ACH payments are a type of electronic bank-to-bank payment for businesses based in the U.S. An ACH return simply means that – for whatever reason – the ACH couldn’t collect the funds from the customer’s account. This results in an ACH return reason code, a three-character code that provides a little more detail about the specific nature of the problem.

How To Know If The Transfer Failed

The sales agent or customer service team will notify the merchant.

What Will Happened when an ACH is Rejected

Funds will be held if the merchant is still processing. Released will happen once the reject issue has been resolved and can be utilized for deposit.

The account will be canceled and the merchant will receive a letter from a debt collection agency if the merchant account is closed or the merchant fails to respond to the notice.

Most Common Ach Return Reason Codes

Insufficient funds (R01): This means that the available balance isn’t enough to cover the value of the debit Entry.

Bank account closed (R02): This means that a previously active account was closed by the customer.

No account or unable to locate the account (R03): This means that although the structure of the account number is valid, the account number doesn’t match up with the individual identified in the Entry. Alternatively, it may indicate that the account isn’t open.


Invalid account number structure (R04): This means that the structure of the account number isn’t valid.

Unauthorized debit (caused by a consumer using a Corporate SEC Code) (R05): This means that a debit Entry was transmitted to a consumer account, but the receiving member hasn’t authorized the Entry.

ODFI requested a return (R06): This means that the ODFI made a request for the RDFI to return the ACH Entry.

Customer revoked authorization (transaction is disputed by the account holder) (R07): This means that the customer who authorized the ACH payment has revoked authorization.

Payment stopped (also known as a stop payment) (R08): This means that the receiver of a recurring debit transaction has placed a stop payment order.

Uncollected funds (R09): This means that although there’s a sufficient ledger balance to satisfy the dollar value of the transaction, the available balance is below this dollar value. This can occur in the case of uncollected checks, for example.


Originator not known and/or not authorized to Debit Receiver's Account (R10): This means that the receiver has notified the RDFI that the Entry is either unauthorized, improper, ineligible, or forms part of an incomplete transaction.

Solutions

The merchant will need to provide various relevant documentation depending on the circumstances.

Closed Bank Account Or Incorrect Bank Account Information

The signer's valid photo ID

Check, bank letter, or bank statement of the new bank account

Stop Payment

The merchant will need to contact their bank to remove the stop peyment (a.k.a. block).

A letter from the bank certifying to the good condition of the account and authorizing credit and debit from the specific processing company.

Insufficient Funds

Verify that there are sufficient funds in the account at the bank.

Request a re-charge

Bank Letter Sample

An official letter from the merchant's bank is known as a bank letter. It contains crucial details regarding the merchant's business bank account, such as the account number, legal name, and address, and it is verified by a banker with their signature.



Please note that while the structure of a bank letter will vary depending on the issuing bank, the crucial information must be included.

Updated on: 04/10/2023