ACH Return Codes: — What They Are and How to Fix Them!

In the realm of electronic payments, the Automated Clearing House (ACH) network plays a pivotal role in facilitating transactions between banks and financial institutions across the United States. However, not all transactions proceed smoothly. Occasionally, payments are returned, accompanied by specific codes that indicate the reason for the return. These are known as ACH return codes.

Understanding these codes is crucial for businesses to maintain efficient payment processes, ensure compliance, and foster trust with customers.

What Are ACH Return Codes?

ACH return codes are standardized alphanumeric codes used to indicate why an ACH payment was returned or rejected. Each code begins with the letter ‘R’ followed by a two-digit number (e.g., R01, R02). These codes are established and maintained by the National Automated Clearing House Association (NACHA) and are used by financial institutions to communicate the specific reason for a transaction’s failure.

For instance, if a customer’s bank account lacks sufficient funds to cover a transaction, the return code R01 (Insufficient Funds) is used. These codes help businesses quickly identify issues and take appropriate corrective actions.

How Do ACH Return Codes Work?

When an ACH transaction fails, the Receiving Depository Financial Institution (RDFI) assigns an appropriate return code and sends it back to the Originating Depository Financial Institution (ODFI). The ODFI then communicates this information to the business that initiated the transaction.

Each return code is associated with specific rules and timeframes for resolution. For example, some codes require action within two banking days, while others allow up to 60 calendar days. Understanding these timeframes is essential to ensure timely responses and maintain compliance with NACHA regulations.

Common ACH Return Codes: –

ACH return codes help banks and businesses understand why a transaction failed. Here’s a complete list of the most common (and uncommon) ACH return codes with explanations:

Code	Description	Reason
R01	Insufficient Funds	Not enough balance to cover the debit.
R02	Account Closed	Account closed by customer or bank.
R03	No Account/Unable to Locate Account	Account number not found at receiving bank.
R04	Invalid Account Number	Account number fails validation or is incorrectly formatted.
R05	Unauthorized Debit to Consumer Account Using Corporate SEC Code	Business debit sent to a personal account without consent.
R06	Returned per ODFI’s Request	Entry returned at originating bank’s request.
R07	Authorization Revoked by Customer	Customer withdrew authorization for the debit.
R08	Payment Stopped	Stop payment order issued by customer.
R09	Uncollected Funds	Funds held or not yet available.
R10	Customer Advises Not Authorized	Customer claims transaction was unauthorized.
R11	Entry Not in Accordance with Terms	Authorized, but amount/date wrong.
R12	Account Sold to Another DFI	Account moved to a different bank.
R13	Invalid ACH Routing Number	Routing number doesn’t pass validation.
R14	Representative Payee Deceased	Authorized payee is deceased.
R15	Account Holder Deceased	Primary account holder is deceased.
R16	Account Frozen	Account restricted due to legal or compliance issues.
R17	File Record/Edit Error	File or formatting error detected.
R18	Improper Effective Date	Invalid or incorrect effective date.
R19	Amount Field Error	Error in transaction amount field.
R20	Non-Transaction Account	Account not authorized for ACH payments.
R21	Invalid Company Identification	Invalid originator company ID.
R22	Invalid Individual ID Number	Invalid customer ID number.
R23	Credit Entry Refused by Receiver	Receiver refused to accept credit.
R24	Duplicate Entry	Same transaction submitted twice.
R25	Addenda Error	Issue in the addenda record.
R26	Mandatory Field Error	Required field missing or incorrect.
R27	Trace Number Error	Issue with the trace number format.
R28	Routing Number Check Digit Error	Check digit in routing number is wrong.
R29	Corporate Customer Advises Not Authorized	Business disputes unauthorized debit.
R30	RDFI Not in Check Truncation Program	Receiver not part of Check 21 system.
R31	Permissible Return Entry	Return allowed by agreement between banks.
R32	RDFI Non-Settlement	Receiving bank unable to settle.
R33	Return of XCK Entry	Check conversion entry returned.
R34	Limited Participation DFI	Receiving bank limited in ACH capabilities.
R35	Return of Improper Debit Entry	Entry not submitted properly.
R36	Return of Improper Credit Entry	Credit entry formatted incorrectly.
R37	Source Document Presented for Payment	Check was also cashed outside ACH.
R38	Stop Payment on Source Document	Stop payment issued on original check.
R39	Improper Source Document	Check used not eligible for conversion.
R40	ENR Return by Government Agency	Government agency rejects enrollment.
R41	Invalid Transaction Code	Transaction code doesn’t match account type.
R42	Routing Number/Check Digit Error	Invalid routing/check digit combo.
R43	Invalid DFI Account Number	Receiving bank doesn’t recognize account number.
R44	Invalid Individual ID Number	ID number not in correct format.
R45	Invalid Individual/Company Name	Name doesn’t match bank records.
R46	Invalid Representative Payee Indicator	Payee indicator incorrectly flagged.
R47	Duplicate Enrollment	Enrollment already exists.
R50	State Law Prevents RCK Entry	State law prohibits check conversion.
R51	RCK Entry Not Eligible	Check not eligible for conversion.
R52	Stop Payment on RCK Entry	Stop payment on check before ACH.
R53	Item and RCK Entry Presented	Both check and ACH submitted.
R61	Misrouted Return	Return sent to wrong bank.
R62	Incorrectly Formatted Reversal	Reversal entry contains errors.
R67	Duplicate Return	Return submitted more than once.
R68	Untimely Return	Return submitted after deadline.
R69	Field Error	General formatting or content issue.
R70	Permissible Return Not Accepted	Receiving bank refused valid return.
R71	Misrouted Dishonored Return	Dishonored return sent to wrong place.
R72	Untimely Dishonored Return	Dishonored return too late.
R73	Timely Original Return	Original return was on time.
R74	Corrected Return	Return corrected and resubmitted.
R75	Return Not a Duplicate	Return claimed as duplicate was not.
R76	No Errors Found	No issue with reported return.
R77	Non-Acceptance of R62	Reversal not accepted by bank.
R80	IAT Coding Error	International ACH transaction has coding error.
R81	Non-Participant in IAT Program	Receiving bank doesn’t support IAT.
R82	Invalid Foreign RDFI ID	Foreign bank identifier invalid.
R83	Foreign RDFI Unable to Settle	Foreign bank can’t complete transaction.
R84	Entry Not Processed by Gateway	Gateway failed to process ACH.
R85	Incorrectly Coded International Payment	Invalid coding in international ACH.

