What are Unauthorized Return Rates and How to Handle Them?

To say that the number of transactions on the ACH Network is growing would be quite an understatement. According to Nacha (National Automated Clearing House Association), the network handled more than 7.3 billion transactions in Q1 2022 - a 2.2% increase from one year ago.


What are Unauthorized Return Rates?

The unauthorized return rate compares the total number of ACH debits returned to the number of ACH debits produced over the last two calendar months. The return rate shows whether or not a merchant sees unusual amounts of payments returned as unauthorized. Merchants calculate unauthorized return rates with the following formula:

(Number of debits returned) ÷ (Number of debits originated for the preceding 60 days)

Unfortunately, with the meteoric increase in the number of transactions, the return rates for failed payments have also increased, which prompted Nacha to decrease the unauthorized return rate threshold from 1% to 0.5% in 2015.

Some of the most popular unauthorized return codes include:

  • R05: Unauthorized Debit to customer’s account
  • R07: Authorization revoked by customer
  • R10: Customer advises not authorized
  • R29: Corporate customer advises not authorized
  • R51: Item is Ineligible, Notice Not Provided, Signatures Not Genuine, Item Altered or Amount of RCK Entry not Accurately Obtained From the Item

Other important codes associated with ACH payment processing include:


How Does a High Unauthorized Return Rate Affect Merchants?

According to Nacha, this change compelled business owners to monitor their return rates closely. Exceeding the threshold would result in fines for the processing bank, or Originating Depository Financial Institution (ODFI), which could then be passed on to the merchant. Fortunately, we now have the tools to help merchants tackle this thorny side of business.

“iCheckGateway.com is committed to helping merchants keep their unauthorized return rates in compliance,” said iCheckGateway.com’s Sarah Wainright. “In addition to providing information on proper authorization types to help merchants reduce the number of transactions returned as unauthorized, we can also turn on check verification to provide online, real-time access to positive and negative account information. Our real-time check verification services identify items at the point-of-sale, which eliminates potential fraud and reduces the likelihood of returning unpaid items.” 

Learn more about the essential components of check verification services.


The following steps in our virtual terminal make it easy to calculate return rates for continued compliance monitoring:

  1. Select the Export Transaction Details Report in the Online Terminal (Reports>Export Transaction Details).
  2. Set Payment Method to Checks and select the desired period (generally, the preceding sixty days or two calendar months).
  3. Be sure to select Exclude Voids for Transaction Type.
  4. Click Export Data to generate an excel sheet.

Merchants use Excel’s count, sort, and subtotal features to quickly calculate the unauthorized return rate. By regularly calculating the Unauthorized Return Rate, businesses can track return rate trends and be ready to take action if needed. Are you facing exceptionally high unauthorized return rates? Speak with an innovative payments technology expert today to get a quick resolution. 


Date Originally Published: July 12, 2016 

Date Updated: July 26, 2022

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