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When a Debit Is Rejected for Breaking the Rules
ACH payments are trusted for their speed, reliability, and low processing costs—but they come with strict rules and formatting standards. If a debit entry doesn’t follow those rules, it may be flagged by the receiving bank and returned with ACH Return Code R35.
This code means the debit was deemed “improper”—either due to a formatting error, the wrong type of transaction, or a mismatch between the transaction type and the recipient’s account.
Let’s explore what R35 – Return of Improper Debit Entry really means, what can cause it, and how to resolve it quickly and correctly.
What Does ACH Return Code R35 Mean?
ACH Return Code R35 stands for:
“Return of Improper Debit Entry.”
According to NACHA’s official definition:
R35 – Return of Improper Debit Entry: The RDFI (Receiving Depository Financial Institution) is returning the debit because it does not comply with NACHA Operating Rules for ACH debit transactions.
In short: the bank on the receiving end reviewed the debit and determined it was submitted in a way that violates one or more ACH rules.
Common Reasons for R35 Returns
There are several ways a debit entry might be considered “improper”:
A consumer debit (PPD) was sent to a business account, or vice versa
A debit entry was sent to an account that only accepts credits (such as some loan accounts)
The wrong SEC code (Standard Entry Class code) was used for the type of account
The debit didn’t match the authorization or wasn’t properly authorized
A formatting or structural error was detected in the transaction
Essentially, R35 is a catch-all return code used when the transaction doesn’t break just one technical rule—it breaks a combination of format, use-case, or compliance expectations.
How to Handle ACH Return Code R35
Here’s how to respond to an R35 return code:
1. Review the Transaction Details
Look at the account type, SEC code, and the authorization you have on file. Determine if the debit was sent using the correct format and to the right kind of account.
2. Contact the Customer or Recipient
Ask the customer to confirm the type of account they’re using and whether they were expecting a debit. If it was a loan account, trust account, or another restricted account, they may not have realized it couldn’t accept debits.
3. Adjust the Entry Type or Account Information
If the issue was due to an incorrect SEC code or an ineligible account, update the transaction format or request alternate banking details from the customer.
4. Correct and Resubmit (If Appropriate)
If you’re still authorized to collect payment and now have valid information, you can create a new ACH entry—just make sure it’s properly formatted and targeted to an account that allows debit entries.
How to Prevent R35 ACH Errors in the Future
To avoid R35 returns, it’s important to tighten up your ACH processes from the start:
Use account validation tools to identify account types and capabilities before sending debits
Match your SEC code to the account type—PPD for consumers, CCD for businesses, etc.
Make sure authorization forms are accurate and specific
Avoid submitting ACH debits to loan, investment, or trust accounts, which often restrict debit activity
Work with an experienced ACH processor who can flag issues before submission
Taking the time to collect and verify correct account details can save you from costly returns and disrupted billing cycles.
Get ACH Processing With Durango
ACH Return Code R35—“Return of Improper Debit Entry”—means the transaction didn’t follow the rules for ACH debits. Whether it’s due to the wrong account type, incorrect SEC code, or another compliance misstep, it’s important to correct the issue before trying again.
At Durango Merchant Services, we help businesses of all sizes—especially those in high-risk or complex industries—navigate the ins and outs of ACH billing. From account validation to proper formatting and return code resolution, we’re here to keep your payments accurate and compliant.
