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ACH Returns 101

ACH Returns are the digital equivalent of a bounced check. RentRedi helps landlords and property managers document these and collect payment

Crystal Abing avatar
Written by Crystal Abing
Updated over a week ago

ACH returns occur when an ACH payment cannot be completed for any reason, or when the payment initially settles but is rejected later. Essentially, it's the ACH payment equivalent of a bounced check.

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How do ACH Payments Work?

The ACH network is a payments system organized and administered by Nacha, formerly the National Automated Clearing House Association.

ACH payments work by moving money from one bank to another electronically, without a physical exchange of currency. There are two categories of transactions use ACH payments:

  • Direct payment refers to the movement of money to make or receive payments. All funds processed through RentRedi are direct payments.

  • Direct deposit involves the transfer of payments from a business or government agency to a consumer. This is common for payroll.

ACH payments are processed in batches daily—not in real time. This means ACH payments may need more time to transfer between accounts than other forms of payment.

What are ACH Returns?

ACH returns are most easily compared to a bounced check. Since ACH processing does not happen in real time, failed payments may occur for a number of reasons, most common of which are:

  • Insufficient Funds: In this case, the tenant did not have enough money in their bank account for the payment. They will need to resubmit the payment once they confirm there are adequate funds.

  • "No Account/Unable to Locate Account": Typically means a tenant entered in their bank account details incorrectly. The tenant will need to delete and reenter their bank details prior to submitting a new payment.

  • Customer Advises Not Authorized/Stop Payment: These are tenant initiated disputes and are decided by the issuing bank. These cannot be contested.

How does RentRedi handle ACH Returns?

In the case of an ACH return, you will notified via email with the subject line: ACH Return. In this email, it will list the reason for the ACH return as well as the property, unit, tenant name, and returned payment amount.

Similar to bounced checks, there is a fee incurred when an ACH return occurs. Each failed payment will result in a $1.50 fee + $1 for the ACH transaction.

In RentRedi, the tenant's charge will automatically be updated to reflect the returned payment and include the incurred fee.

*In rare cases, RentRedi will not be able to update the charge automatically and you will be required to manually document the returned payment. You will be notified via email if this is required.

What are Clawbacks?

RentRedi partners with ProPay as our payment processor. ProPay utilizes a default 3-day hold to determine the availability of funds and allow the payment to settle. If an issuing bank does not respond in the 3-day allotment, ProPay will “front” or give credit to the end user (the owner) before the ACH transaction settles. This is a common practice because ACH transactions can take anywhere from hours to several days to settle.

If that money is later returned, ProPay will recoup those credited funds by either deducting the negative amount from future deposits or withdrawing from the deposit account.

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