An unauthorized return for an ACH payment occurs when the originating depository financial institution asks for the amount debited from the bank account of the buyer to be returned to the account from which it was withdrawn.
In most situations, the return is initiated when an account holder submits a signed statement (some banks require affidavits) to their bank in which they claim that the transaction is not authorized.
Unauthorized returns have a financial impact on your business. Therefore, understanding and controlling them is important to protect your cash flow from your payment processing accounts.
There are a variety of reason codes for unauthorized returns. However, you'll find that most of your unauthorized returns in your ACH merchant account fall under the following four return codes.
The unauthorized return rules were subject to considerable revision in September of 2015. One of the most important changes introduced a new unauthorized rate threshold that was decreased from 1% to 0.5%. Keeping a low unauthorized return rate should be a priority for any merchant that uses ACH payments because going over the maximum threshold of 0.5% can come along with risk evaluations and penalties.
Paying close attention to unauthorized returns and handling them as soon as they happen is a best business practice that should turn into a habit.
If an unauthorized claim occurs, make sure you cancel the recurring billing feature on the customer’s account and contact them as soon as possible to understand the reasons behind the dispute. Since such claims are not always settled in favor of the merchant, providing another payment method to the customer who made the claim might reduce the risk of losing money for services and products that have already been delivered.
Recent changes in the ACH network rules regarding unauthorized returns make it challenging for all merchants, but particularly those classified as "high risk" to maintain ACH processing accounts. As a result, merchants in high risk categories and well as those classified as standard risk are using other technologies to process echecks outside of the ACH network.
How is your business handling unauthorized returns within your ACH payment processing accounts?
Contact info@NationalACH today.