ACH FAQs

Here is a general list of frequently asked questions related to TOOLBX ACH payments.

An automated clearing house payment (ACH payment for short) is a form of electronic funds transfer sent from one bank account to another and can be either a credit or a debit.

TOOLBX always settles ACH transactions within 2 business days. However, we do not know if the funds have been successfully received or if there are any issues, such as an incorrect account number, until up to 4 days after the transaction. This means that if there is a problem with the account number or other details, the payment could initially bounce, similar to a bounced check. Rest assured, after 4 days, we can confirm that the funds have settled correctly.

• ACH Pull Transactions: These transactions are initiated by the recipient of the funds. For example, a dealer submitting a payment request to be paid by ACH would be classified as a pull transaction. Pull transactions can take longer because they involve additional steps, such as obtaining authorization and processing the request through the ACH network. Pull transactions typically settle in 3-4 business days.

• ACH Push Transactions: These transactions are initiated by the account holder to send funds to another account. For example, your customer pushes funds from their bank account to pay a statement. Push transactions are typically faster because they involve direct instructions from the account holder to transfer funds. Push transactions settle within 1-2 business days.

Yes, ACH payments can be disputed if there is an error or unauthorized transaction. Business accounts have 2 days to report a dispute in an ACH transaction while non-business accounts have 60 days to dispute an ACH transaction.

No, the ACH network does not allow for disputes of returns. The ACH network processes the return according to its rules and does not offer a formal dispute process for these types of returns. Under exceptional circumstances, ACH network may accept Proof of Authorization (POA) in the event of a customer-initiated return. TOOLBX keeps audit logs, IP and customer information and will help provide this information to the ACH network to help provide Proof of Authorization in the event of any customer-initiated returns. To address most issues with returns you should work directly with the customer to resubmit payment.

We recommend that you only allow ACH payments from credit customers who have been vetted and deemed creditworthy. This is because there is limited recourse to dispute and recover funds in the event of an ACH return or error. Cash customers may not provide sufficient security for ACH transactions, as recovering funds from ACH returns can be more challenging compared to other payment methods. Ensuring that your ACH payments are made by reliable, vetted customers can help mitigate risks and protect your business.

To reduce the risk of errors and ensure accurate transaction processing, we require customers to input their bank account and routing numbers twice. They are not able to copy and paste this data into the secondary validation field. This practice helps to confirm that the information provided is correct and minimizes the chance of mistakes due to typographical errors. By double-checking these details, we aim to prevent issues such as incorrect transfers or bounced payments.

Additionally, we use Gverify, a verification tool that cross-checks the entered bank and routing numbers to further ensure accuracy and validity. This extra step helps to prevent issues such as incorrect transfers or bounced payments, providing an added layer of security and reliability to the ACH process. There are some limitations to Gverify in its coverage for smaller regional banks.

Besides providing the required information to ensure your funds can be sent and ensuring that your customers have the necessary available funds to prevent transactions from being flagged as NSF, you are also obliged to maintain an acceptable rate of returned transactions. 

Measured on a rolling 60-day period, your organization is obliged to stay below the NACHA thresholds.

As an ACH originator, it is your responsibility to maintain ACH return rates that are within acceptable levels. Non-compliance may result in revocation of your access, as NACHA (National Automated Clearing House Association) has the authority to revoke your ability to originate transactions on the ACH network.

The R Code explains the circumstances that prompted the return, whether that be insufficient funds, a frozen account, or an invalid account number. Some codes allow the transaction to be re-authorized and attempted again after the problem is resolved, while others freeze the linked account and subsequent transactions will automatically fail. Below is a breakdown of the codes that often apply to ACH.

Not all codes pertain to one category, but all contribute toward your overall return rate and are defined below:

Administrative Returns must stay below three percent. This percentage is calculated based on ACH debit returns for the preceding 60 days on the following return reason codes: R02, R03 and R04.

Unauthorized Returns must stay below 0.5 percent. This percentage is calculated based on ACH debit returns for the preceding 60 days on the following return reason codes: R05, R07, R10, R29 and R51.

Overall Returns must stay below 15 percent. This percentage is calculated based on ACH debit returns for the preceding 60 days and includes all return reason codes.

***NSF Returns have no specific threshold by themselves; however, these returns contribute to the Overall Return rate (see above) and make up the largest number of returns, by volume. NSF Returns include R01 and R09***