In the world of ACH, returns can be a daunting and confusing task. It's important for businesses to be familiar with ACH returns and the Nacha Rules that accompany them. Putting procedures in place can help safeguard against potential financial losses.
Below are some of the more common questions we receive. We’ll walk through what ACH returns are, timeframes regarding returns, and a brief description of our most common return codes.
What are ACH returns?
ACH returns are transactions that could not be processed to a designated account. Think of them like a bounced check. Returns can show up for both debit and credit transactions.
How long do ACH returns take?
Most ACH returns come within two business days after the effective entry date of the transaction.
What happens if an employee’s direct deposit gets returned?
We will send the funds back to the employer’s account that the funds were originally debited from. The transfer will be effective for the next business day. To know if you have an employee direct deposit return, please login to the Kotapay site and view the Returns Report.
The draft to my client’s account was returned, why did the employees still get paid?
Your client’s employees may still be paid even if the draft to their account gets returned depending on the funding window they are on. Keep in mind that we may not receive a return back from the receiving financial institution until two business days after the effective entry date of the debit.
Your client did not have enough money in their account at the time of the debit.
The receiving account is no longer open and active, and therefore, can’t accept transactions.
Unable to Locate
The bank does not have this routing and account number for the individual identified (It could be a routing, account or name issue).
Invalid account number based on the bank’s account format.
Ex: All accounts at that specific bank are 10 digits long and an entry for an account with 12 digits is sent.
The receiving bank or account holder requested a stop on the specific ACH entry.
The available balance in the account is not sufficient to cover the incoming debit
Ex: There is $1,000.00 in the account but there are $500.00 worth of pending debits leaving an available balance of $500.00. A draft to the account for $750.00 may get returned as R09.
Customer Advises Not Authorized
The account holder has not granted authorization to that party to debit their consumer account. The consumer has 60 days to return the transaction. A written statement is required.
The account may be temporarily or permanently blocked from processing transactions due to fraud or legal action.
The account is currently restricted and therefore, cannot receive the transaction at this time.
Ex: There may be restrictions on different types of accounts such as only allowing five ACH debits per month or the account may not allow ACH debits at all.
Corporate Customer Advises Not Authorized
The debit to a corporate account is not authorized by the account holder.
Ex: Many banks utilize fraud filters or Positive Pay. If your client is enrolled in Positive Pay they usually need to approve the incoming debits to their corporate account. If they miss approving it could be returned as R29.
Get Additional Protection with Kotapay’s Patented Xcelerated® Returns & Corrections
Take advantage of Kotapay’s screening system to detect any transaction errors before your file is sent to the Federal Reserve System.
Once you submit your file to Kotapay, the routing and account numbers are automatically compared to Kotapay’s database of previously returned ACH transactions. Transactions that match a previously returned item will not be processed through the ACH Network. With Xcelerated Returns, you will be notified more quickly than if the transaction was processed through the ACH Network and returned days later.
If your company receives a Notification of Change (NOC) from the Receiving Depository Financial Institution (RDFI), Kotapay's database captures the corrected information. Subsequent transactions with the same transit information will be automatically corrected by Kotapay prior to being sent through the ACH network to the RDFI.