What are ACH return codes? ( with complete list & Time Frame)

Introduction

When processing electronic payments using ACH (Automated Clearing House) transfers, disruptions can occur unexpectedly, leaving you with unreceived funds and a disrupted cash flow. These payment hiccups can be puzzling and frustrating, impacting your business operations.

The solution lies in understanding ACH return codes. In this blog, we will cover everything about these three-digit codes, explain the reasons behind ACH returns, and provide insights to help you manage and prevent such issues effectively.

What Is ACH Return Code ?

An ACH return happens when an electronic payment, like an ACH transfer, fails to retrieve funds from the customer’s bank account. It signals that something went wrong with the payment process. Each return comes with a code that provides a specific reason for the payment failure.

Importance of ACH Return Codes

ACH return codes are critical for maintaining the integrity and efficiency of the Automated Clearing House (ACH) network. They provide standardized reasons for returned transactions, which helps originators quickly identify and rectify issues, minimizing delays in payment processing.

 Understanding these NACHA return codes helps financial institutions and businesses improve their transaction success rates, ensure compliance with NACHA rules, and enhance customer satisfaction by promptly addressing payment issues.

How Do ACH Return Codes Work

ACH return codes are used when a transaction cannot be processed as intended. When an issue arises, the Receiving Depository Financial Institution (RDFI) sends back the transaction with a specific return code that explains the reason for the return. 

Each code consists of a letter ‘R’ followed by a two-digit number, which categorizes the type of error or issue encountered, such as insufficient funds, incorrect account numbers, or unauthorized transactions. This standardized system enables clear communication between financial institutions, helping them address and resolve transaction problems efficiently. 

List of All ACH Return Codes and Time Frames

Most Common ACH Return Codes

Though we have covered a comprehensive list of all ACH return codes, not all are commonly encountered. Here are the most common ACH return codes you should be aware of.

R01 – Insufficient funds

The receiver’s account does not have enough funds to cover the transaction amount. This is one of the most common reasons for returns. The originator can attempt the transaction again once funds are available.

R02 – Account closed

The receiver’s account has been closed, making it impossible to complete the transaction. The originator must contact the receiver for updated banking information.

R03 – No account/unable to locate account

The account number provided does not correspond to any account at the receiving financial institution. The originator should verify the account details with the receiver.

R04 – Invalid account number

The account number provided does not pass the receiving bank’s validation checks. The originator needs to correct the account information and resubmit the entry.

R05 – Unauthorized debit to consumer account using corporate SEC code

The transaction was initiated with a corporate standard entry class (SEC) code but was posted to a consumer account without proper authorization. The originator must use the appropriate SEC code for consumer accounts.

R06 – Returned per ODFI’s request

The originating depository financial institution (ODFI) has requested the return of the entry. This is typically used in cases of erroneous or duplicate entries.

R07 – Authorization revoked by customer

The receiver has revoked authorization for the transaction. The originator must stop all further debits unless a new authorization is obtained.

R08 – Payment stopped

The receiver has requested a stop payment on the transaction. The originator should contact the receiver to understand the reason and resolve the issue before attempting another transaction.

R09 – Uncollected funds

The receiver’s account has uncollected funds that are not yet available. The originator should wait until the funds clear and then reinitiate the transaction.

R10 – Customer advises unauthorized, improper, ineligible, or part of an incomplete transaction

The receiver has advised that the transaction was unauthorized or improperly executed. The originator should obtain proper authorization or correct the transaction details.

Less Common ACH Return Codes

R11: Check truncation entry return – Indicates a return due to a check truncation error.

R12: Account sold to another DFI – Denotes that the account has been transferred to a different financial institution.

R13: Invalid ACH routing number – Signals an incorrect ACH routing number in the transaction.

R14: Representative payee deceased – Indicates that the representative payee for the account is deceased.

R15: Beneficiary or account holder deceased – Indicates that the beneficiary or account holder is deceased.

R16: Account frozen – Denotes that the account has been frozen by the financial institution.

R17: File record edit criteria – Denotes a return due to file record edit criteria.

R18: Improper effective entry date – Indicates an issue with the effective entry date of the transaction.

R19: Amount field error – Denotes an error in the amount field of the transaction.

R20: Non-Transaction account – Indicates that the account is not eligible for ACH transactions.

R21: Invalid company identification – Denotes an invalid company identification number in the transaction.

R22: Invalid individual ID number – Indicates an invalid individual identification number in the transaction.

R23: Credit entry refused by receiver – Denotes that the receiver has refused the credit entry.

International ACH Return Codes Reasons

Here are the common NACHA return codes for international transactions and the reasons: 

R80 – IAT entry coding error

The R80 return code is used when an International ACH Transaction (IAT) entry has a coding error. This could involve incorrect formatting or data entry mistakes that do not conform to NACHA’s requirements.

R81 – Non-participant in IAT program

The foreign RDFI does not participate in the International ACH Transactions (IAT) program. The originator should use an alternative payment method or contact the receiver for a different bank.

R82 – Invalid foreign receiving DFI identification

The identification number for the foreign receiving depository financial institution (DFI) is incorrect. The originator must verify and correct the DFI identification details before resubmitting.

R83 – Foreign receiving DFI unable to settle

The foreign RDFI is unable to settle the transaction due to regulatory or financial reasons. The originator should contact the receiver to resolve any issues or find an alternative payment method.

R84 – Invalid Foreign RDFI Identification Number

The RDFI identification number for the foreign bank is invalid. The originator should confirm the correct identification number with the receiver or their bank before resubmitting.

R85 – Incorrect International ACH Transaction Code

The ACH transaction code used is incorrect or not recognized by the foreign RDFI. The originator must ensure the correct transaction code is used according to international standards.

