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Handling Unauthorized Returns for US processing

Understanding Unauthorized Return Rates (UARs) and Your Obligations

At Rotessa, we aim to provide seamless and secure ACH transactions for our clients. To maintain this standard, it is crucial to understand Unauthorized Return Rates (UARs), the NACHA rules governing them, and your obligations as a client.

What Are Unauthorized Return Rates (UARs)?

Unauthorized Return Rates (UARs) refer to the percentage of ACH transactions that are returned due to unauthorized reasons. These returns occur when the account holder disputes the transaction, claiming they did not authorize it. Common NACHA return codes associated with UARs include:

  • R05: Unauthorized Debit to Consumer Account Using Corporate SEC Code
  • R07: Authorization Revoked by Customer
  • R10: Customer Advises Originator is Not Known to Receiver and/or Originator is Not Authorized by Receiver to Debit Receiver’s Account
  • R29: Corporate Customer Advises Not Authorized
  • R51: Item Related to RCK Entry is Ineligible or RCK Entry is Improper

What Are NACHA Rules?

NACHA (National Automated Clearing House Association) governs the ACH network and sets the standards and rules for ACH transactions. Key points related to UARs include:

  1. Return Rate Thresholds: NACHA has established thresholds for unauthorized returns. The threshold for UARs is 0.5%. If your return rate exceeds this threshold, you may be subject to additional scrutiny and potential fines.
  2. Authorization Requirements: NACHA rules require that all ACH debits must be authorized by the account holder. Proper authorization can be obtained through a written, verbal, or electronic agreement.
  3. Record Retention: You must retain a copy of each authorization for at least two years from the termination or revocation of the authorization.

Your Obligations as a Rotessa Client

To comply with NACHA rules and minimize UARs, please adhere to the following guidelines:

  1. Obtain Proper Authorization: Ensure that you have obtained and can verify the proper authorization for each ACH debit. Use clear and concise language when obtaining authorization to avoid misunderstandings.
  2. Maintain Records: Keep records of all authorizations securely and ensure they are accessible for the required retention period.
  3. Monitor and Manage UARs: Regularly monitor your return rates. If you notice an increase in unauthorized returns, investigate the causes and take corrective action promptly.
  4. Communicate with Your Customers: Clearly communicate with your customers about the nature of the ACH debit and obtain their explicit consent. Educate them about the importance of recognizing and authorizing ACH transactions.
  5. Respond to Returns Promptly: If a return occurs, address it immediately. Understand the reason for the return and take steps to prevent similar issues in the future.
  6. Review and Update Practices: Regularly review your ACH debit practices and authorization processes. Update them as necessary to ensure compliance with NACHA rules and to reduce UARs.

Special Note on R29 Returns

We often see R29 return codes due to customers (or their banks) blocking all incoming debits. To prevent this issue, it is a good idea for your customers to add the Rotessa ACH Originator ID to their allow list. Our ACH Originator ID is 371865448. By doing this, your customers can ensure that debits from Rotessa are allowed and not inadvertently blocked.

Conclusion

By understanding UARs, adhering to NACHA rules, and fulfilling your obligations as a Rotessa client, you can help maintain the integrity of your ACH transactions and avoid potential penalties. If you have any questions or need assistance, please contact our support team at support@rotessa.com.