Posted by NationalACH on Nov 30, 2015
ACH Unauthorized Return

What is an ACH Unauthorized Return?

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asks for the amount  debited from the bank account of the buyer to be returned to the account from which it was withdrawn.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.  

Most Common Unauthorized Return Codes

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.    

  • R05 - Unauthorized Debit to Consumer Account Using Corporate SEC Code – this return occurs when an unauthorized transaction is submitted as if a business checking account was involved. The distinction between personal and business checking accounts is essential, as a business will have only 3 days to dispute the transaction, while a consumer will be able to do so in 60 days.
  • R07 - Authorization revoked by Customer – this reason code is assigned to a dispute when a payment was processed in spite of the fact that the account holder revoked it. This occurs most frequently for recurring billing.
  • R10 - Customer advises Unauthorized, Improper, Ineligible or part of an Incomplete Transaction – this type of unauthorized return can be filed with the financial institution in up to 60 days after the date of the transaction and it means that the account holder considers the payment fraudulent or incorrect.
  • R29 - Corporate Customer advises not authorized - This reason code is applied only when a business account is involved. It means that the account owner did not authorize the transaction or the ACH payment option is not enabled on the account.

Keeping a Low Unauthorized Return Rate

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.