When a Customer Disputes an ACH Payment
ACH payments are a reliable and cost-effective way to handle everything from recurring billing to one-time transfers. But sometimes, a customer disputes a charge—and when that happens, it shows up as a return.
Each ACH return comes with a code that explains why the transaction failed. One that tends to raise red flags—and sometimes confusion—is ACH Return Code R10, which deals with unauthorized or improper transactions.
Let’s unpack what R10 means, what causes it, and how to fix the issue while protecting your business.
Quick Overview: What Is ACH?
The Automated Clearing House (ACH) network is a U.S. payment system that moves money between bank accounts. It’s the behind-the-scenes system that handles things like direct deposits, recurring utility payments, and B2B transfers.
ACH is popular with businesses because it’s more affordable than credit card processing, especially for large or frequent payments. But when a customer flags a payment as improper, the transaction gets reversed—and you receive a return code like R10.
What Does ACH Return Code R10 Mean?
ACH Return Code R10 stands for:
“Customer Advises Originator Is Not Authorized to Debit Account”
Or in plain terms:
The customer told their bank they didn’t authorize the payment, or that it was improper in some way.
Here’s the official NACHA definition:
R10 – Customer Advises Not Authorized, Improper, or Ineligible: The customer claims the debit was not authorized, or was processed in a way that violates the terms of their original agreement.
This return code is serious because it can imply a breach of trust or even a fraud concern in the eyes of the bank. It’s commonly used for:
Debits made without any authorization
Recurring payments that continued after the customer canceled
Charges made for the wrong amount or on the wrong date
Duplicate transactions
The use of corporate codes on consumer accounts (when it should’ve been a PPD)
Why R10 Returns Happen
ACH R10 return codes usually result from one of these situations:
The customer doesn’t recognize the charge and thinks it’s fraud
They canceled the agreement but still saw the charge
The payment amount was different from what was expected
The charge was made earlier or later than agreed
You used the wrong type of authorization or skipped it entirely
Even if your business had a legitimate agreement with the customer, R10 can still show up if something about the charge catches them off guard.
How to Handle ACH Return Code R10
If you receive an R10 return, don’t panic—but do take it seriously. Here’s what to do:
1. Stop Any Future Payments
You should immediately halt future debits to that account. Submitting another charge without new authorization could get you flagged by your processor—or worse, banned from ACH processing.
2. Reach Out to the Customer
This is the time to open a conversation. Ask what went wrong. Did they forget about the payment? Did they cancel and not see confirmation? Listen and document everything.
3. Review the Original Authorization
Look at the ACH authorization you had on file. Was it written, electronic, or verbal? Was the amount and timing clearly spelled out? This helps determine whether the issue was a misunderstanding or something you need to adjust in your billing process.
4. Collect a New Authorization (If Applicable)
If the customer is still interested in continuing service, get a fresh authorization and start clean. Make sure to follow NACHA’s guidelines for how to capture and store these.
5. Keep Detailed Records
Save your customer communications, billing history, and authorization forms. If the return is disputed or you’re asked to provide proof, this documentation is key.
How to Prevent R10 Returns
You can’t avoid every R10 situation, but you can reduce the chances significantly with a few best practices:
Send payment reminders a few days before charging a customer’s account
Make your company name recognizable on bank statements
Make it easy for customers to cancel or change billing
Get clear, detailed authorization (written or digital) before initiating ACH debits
Follow the terms of the authorization exactly—timing, amount, and frequency matter
When customers know what to expect, they’re less likely to feel surprised—or reach out to their bank to dispute a charge.
Get ACH Processing With Durango
ACH Return Code R10—“Customer Advises Not Authorized or Improper Transaction”—means the customer told their bank they didn’t approve the charge, or that something about it didn’t match the original agreement. While these returns are serious, they’re also a chance to tighten up your process and rebuild trust with the customer.
At Durango Merchant Services, we help businesses manage ACH payments, reduce returns, and stay compliant with the rules—even in high-risk industries where issues like R10 are more common.
