How U.S. Payments Really Work Part 18

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ACH Dishonored Returns — Interbank Operational Disputes

Two banks enter, one return leaves 🐭 How to handle R61, R62, and other dishonored return codes in your payment system

Author: Suma Manjunath

Published on: October 08, 2025

Dishnonored ACH Returns

For: Payments engineers, fintech developers, ACH operations teams
Reading Time: 12 minutes
Prerequisites: Familiarity with ACH file formats, NACHA rules, and standard return codes (R01–R33)
Why now: While dishonored returns are rare (<0.1% of all returns), they represent critical operational failures that require immediate attention. Systems without proper handling risk frozen settlements and banking partner escalations.

TL;DR:

Dishonored returns are when the ODFI formally disputes the validity of a return sent by the RDFI.

These are bank-to-bank operational disputes, not customer complaints.

Primary codes: R61 (misrouted), R62 (erroneous return), R67–R69 (timing/format errors).

Requires escalation to banking operations team and investigation workflow.

Separate from consumer dispute processes (Reg E).

⚠️ Critical Distinction: Dishonored returns are interbank operational disputes. They are not the same as consumer disputes under Regulation E.

⚠️ Disclaimer: All scenarios, accounts, names, and data used in examples are fictional and for educational purposes only.

Problem Definition

The challenge: When your ODFI (bank partner) identifies that a return received from an RDFI is invalid, improperly formatted, or misrouted, they must formally dispute it through a dishonored return. Your system needs to recognize these scenarios and trigger appropriate operational workflows.

Who faces this: Fintechs and payment platforms that process high ACH volumes (>10,000 transactions/month) and have direct ACH sponsorship relationships.

Cost of inaction:

Unreconciled ledger entries (funds in limbo)
Banking partner escalations and potential fee assessments
NACHA rule violations if a pattern emerges
Delayed settlement for your customers

Why standard solutions fail: Most ACH integrations only handle the “happy path” return flow (debit → return → done). They don’t model the recursive case where the return itself is disputed.

Understanding Dishonored Returns

The Actual Flow

flowchart TD
  A["Originator sends ACH debit"] --> B["ODFI processes debit"]
  B --> C["ACH Network routes to RDFI"]
  C --> D["RDFI returns transaction (R01, R03, etc.)"]
  D --> E["ODFI receives return"]
  E --> F{"Is return valid?"}
  F -->|"Yes"| G["ODFI processes return normally"]
  F -->|"No - Invalid reason or misrouted"| H["ODFI creates dishonored return entry"]
  H --> I["ODFI sends dishonored return to RDFI (R61, R62, R67–R69)"]
  I --> J["Banks negotiate resolution"]
  J --> K["Final settlement determined"]

💡 Key Point: The ODFI is the one who dishonors (disputes) the RDFI’s return, not the other way around.

Dishonored Return Codes Explained

Code	Official Name	What It Means	Example Scenario	Who Initiates
R61	Misrouted Return	Return was sent to wrong ODFI	RDFI used old routing number; correct ODFI returns it	Correct ODFI
R62	Return of Erroneous or Reversing Debit	Return itself is erroneous or reverses properly authorized debit	RDFI returned an authorized payroll debit as “unauthorized”	Original ODFI
R67	Duplicate Return	Same return already processed	RDFI accidentally submitted return twice	ODFI
R68	Untimely Return	Return outside allowed timeframe	Insufficient funds return sent 5 days late	ODFI
R69	Field Error	Return has data format errors	Trace number missing or malformed	Either bank
R70	Permissible Return Entry Not Accepted / Return Not a Duplicate	RDFI contests a dishonor	Complex dispute scenarios	RDFI

Real-World Scenarios

Scenario 1: Misrouted Return (R61)

Situation: Acme Payroll sends a debit via ODFI Bank A (routing: 123456789). The employee changes banks, and the old RDFI returns it for “Account Closed” (R02) — but sends it to the wrong ODFI.

What happens:

Bank A receives a return it doesn’t recognize.
ODFI issues R61 dishonored return: “This wasn’t our transaction.”
RDFI must reroute to the correct ODFI.

Your system’s job:

Receive ODFI notification for R61.
Do not adjust customer balances.
Log for audit.
Await correct routing.

# R61 - Misrouted Return Example
require 'date'

class ACHReturn
  attr_reader :trace_number, :code, :amount_cents, :received_date

  def initialize(trace_number:, code:, amount_cents:, received_date: Date.today)
    @trace_number = trace_number
    @code = code
    @amount_cents = amount_cents
    @received_date = received_date
  end
end

class DishonoredReturnHandler
  def handle_r61(return_item)
    puts "📬 Received R61 - Misrouted return for trace #{return_item.trace_number}"
    puts "⚙️  No customer impact. Logging and alerting ODFI ops."
    {
      status: 'dishonored',
      code: return_item.code,
      action: 'awaiting_correct_routing'
    }
  end
end

r61 = ACHReturn.new(trace_number: '000000001234567', code: 'R61', amount_cents: 150_000)
handler = DishonoredReturnHandler.new
puts handler.handle_r61(r61)

Scenario 2: Erroneous Return (R62)

Situation: Your platform processes an authorized subscription debit, but the RDFI returns it as unauthorized (R05).

