ACH Return Codes

When an ACH transaction is unsuccessful due to issues such as insufficient funds, invalid account information, or unauthorized debits, a return code is generated to indicate why the transaction was rejected or reversed.

NACHA, the governing body for the ACH network, standardizes ACH return codes. Each code consists of an R followed by a two-digit number. Banks and fintechs send and receive these error codes and usually pass them on to their merchants, to help them better understand why the payment failed.

Parties Related To ACH Return Codes

There are two main parties involved in ACH payments and associated return codes:

Originating Depository Financial Institution (ODFI) - The party that initiates the transaction.

Receiving Depository Financial Institution (RDFI) - The party that receives the transaction.

Note that regardless of whether the transaction is an ACH credit or debit, the ODFI always initiates the transaction, and the RDFI still receives the transaction.

An ACH return code will be sent by the RDFI to the ODFI to let them know that the ACH network was unable to complete the transaction.

Example: ACH Return Code R01

One of the most common return codes used is R01, which is the Insufficient Funds code. This means that the RDFI is letting the ODFI know that their payor does not have enough money in their account to cover the collection request.

In this instance, the ODFI can choose to retry the transaction or inform their merchant that the payor does not have the funds required to cover the collection request. Merchants can then use this information to make informed decisions about the best way to handle these scenarios.