Understanding ACH Returns and Disputes
If a bank payment (ACH) fails, it’s referred to as a “return.” These are typically initiated by the bank and fall into two categories: Administrative Returns and Disputes.
Administrative Returns
These are due to incorrect or invalid banking details and are often not resolvable:
Invalid routing number
Invalid account number
Closed bank account
Some administrative returns may be resolved, like those due to insufficient funds, which can be retried at a later time.
Disputes
ACH disputes happen when a user reports a payment as unauthorized. These disputes are similar to credit card chargebacks but are final and cannot be appealed. In these cases, the bank account details used for the payment should not be reused.
Any amounts still owed must be resolved outside of the ACH network, typically through direct communication and alternative payment arrangements.
ACH Dispute Codes
These codes help you understand the reason a dispute was filed:
R05 – Unauthorized Consumer Debit (60 days)
R07 – Authorization Revoked by Customer (60 days)
R08 – Payment Stopped (2 banking days)
R10 – Not Authorized or Originator Unknown (60 days)
R29 – Not Authorized by Business Customer (2 banking days)
Understanding Card Disputes
Card disputes, also known as chargebacks, occur when a customer challenges a transaction. Common reasons include:
Credit Not Processed – A promised refund hasn’t appeared.
Duplicate – The customer was charged twice.
Fraudulent – The customer says they didn’t authorize the charge.
Product Not Received – The customer claims the item or service never arrived.
Subscription Canceled – A recurring charge happened after cancellation.
How to Respond to a Dispute
If a dispute is filed against your payment, you may be asked to provide documentation. Here are common evidence types:
Proof of Delivery – Photos, tracking info, or delivery confirmation.
Authorization Documents – Signed agreements or receipts.
Product or Service Usage – Evidence that the customer accessed or used the service.
Recurring Billing Agreement – A signed agreement showing the customer agreed to ongoing charges.
Cancellation Policy – Proof the customer was informed of and agreed to your cancellation terms.
Clear and relevant documentation greatly increases the chances of resolving a dispute in your favor.
FAQs & Troubleshooting
Why was my ACH payment returned?
Most likely due to incorrect banking details, a closed account, or insufficient funds. In some cases, the customer’s bank may reject the transaction if it's not authorized.
Can I retry a failed ACH payment?
Only if the reason was something temporary, like insufficient funds. Do not retry payments for disputed or invalid account details.
How do I resolve a payment dispute?
Start by reviewing the reason for the dispute. Then, communicate with the customer directly to clarify and, if needed, offer an alternative payment method. Gather and submit any evidence requested to support your case.
Are all disputes final?
ACH disputes are final and cannot be appealed. Card disputes can be challenged with proper documentation.