ACH chargebacks fall into two basic categories—transactions rejected by the banks directly and transactions disputed by your customers.
Two ACH Return Codes are used for transactions rejected by the banks directly:
R05: This return code is used when you process a transaction against a consumer checking or savings account using the CCD ACH type code. (See Appendix B: R05 Unauthorized Debit to Consumer Account Using Corporate SEC Code).
NOTE: In most cases the bank will reject this transaction without your customer’s knowledge.
R29: This return code is used when you attempt to charge a business checking account for which ACH transactions are not enabled. (See Appendix B: R29 Corporate Customer Advises Not Authorized.)
NOTE: This code is also used when a business customer disputes a CCD transaction. When it is used to reject all ACH transactions because of account set-up, your customer may not know that the bank has rejected the transaction.
All other ACH chargebacks are a result of your customer taking action to dispute a charge or to remove the authorization to debit their bank accounts. However, unlike with credit card transactions, the reasons that a customer can use to dispute an ACH transaction are very limited. In fact, there are only three permissible reasons to dispute an ACH debit:
The transaction was never authorized or the authorization was revoked.
The amount debited was not the authorized amount.
NOTE: You must process the payment for the EXACT amount authorized—amounts higher or lower are grounds for a chargeback.
The transaction was executed BEFORE the authorized date. (Any date after the authorized date is not grounds for a chargeback.)
ACH Return Codes R10 (for consumer accounts) and R29 (for business accounts) will be used when a customer claims that a transaction was not properly authorized for one of the above reasons. For revoked authorizations (such as a revoked recurring payment authorization) ACH Return Code R07 will be used.
The following are some common things that cause customers to dispute ACH transactions:
The customer does not recognize the charge.
The customer does not remember authorizing the charge.
A spouse or other joint account holder does not know the charge was authorized.
You make a data entry error on amount, transaction date, or account number.
You split a single authorized amount into two smaller transactions (For example, you are authorized to make a single $100 charge, and instead you process two $50 charges.)
You enter the wrong ACH Type for the transaction. (For example, processing a paper check as PPD)
You attempt an ACH transaction on a business bank account not configured for ACH.
The customer revokes your permission to debit his account but only tells the bank and does not also notify you.
The customer lies to the bank about the authorization.