Understanding these codes enables businesses to identify issues promptly and take corrective measures to prevent future occurrences.

Why Am I Receiving an ACH Return?

Several factors can lead to ACH returns:

1. Insufficient Funds: The customer’s account doesn’t have enough money to cover the transaction.
2. Incorrect Account Information: Errors in account numbers or routing numbers can cause returns.
3. Closed Accounts: Transactions attempted on closed accounts will be returned.
4. Unauthorized Transactions: If a customer disputes a transaction or claims it was unauthorized, it may be returned.
5. Duplicate Transactions: Submitting the same transaction multiple times can result in returns.

Identifying the root cause of each return is essential for implementing effective solutions and maintaining customer trust.

How to Fix and Prevent ACH Return Codes: –

To minimize ACH returns, businesses should consider the following strategies:

1. Verify Customer Information: Ensure that all account and routing numbers are accurate before initiating transactions.
2. Obtain Proper Authorization: Secure explicit authorization from customers for each transaction to prevent disputes.
3. Monitor Transactions: Regularly review transaction reports to identify and address issues promptly.
4. Educate Customers: Inform customers about the importance of maintaining sufficient funds and notifying the business of any account changes.
5. Implement Fraud Detection Tools: Utilize advanced tools to detect and prevent fraudulent transactions.

By adopting these practices, businesses can reduce the incidence of ACH returns and enhance the efficiency of their payment processes.

Recent Trends and Updates in ACH Processing: –

Recently, NACHA has updated several ACH return codes to reflect changes in transaction behavior:

• R11 now addresses payment errors, such as wrong amount/date

• Increased adoption of AI-powered ACH fraud detection tools

• More businesses are using eCheck and ACH API integrations

With digital payment processing evolving rapidly, staying informed of changes is crucial for compliance and performance.

Conclusion: –

ACH return codes are integral to understanding and managing electronic payment failures. By comprehending the reasons behind these codes and implementing proactive measures, businesses can minimize disruptions, maintain compliance, and foster positive relationships with customers. Staying updated with the latest industry standards and leveraging advanced payment solutions will position businesses for success in the evolving financial landscape.