Check Processing

R20 ACH Return Code: Non-Transaction Account

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To understand why ACH return code R20 occurs, you must first understand how ACH payment processing works.

Automated Clearing House (ACH) transactions have become a prime payment processing method, especially for recurring payments. A form of electronic funds transfer, this method also allows employees to receive direct deposit paychecks quickly. This processing reduces the time spent waiting for funds to clear from a traditional paper check, thus freeing cash flow. These reasons, among others, make ACH transactions a preferred processing method for many businesses.

two people doing online banking on their phones only to receive ACH return code R20

The Automated Clearing House system, used by businesses in the United States, enables companies to electronically transfer funds between financial institutions in a matter of a few days. The National Automated Clearing House Association (NACHA) manages the ACH Network. In doing so, NACHA maintains a list of over 80 return codes. When a transfer through the ACH network cannot be completed, NACHA generates a code. These codes, one of which is R20, explain errors in processing that led to the transaction reversal.

To deal with processing errors, you must also understand how the ODFI and RDFI work together. ODFI stands for Originating Depository Financial Institution. Meanwhile, RDFI stands for Receiving Depository Financial Institution. The ODFI originates the transfer, while the RDFI receives the debited or credited funds at the competition of the transaction. Banks and third-party payers serve as ODFI and RDFI processors to facilitate customer payments.

What Does ACH Return Code R20 Mean?

NACHA titles ACH return code R20 as a “Non-Transaction Account.” [1] NACHA.org. Accessed January 14, 2022. Thus, ODFI originated a transaction with a non-transaction account as the RDFI.

Formal definition

If you receive the return code R20, it’s likely the RDFI is a non-transaction account, limited account, or prohibited account. Essentially, it’s not an account designed to accept payments.

Examples of non-transaction accounts may include savings deposits, money market deposit accounts (MMDAs) [2]Investopedia. Money Market Account. Accessed January 14, 2022 , and similar savings deposits, such as time deposits or time certificates. There are rules in place regarding how these accounts send or receive money.

Solutions to Fix an R20 Return Code

To resolve an ACH return code R20, contact the consumer. The consumer may not be aware that their account is a non-transaction account. You’ll need to explain this to them. Finally, ask the customer if they can send or receive the funds from a different account without payment restrictions. A regular checking account will likely suffice.

Article Sources

  1. NACHA.org. Accessed January 14, 2022
  2. Investopedia. Money Market Account. Accessed January 14, 2022