What an ACH reversal is
A reversal undoes an ACH payment that was sent by mistake. The sender, or the sender’s bank, sends a second payment in the opposite direction for the same amount. If the mistake was a credit, the reversal is a debit. If the mistake was a debit, the reversal is a credit.
A reversal is the sender’s tool. It is not a way for a customer to get a refund, and it is not a way for a business to take back a payment it regrets.
When a reversal is allowed
Nacha rules allow a reversal only to correct an erroneous payment. These are the permitted reasons.
| Reason | Example |
|---|---|
| Duplicate | The same payroll file was sent twice |
| Wrong receiver | The payment went to the wrong person or account |
| Wrong amount | $5,000 was sent instead of $500 |
| Wrong date | A debit was taken earlier than intended, or a credit was sent later than intended |
| Final pay already given by check | A direct deposit of pay was sent, but the same pay was already in a check handed over when the employee left |
A reversal is improper if it is sent for any other reason, if it is sent because the sender could not fund the original payment, or if it is sent too late.
The reversal rules
| Rule | Detail |
|---|---|
| Time limit | Must be available to the receiving bank within 5 banking days after the settlement date of the mistaken payment |
| A whole file sent in error | The reversing file must be sent within 24 hours of discovering the mistake |
| Label | The batch must say REVERSAL, in capitals, in the entry description |
| Must match | Same payment type, same company ID and same amount as the original |
| Notice | The sender must make a reasonable attempt to tell the receiver, and say why, no later than the day the reversal settles |
| Company name | Must stay recognizable to the receiver |
A wrong amount is fixed in two steps. Reverse the full mistaken payment, then send a new payment for the right amount.
If a reversal is improper
The receiving bank can send an improper reversal back.
| Account | Return code | Time limit |
|---|---|---|
| Consumer account | R11 | 60 days, with the consumer’s signed statement |
| Business account | R17 | 2 banking days |
Nacha can also fine banks for serious misuse. Since 2021 it treats a willful or reckless breach involving at least 500 payments, or at least $500,000, as an egregious violation.
Reversal, return, request for return, dispute
These four things are often mixed up.
| Who starts it | When it is used | Time limit | |
|---|---|---|---|
| Reversal | The sender or its bank | The sender made a mistake | 5 banking days |
| Return | The receiving bank | The payment cannot or should not be completed | Usually 2 banking days. 60 days for unauthorized consumer debits |
| Request for return | The sender’s bank asks the receiving bank | Any reason, since October 1, 2024. The receiving bank may refuse | No fixed limit. The receiving bank must answer within 10 banking days |
| Dispute | The account holder, through their bank | The account holder did not authorize the debit | 60 days from the statement for consumers |
If the 5 banking days have passed, ask your bank to send a request for return. The receiving bank does not have to agree, and the payment comes back as R06 if it does.
How to reverse a payment you sent
- Act the same day. The clock is short, and money that has been withdrawn cannot be pulled back.
- Call your bank or processor and say you need to reverse an erroneous payment. Give the trace number, amount and date.
- Tell the person or business that received the payment what happened and that a reversal is coming.
- Send the correct payment, if the mistake was the amount or the account.
- Check that the reversal settled. If it was returned, you will need to recover the money directly.
If a reversal took money from your account
- Check for a message from the sender. A proper reversal comes with an explanation.
- Ask whether a correct payment is coming. A wrong-amount mistake is fixed by a reversal followed by a new payment.
- If the reversal was not justified, tell your bank. For a personal account, do it as soon as you see it, and no later than 60 days after the statement that shows it. Your bank can return it. If the 60 days have passed, tell your bank anyway.
Common mistakes
- Reversing because the customer has not paid you. Not allowed. A reversal only corrects a payment sent in error.
- Reversing for a different amount. The reversal must match the original exactly.
- Waiting a week. After 5 banking days the reversal itself is improper.
- Counting on the money being there. A reversing debit can be returned for insufficient funds.