R86 – No Agreement with Gateway

The foreign RDFI does not have an agreement with the gateway operator to process IAT entries. The originator should contact the gateway operator for further instructions or use a different payment method.

R87 – Gateway Operator Declined

The gateway operator has declined the transaction, possibly due to compliance or operational issues. The originator should contact the gateway operator to determine the reason for the problem and resolve any issues.

R88 – Unable to Apply

The foreign RDFI is unable to apply the payment to the receiver’s account due to missing or incorrect information. The originator should verify all transaction details with the receiver before resubmitting.

R89 – Entry Not Processed by Gateway

The entry was not processed by the gateway operator due to system or operational issues. The originator should contact the gateway operator to identify the issue and determine when to resubmit the transaction. 

Role of ACH Return Codes in the Payment Process 

ACH return codes play a vital role in the payment process by ensuring that all parties involved can swiftly identify and address transaction issues.

Issue Identification: Each return code corresponds to a specific reason for the transaction failure, such as insufficient funds (R01) or invalid account number (R03). This specificity helps quickly identify and rectify the exact problem.

• Transaction Tracking: These codes enable ODFIs and RDFIs to track transaction volumes and types, facilitating better management and analysis of ACH activity
• Performance Insights: These return code reasons provide valuable insights into potential weaknesses in the payment system. By understanding these specific issues, businesses can pinpoint areas for improvement and ultimately improve their overall payment performance.
• Communication Facilitation: Return codes enable efficient communication between financial institutions and businesses, ensuring that all parties are informed about the status and issues of transactions. This clear communication helps coordinate the resolution process.
• Risk Management: By providing detailed reasons for transaction failures, NACHA return codes help businesses manage financial risks. They allow for the early detection of potential fraud or recurring issues, enabling proactive risk mitigation strategies.

  Overall, these codes help maintain the accuracy and reliability of electronic payments by providing detailed reasons for transaction failures, reducing the risk of repeated errors, and improving the overall efficiency of the ACH network.

Best Practices for Managing ACH Return Codes 

Now that you understand the role of ACH return codes let’s look at the best practices for managing them. 

1. Regular Monitoring: Routinely check for ACH return codes to quickly identify and address returned transactions.
2. Mitigate errors: Implement robust processes to minimize the occurrence of return codes by ensuring accurate data entry, verifying account information, and staying updated with regulatory requirements.
3. Staff Training: Train staff to understand and manage ACH return codes, ensuring they know how to respond to different codes appropriately.
4. Compliance: Adhere to NACHA rules and guidelines to avoid unnecessary returns and ensure smooth transaction processing.
5. Documentation: Maintain detailed records of ACH transactions, return codes, and actions taken to resolve them. This helps in identifying trends, improving processes, and providing evidence in case of disputes.
6. Continuous improvement: Regularly review and enhance your ACH management practices based on industry updates, feedback, and performance metrics to optimize efficiency and minimize return rates.
7. Automation and technology: Leverage automation and technology solutions, such as ACH processing software and real-time transaction monitoring tools, to streamline processes, enhance accuracy, and minimize the occurrence of return codes.

By implementing these best practices, businesses and financial institutions can effectively manage ACH return codes, reducing the frequency of transaction issues and enhancing the reliability of their payment processes.

Streamlining ACH Payments Processing with HighRadius Payment Gateway

Manual invoice chasing is costly and prone to errors, which can result in frequent ACH return codes. Automating ACH payments can significantly streamline this process and reduce the incidence of return codes.

For growing companies, automation helps prevent bottlenecks by efficiently handling an increasing volume of transactions. This allows businesses to scale their operations without a corresponding increase in administrative overhead.

For businesses seeking to optimize their ACH payment processes, HighRadius offers a robust payment gateway that enhances ACH processing efficiency. Here’s how: 

• 90% Less Processing Costs: Significantly reduce processing costs by validating bank accounts and accepting low-cost ACH payments.
• ACH/eCheck via Merchant Bank: Process ACH payments in the USA and Canada through your bank, ensuring secure and efficient transactions.
• ACH/eCheck via Processors: Utilize payment processors to handle ACH/eCheck payments across the USA and Canada, providing flexibility and reliability.
• Bank Account Validation: Validate first-use bank accounts to minimize fraud and reduce the risk of failed payments.

Conclusion

Mastering the management of ACH return codes is essential for businesses aiming to optimize their payment processes and maintain financial health. These codes provide invaluable insights into transaction issues, enabling businesses to address and resolve problems swiftly. 

By understanding and effectively utilizing return codes, companies can not only streamline operations but also fosters growth by ensuring reliable and efficient financial transactions. This way, businesses can transform potential payment challenges into opportunities for efficiency and growth, positioning themselves for long-term success in an increasingly digital financial landscape.

FAQs

1) What is the difference between R10 and R11 return code?

R10 return code indicates that the customer has advised that the transaction was unauthorized or improperly executed. R11 is used specifically for returns related to check truncation entries, indicating issues with the conversion of a physical check into an electronic transaction.

2) How to identify an ACH return code?

ACH return codes are listed in the return entry notification sent by the RDFI to the ODFI. Each code consists of the letter ‘R’ followed by a two-digit number (e.g., R01, R02). These codes are standardized by NACHA, and financial institutions often provide detailed reports with these return codes.

3) How long does it take for an ACH to be returned?

Standard ACH returns are typically processed within 2-3 business days. However, returns involving unauthorized transactions, such as R10, can be processed within 60 calendar days of the settlement date for consumer accounts. Immediate returns can occur on the same day if critical errors are detected.