Each code begins with 'R' followed by a two digit number. For example, 'R04' indicates that an invalid account number was provided. In response, the ACH network returns a payment to the originating party if it fails to complete the request. Payments returned in this way are typically referred to as ACH Returns. ACH return codes are standardized and maintained by NACHA, the governing body for the ACH network.
How do ACH Return Codes work in practice?
NACHA prescribes separate rules for handling each return code since each one represents a unique scenario. ODFIs (Originating Depository Financial Institutions) and RDFIs (Receiving Depository Financial Institutions) are responsible for handling ACH return codes according to these rules.
For example, let’s say a consumer's account is debited for a streaming service subscription without their authorization. In that scenario, the consumer's bank has up to 60 days after the payment has settled to return the payment to the company's bank with the ACH return code R05.
Now, let’s take a different example. Let's say the consumer has provided the streaming service with debit authorization but doesn't have enough funds in their account to cover the transaction. In this case, their bank has up to 2 days after settlement to return the payment to the streaming service with the code R02. Failure to do so within 2 days will make the consumer's bank liable for the funds.
ACH Return codes are constantly evolving, with NACHA clarifying and updating existing codes and adding new ones on a regular basis. At the time of writing, the most recent update involved repurposing the return code, R11. Now, R11 will be used when there's an error with a received payment. In this case, the error would be reported by someone who has received a payment for an incorrect amount of money or received a payment on the wrong date.
ACH Return Codes
There are currently 85 distinct ACH return codes. The most common of which are:
The other return codes, which are less common, include:
This list will be continually updated as NACHA updates their operating rules.
Modern Treasury makes it really easy to initiate a return with the appropriate return code and automates linking the return to the original payment. Learn how to return a payment using our API with this guide.