When a Tenant's Payment Bounces
You submitted your ACH file, your bank processed the debits, and most of the rent came through. But one or two entries came back as returns. Now what?
ACH returns are a normal part of collecting rent electronically. They happen when a tenant's bank cannot or will not honor the debit. The key is understanding why the return happened and what you can do about it.
How ACH Returns Work
When your bank sends a debit request to a tenant's bank, that bank has two business days to accept or reject the transaction. If they reject it, they send back a return entry with a standardized reason code.
Your bank packages these returns into a return file — the same NACHA format used for the original transaction, but with return reason codes attached. You need to read that file, match each return to the original entry, and take the appropriate action.
The Return Codes You Will See Most Often
There are dozens of ACH return codes, but as a property manager collecting rent, you will encounter the same handful repeatedly:
R01 — Insufficient Funds
The tenant's account did not have enough money to cover the debit. This is the most common return code by far.
What to do: Contact the tenant. You can re-initiate the debit once they confirm funds are available, but NACHA rules limit you to two retry attempts within a specific timeframe.
R02 — Account Closed
The tenant closed their bank account.
What to do: Get updated bank information from the tenant and have them sign a new ACH authorization form before re-initiating.
R03 — No Account / Unable to Locate Account
The routing and account number combination does not match any account at the tenant's bank.
What to do: Verify the account details with the tenant. This usually means a data entry error — a transposed digit or wrong routing number.
R04 — Invalid Account Number
The account number format is not valid for the receiving bank.
What to do: Same as R03. Get the correct account number and update your records.
R07 — Authorization Revoked by Customer
The tenant has told their bank to stop honoring ACH debits from you.
What to do: This is a formal revocation. You cannot re-initiate. Contact the tenant to discuss alternative payment methods or resolve whatever prompted the revocation.
R08 — Payment Stopped
The tenant placed a stop payment on this specific transaction.
What to do: Similar to R07, but applies to a single transaction rather than all future debits. Contact the tenant to understand why and arrange an alternative for this payment.
R10 — Customer Advises Not Authorized
The tenant is claiming they never authorized you to debit their account.
What to do: Pull your signed authorization form. If you have it, you can dispute the return through your bank. If you do not have a signed form, you have a compliance problem.
NACHA Retry Rules
For R01 (insufficient funds) and R09 (uncollected funds), NACHA allows you to retry the transaction up to two times. Both retries must occur within 15 calendar days of the original return, and you must use the Standard Entry Class code of the original transaction.
Retrying a return for any other reason code violates NACHA rules and can result in fines or losing your ACH origination privileges.
Reading Return Files
Return files use the same NACHA format as your original payment files, but with additional addenda records containing the return reason code. If you are generating your own NACHA files, you also need a way to parse these return files.
Decoding a return file manually means mapping 3-digit codes to their descriptions, matching returns to original entries by trace number, and figuring out the right next step for each one.
Handling Returns Without the Guesswork
FiSTWorks reads your return files and decodes every return code automatically. You see which tenant bounced, why, and what your options are — in plain language, not NACHA code tables. For retryable returns like R01, FiSTWorks tracks your retry count so you stay within NACHA limits.