What happens:

ODFI disputes with R62 dishonored return, providing proof of authorization.
RDFI and ODFI enter a dispute negotiation.

Your system’s job:

Provide authorization documentation.
Mark transaction as under_investigation.
Set 30-day review reminder.

# R62 - Erroneous Return Example
class ErroneousReturnHandler
  def initialize(odfi_client)
    @odfi_client = odfi_client
  end

  def handle_r62(trace_number, authorization_docs)
    puts "🚨 R62 - Disputing erroneous return for trace #{trace_number}"
    @odfi_client.submit_dishonor_evidence(
      trace_number: trace_number,
      dishonor_code: 'R62',
      documentation: authorization_docs
    )
    puts "📤 Submitted documentation to ODFI. Awaiting RDFI review."
    {
      status: 'under_investigation',
      trace: trace_number,
      action: 'evidence_submitted'
    }
  end
end

class MockODFIClient
  def submit_dishonor_evidence(trace_number:, dishonor_code:, documentation: {})
    puts "Submitting evidence for #{trace_number} with code #{dishonor_code}"
  end
end

auth_docs = {
  authorization_form: 'auth_form_tx001.pdf',
  previous_payments: ['tx_001', 'tx_002'],
  authorization_type: 'recurring_web'
}

handler = ErroneousReturnHandler.new(MockODFIClient.new)
puts handler.handle_r62('000000001234568', auth_docs)

Scenario 3: Duplicate Return (R67)

Situation: RDFI submits a duplicate return for an already processed transaction.

Your system’s job:

Confirm duplicate caught.
Ensure only one ledger posting.

# R67 - Duplicate Return Example
class DuplicateReturnHandler
  def handle_r67(trace_number)
    puts "🔁 Duplicate return detected for trace #{trace_number}."
    puts "✅ ODFI rejected duplicate, verified single posting."
    {
      status: 'dishonored',
      code: 'R67',
      trace: trace_number,
      action: 'duplicate_rejected'
    }
  end
end

handler = DuplicateReturnHandler.new
puts handler.handle_r67('000000001234569')

Monitoring & Alerts

# Example Prometheus-compatible metric logging
def record_dishonored_return(code)
  puts "[METRIC] Increment counter ach_dishonored_returns_total{code=\"#{code}\"}"
end

record_dishonored_return('R62')

Prometheus Alert Rules (YAML):

groups:
  - name: ach_dishonored_returns
    rules:
      - alert: HighR62Rate
        expr: rate(ach_dishonored_returns_total{code="R62"}[1h]) > 0.01
        for: 30m
        labels:
          severity: warning
        annotations:
          summary: "High R62 erroneous return rate"
          description: ">1% of returns disputed as erroneous. May indicate authorization problems."

Escalation Guide

Contact your ODFI immediately if:

R62 received without clear authorization records.
Multiple R61s indicate routing errors.
Unexpected R67s suggest duplicate processing.
Investigation exceeds 10 business days — escalate through NACHA.

Validation Checklist

✅ System distinguishes dishonored returns (R61–R70) from standard returns.
✅ R61 processing avoids customer balance changes.
✅ R62 triggers authorization workflow.
✅ R67 includes duplicate detection.
✅ SLA tracking and alerting enabled.
✅ Idempotency ensured for notifications.
✅ Ops team escalation documented.

Takeaways

Dishonored returns are rare but critical; handle them as exceptions.
R62 is the highest priority — defend authorization validity.
Never auto-process dishonored returns; route to investigation.
Maintain close ODFI collaboration for resolution.

References

NACHA Operating Rules & Guidelines — 2024 Rulebook
NACHA Return Codes Reference — Official Code List, 2024
Federal Reserve — FedACH Operating Circular, 2024
Accuity — ACH Exception Handling Best Practices, 2023

At BuildTales.dev, Suma Manjunath is passionate about writing, intentional tech, and the messy magic of building great software teams.

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ACH Dishonored Returns — Interbank Operational Disputes

Problem Definition

Understanding Dishonored Returns

The Actual Flow

Dishonored Return Codes Explained

Real-World Scenarios

Scenario 1: Misrouted Return (R61)

Scenario 2: Erroneous Return (R62)

Scenario 3: Duplicate Return (R67)

Monitoring & Alerts

Escalation Guide

Validation Checklist

Takeaways

References

Comments & Discussion