07/12/2024

Payments Hot Tip: Returns Outside of the Reversing Entry Timeframe

With erroneous, duplicate, or unauthorized ACH entries, it can be hard to determine compliance responsibility and liability.

For instance, consider this scenario:

• The Originating Depository Financial Institution (ODFI) has initiated an erroneous, duplicate, or unauthorized entry by the Originator.
• The ODFI is not made aware of the error within the Nacha Operating Rules timeframe to initiate a Reversing Entry. (A reversing entry must be initiated in a timely manner and made available to the Receiving Depository Financial Institution (RDFI) within five banking days after the Settlement Date of the Erroneous File.)
• If it is beyond the timeframe to send a Reversing Entry (five banking days after the Settlement Date of the Erroneous File), the ODFI may ask the RDFI to return the entry R06 – Returned per ODFI’s request.

What is the RDFI to do?

• The RDFI is not required to comply with this request.
• In fact, SFE recommends the RDFI consider the following before agreeing to the request:
  • Will the R06 return cause an overdraft?
  • Is the ODFI willing to send a letter of indemnity?
  • Does the return interfere with actions anticipated or in process?
• From a business perspective, the answers to those questions will dictate whether the RDFI should accommodate the ODFI’s request.

Effective, April 1, 2025, Nacha Operating Rules will allow ODFIs to request the return of an entry for any reason, and the RDFI will have an obligation to advise the ODFI of its decision or the status of the request within 10 banking days of receipt of the request. 

For more information on this and other complicated ACH scenarios, access our on-demand training, ACH 101: Fundamentals for Operations and Frontline (3.6 CEUs).

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