities to maintain compliance.
11. Maintain detailed records: Keep thorough documentation of transaction details, authorizations, communications, and responses to return codes.
12. Analyze trends/patterns: Review your ACH return history to identify areas of concern that may require attention.
13. Implement technology solutions: Consider software or platforms designed to assist in managing electronic payments, and ACH returns more efficiently.

 

Conclusion

There you have it! Almost everything you need to know about ACH return codes.

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