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Electronic fund transfers (EFT) are quickly becoming an everyday element of business operations in the United States. The most commonly known type of EFT, Automatic Clearing House (ACH) payments totaled over 29 billion payments processed to the tune of $72.6 trillion in just 2021.[1]NACHA. “The economy moves through ACH“. Accessed April 20, 2022. Since ACH payments make up such a significant portion of the market, it’s imperative merchants understand ACH transfers, as well as how to handle ACH returns. This article explains why returns occur, with a special focus on ACH return code R35. Now, let’s electronically transfer some knowledge!
What Are ACH Returns?
Now that we’ve established what ACH payments are, it’s time to take a look at ACH returns.
National Automatic Clearing House Association (NACHA) is the body responsible for governing the ACH network. As such, it maintains standards ACH payments must meet. When an ACH payment does not meet said standards, it’s returned, accompanied by a three-character return code. Currently, there are over 80 possible ACH return codes in this standardization.
The code follows the sequence of beginning with “R” and ending in a two-digit number. As you may have guessed, the “R” stands for “return.” The second part of the code, the two-digit number, indicates the specific reason for the return. As returns happen for a variety of reasons, the two-digit number is essential to pinpointing and correcting the underlying issue preventing a successful ACH payment.
What Does ACH Return Code R35 Mean?
A less common return, ACH return code R35 emerges due to an improperly submitted debit entry. Because debit entries are not universally permissible, R35 signals the improper use of a debit entry. For example, loan accounts and Consumer Initiated Entries (CIE) do not support debit entries.
Formal definition
The formal definition of ACH return code R35 is: “Return of Improper Debit Entry.”
Solutions to Fix R35 Return Code
Unfortunately, a merchant cannot resolve this ACH return code on their own. The associated banking institutions must solve the issue to resolve the return. Linked to both consumer and non-consumer accounts, the resolution timeframe is the next file delivery day following return processing.
If the return disrupts the delivery of goods or services, inform your customer. If the customer desires a quicker delivery timeframe, you may offer to accept another payment method. It’s also best to communicate to them that the associated banking institutions handle this type of return and that you, as the merchant, cannot facilitate a quicker resolution.
Final Thoughts
Don’t let the possibility of returns deter you from accepting ACH payments at your business. While frustrating, ACH returns are rare and typically resolvable. The benefits of low ACH processing fees, automation of recurring payments, and speed with which funds are made available certainly outweigh the occasional downside of troubleshooting a return.
