ACH Reversals Guide

An ACH reversal occurs when a mistaken transaction occurs, and the transaction must be reversed and the funds returned to the sender.

ACH reversals are an essential part of the Automated Clearing House network, allowing for mistakes and unauthorized transactions to be reversed. Whether due to an error in the transaction information, or a payment made without consent, payments have to be reversed and it is important to understand the reversal rules and guidelines.

What Is An ACH Reversal?

An ACH reversal is a process regulated by NACHA, the governing body for ACH, that allows an Originating Depository Financial Institution (ODFI) to reverse a previously submitted ACH transaction. Reversals can include ACH credits or ACH debits, and must adhere to the NACHA rules.

Common ACH Reversal Scenarios

NACHA states that ACH reversals can only be initiated under certain circumstances, such as:

• Duplicate Transactions: The same transaction was accidentally submitted more than once.
• Incorrect Amount: The transaction was submitted with an incorrect amount.
• Incorrect Account Details: A payment was sent to the wrong recipient due to incorrect account information.
• Unauthorized Transactions: The receiver did not authorize the debit or credit.

ACH Reversal Rules

NACHA imposes strict rules for ACH reversals to prevent system abuse, including:

• Reversal Timeframe: ACH reversals must be initiated within 5 business days of the original transaction settlement date.
• RDFI Notification: The ODFI must inform the Receiving Depository Financial Institution (RDFI) of the reversal and include an explanation of why it is taking place.
• Reversal Eligibility: Only in specific circumstances can the reversal process be used.

How To Initiate An ACH Reversal

To initiate an ACH reversal, you must contact your bank or financial institution as soon as the error is discovered. Your bank or FI may request supporting documentation, and you must give the reason for the reversal.