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ACH Chargebacks: Key Info & How to Resolve them on Floorzap Payments

How to resolve common ACH chargebacks on Floorzap Payments:

 

Common ACH Chargeback Types:

Reason Code

Reason

Description

R01

Insufficient funds

The customer did not have sufficient funds to cover the payment attempted.

R03

No Account/Unable to locate account

The customer’s bank account couldn’t be located, so the withdrawal attempt failed. Typically, due to one of the following:

  • Incorrect or mistyped account number
  • Mismatched account and customer name
  • Account number is invalid or doesn’t exist

R04

Invalid account number

The recipient’s account number was entered incorrectly or does not meet the bank’s formatting requirements.

R10

Customer Advises Not Authorized

 

The customer or their bank disputed the transaction and blocked the payment from being debited for collection.

 

  • Please Note: ALL ACH chargebacks are not defendable resulting in an automatic lost status, and impacted funds will be taken back
    • The chargeback amount is debited from your Floorzap Payments account (the same account where you receive payment deposits), not directly from your bank account.
  • Each Chargeback instance carries a $15 fee applied to your Floorzap Merchant Account
  • Floorzap invoice status must be adjusted manually in order to recollect payment.

ACH Chargeback Example:

In this example, the account is on a T+2 (transaction date plus two business days) funding delay and has taken a $1000 ACH payment with a 1% processing fee. A “R03 - No Account/Unable to locate account” chargeback occurred 3 business days after the initial day of payment. The table below will show the payment flow of the funds in question for reconciliation and account purposes.

Date

Action

Payment Amount

May 26th

$1000 ACH payment taken

$990

May 27th

Funds are in transit

 

May 28th

Deposit Date

+$990

May 29th

R03 – “No Account/Unable to locate account” Chargeback Notification via Email & $15 Chargeback Fee applied on Merchant

-$990 Deducted

Important Chargeback Related Information

  • Adyen refers to ACH returns as chargebacks. It is not possible to defend ACH returns. 
  • Both Chargebacks and Refunds are debited from your Floorzap Payments merchant account, not directly from your bank account.
  • If you have not been paid out a customer’s ACH payment yet you receive a chargeback notification within 5 business days of the payment date, please keep this in mind:
    • ACH payments can take up to 5 business days to fully clear from the customer’s bank, which means collection of funds can take place after deposit date listed in your merchant portal if you are on Two Day Funding.
    • This is not an indefinite process and will be resolved to update automatically in the coming months.
  • The merchant portal should always be your first step in the Chargeback Management process for the following reasons:
    • In order to review chargeback reason
    • Verify if its defendable or automatically lost
    • Clarify the specific transaction that is being disputed in order to contact the customer
  • For further details and explanation of the ACH chargeback, please refer to the ACH Chargeback Reference Table