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ACH Payment Returns

A return is a credit or debit entry initiated by the Receiving Depository Financial Institution (RDFI) that returns a previously originated payment to the Originating Depository Financial Institution (ODFI).

You can think of a return being similar to a chargeback for credit cards - it is something that as a business you hope to avoid, but at times can be unavoidable. Returns being initiated by the RDFI can only be initiated during specific timeframes, due to rules set by the NACHA operating guidelines. An ACH payment is payment processing network that's used to send money electronically between banks in the United States.

How do you return an ACH payment?

Oftentimes there are a set of situations where the RDFI can quickly identify when a return needs to be initiated. Think about the situations where there might not be enough funds in the receiving party's account or even in an example where the legal name on the account doesn't match with the legal name included within a payment. The RDFI will want to act in short order to ensure that these returns are highlighted and can be sent quickly to the ODFI to handle accordingly.

However, there are other situations where the receiving party can reach out to their bank to request a return on a payment. This scenario might include times when the receiving party has alerted the RDFI that they had not initially provided permission for a payment to occur on their account.

What are the rules?

The RDFI is responsible for initiating the return entry. The return has to be for the total amount of the original payment (partial returns are not permitted) as well as for the same direction that the original payment was for (so if a payment was for a credit, the return needs to be a credit back).

Returns in general have specific timeframes when they must be received depending on the return code. They also must include the same level of information as the original payment itself.

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