Understanding the Recent NACHA Updates to R06 and R17 Return Codes: What Merchants and ISO Resellers Need to Know

As of October 1, NACHA has expanded the definitions of R06 and R17 return codes to provide additional flexibility for handling ACH transactions. Whether you’re a merchant, processing payments via ACH or an ISO reseller helping merchants implement these payment capabilities, it’s important to stay informed about these changes to ensure efficient and secure transaction handling.

What’s New for R06: Expanding the Scope of Return Requests

Historically, Return Code R06 was used for limited, specific cases—such as when an Originating Depository Financial Institution (ODFI) believed an ACH transaction involved fraud, incorrect details, or had explicit instructions from the account holder to return the funds. Now, with the recent NACHA update, R06 can be used more broadly: an ODFI can request a return from a Receiving Depository Financial Institution (RDFI) for any reason, making it a versatile tool in managing ACH transactions.

Here’s what to keep in mind:

• RDFI Discretion: Although the ODFI can now request an R06 return for any reason, the RDFI is not required to comply with the request. The decision to return the transaction remains at the discretion of the RDFI.
• Response Time: Once an RDFI receives an R06 return request, it must notify the ODFI of its decision within 10 banking days. This added timeframe supports timely communication and streamlined issue resolution between institutions.

For merchants and ISO resellers, the impact of this update may be minimal in day-to-day operations, but it adds a layer of flexibility in handling returns, especially in cases where a return request doesn’t fit traditional categories. This expansion ensures that RDFIs can respond more quickly to ODFI requests, creating a smoother process for all parties.

What’s New for R17: Enhanced Fraud Protection

The changes to Return Code R17 represent a proactive step in fraud prevention. Originally, R17 was used primarily for issues like formatting errors, missing information, or discrepancies preventing a transaction from being processed. With NACHA’s update, however, R17 now allows an RDFI to return any transaction it believes to be questionable or potentially fraudulent.

Key points for understanding this change:

• Fraud Prevention Tool: By allowing RDFIs to return questionable transactions, NACHA has given institutions a tool to combat fraud more effectively, empowering them to respond to suspicious transactions directly.
• Optional Return: Just as with R06, the expanded use of R17 is optional. RDFIs are not required to use R17 for every suspicious transaction, but the option provides them with a practical mechanism to protect account holders from potential fraud.

For businesses processing ACH payments, this means enhanced vigilance on the part of RDFIs, potentially reducing the risk of fraudulent transactions. While the updates don’t mandate changes to your processes, it’s helpful to understand these adjustments to better communicate with customers or financial institutions if a return occurs under this expanded fraud prevention scope.

Key Takeaways

1. Minimal Impact on Day-to-Day Operations: These rule changes are unlikely to disrupt your daily operations, but they could impact return handling in cases where fraud or other issues arise.
2. Increased Fraud Prevention: The flexibility provided by the R17 update supports a more robust fraud prevention approach, giving RDFIs the discretion to return transactions they find questionable.
3. Clearer Communication: The changes emphasize communication between financial institutions, with timelines in place to support efficient resolution of return requests.

As always, if you have questions about these updates or how they might impact your business, VeriCheck’s support team is here to help. We’re dedicated to ensuring that your ACH processing remains smooth, efficient, and secure, adapting to updates as needed to support your success.