ACH DisputesNavigating Payment Transfer Problems: A Quick Guide for Consumers & Merchants

May 19, 2023 | 14 min read

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ACH Disputes

In a Nutshell

Let’s say a customer sends you a payment via P2P transfer, but something goes wrong with the transaction. Can they file a dispute against you for the amount? This article will take a close look at ACH disputes, from what situations qualify to how ACH disputes are filed. We’ll also provide you with a few tips to help you avoid ACH disputes altogether.

10 Tips for Merchants to Prevent ACH Disputes

A lot of us engage with the ACH system without even being aware of it.

The Automated Clearing House (ACH) system is a vital component of the financial framework in the United States, playing an essential role in enabling electronic funds transfers between banks and their customers. The most typical applications of ACH transfers include receiving paychecks through direct deposit and settling bills by giving bank account details to the service provider. The system acts as the financial foundation for peer-to-peer payment apps like Venmo and Cash App. 

ACH transfers provide a speedy means of receiving our paychecks via direct deposit and settling bills by sharing our bank account information. But, while ACH is an amazing service, occasional issues can arise.

For example, consider a scenario where a customer's payment is returned. How is the merchant alerted to the problem, and how do they determine the cause of it? Let's explore this further.

What is an ACH Dispute?

ACH Dispute

[noun]/ā • cee • atch • dis • pyoot/

An ACH (Automated Clearing House) payment dispute is a situation in which one party involved in an ACH transaction raises a concern or disagreement over the legitimacy, accuracy, or authorization of the transaction.

ACH disputes pertain to various parties involved in an ACH transaction, which is an electronic funds transfer facilitated through the Automated Clearing House (ACH) network in the United States. Key stakeholders include bank customers, banks, and merchants.

Essentially, if an ACH transfer is initiated without a buyer's consent, they (or the bank) may submit a Written Statement of Unauthorized Debit (WSUD) to initiate an ACH dispute. This will allow them to claw back the funds lost.

The National Automated Clearing House Association (NACHA) governs the ACH network and establishes the Operating Rules and Guidelines that banks must follow when handling ACH transactions and disputes. 

Valid Consumer Reasons for an ACH Dispute

Valid reasons customers can cite for initiating an ACH dispute generally fall under specific categories defined by NACHA rules and guidelines

Some of the most commonly used valid reasons for disputes include:

Unauthorized Transactions

If an account holder discovers an ACH transaction that they did not authorize, they have the right to dispute the transaction. Unauthorized transactions can occur due to fraud, identity theft, or errors in the processing of a transaction.

Incorrect Amounts

If the amount of an ACH transaction differs from the agreed-upon or expected amount, the account holder can initiate a dispute. This can happen due to clerical errors, data entry mistakes, or system glitches.

Duplicate Transactions

If an account holder is charged twice or more for the same transaction, they can dispute the duplicate charges. Such occurrences can result from technical issues, processing errors, or miscommunication between parties.

Non-Receipt of Goods or Services

If an account holder has paid for goods or services via an ACH transaction but did not receive them, or they were not as described, they can initiate a dispute. This can happen due to issues with the merchant, such as shipping delays, damaged goods, or misrepresentation of products or services.

Reversal Errors

If an account holder has requested a reversal of an ACH transaction, but the reversal was processed incorrectly, or not at all, they can dispute the transaction. This can occur due to bank errors, miscommunication, or technical issues in the reversal process.

Canceled or Revoked Authorization

If an account holder has canceled or revoked the authorization for a recurring ACH transaction, but the transaction was still processed, they can dispute the transaction. This can happen if the cancellation request isn’t processed correctly or in a timely manner.

Inaccurate Account Information

If an ACH transaction was processed using incorrect or outdated account information, such as an old bank account number or routing number, the account holder can initiate a dispute. This can occur due to data entry errors or outdated information in the system.

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It’s very important for both customers and merchants to understand the difference between valid and invalid reasons for filing ACH disputes. On that note, let’s take a look at a few of the invalid reasons to file.

Invalid Consumer Reasons for an ACH Dispute

Misusing the ACH dispute process is not only wrong on a technical level. It can lead to penalties and increased fees, so there is actually something at stake here for banks and their customers.

Invalid reasons for an ACH dispute are those that do not meet the criteria established by NACHA for legitimate disputes. For instance, invalid ACH dispute reasons include:

Buyer's Remorse

Filing a dispute simply because the customer changed their mind about a purchase is not a valid reason. ACH disputes should be reserved for unauthorized transactions, errors, or non-receipt of goods or services.

Personal Grievances

A dispute arising from a personal disagreement or dissatisfaction with the merchant is not a valid reason for an ACH dispute. Issues unrelated to the specific transaction should be resolved separately between the customer and the merchant.

Delivery Delays

Delays in the delivery of goods or services can be frustrating. But, as long as the merchant has fulfilled their obligations as agreed upon, they are not a valid reason for an ACH dispute.

Avoiding Payment

Ordering something from a company without the intent to pay for that item, and instead file a dispute to avoid paying for a legitimate transaction, is considered an act of fraud. Any ACH dispute that is filed without verifiable cause (with proof) could result in repercussions for the buyer.

Forgetting a Payment

When a customer signs up for recurring payments and promptly forgets about the due date, the issue isn’t the merchant’s responsibility to resolve. Remember, if the merchant can prove that the customer agreed to the payment date, the customer will be required to honor the agreement. 

As a last note, there may be other circumstances that would invalidate a customer’s ACH dispute claim. For example, if a customer has used a product or service, then files a dispute claiming it was defective without first attempting to return the product, this would be considered invalid.

Now that we have a better understanding of which ACH transactions qualify for disputes and which do not, let’s go over the various steps involved in the process. 

The ACH Dispute Process

When initiating an ACH dispute, the buyer must provide as much information and supporting documentation as possible to help the bank investigate the issue. So, assuming the situation aligns with any of the reasons listed above, the account holder (or a representative from their bank) may proceed with the dispute. 

Note that timeframes and specific procedures for ACH payment disputes may vary depending on the banks involved. The nature of the dispute and the applicable rules and regulations may also be factors.

The ACH dispute process typically involves the following steps:


The disputing party (usually the account holder) identifies an issue with the transaction and notifies their bank of their intent to dispute the charge.


The disputing bank initiates an investigation by gathering relevant information, such as transaction details, authorization records, and any supporting documentation. The bank may also contact the other party involved in the transaction (the originating bank or the merchant) to request additional information or clarification.

Dispute Resolution

Based on the investigation, the disputing bank will determine whether the dispute is valid or not. If valid, the bank will usually take appropriate action to rectify the issue, which may include:

  • Reversing the transaction and crediting the funds back to the account holder.
  • Initiating a bank chargeback if the dispute involves a merchant.
  • Working with the originating bank or the merchant to correct the transaction details.


The disputing bank will communicate the outcome of the dispute to the account holder. They may also inform the other party involved, depending on the circumstances.

What is an ACH Return?

If an ACH transaction fails to process, one of the banks involved in the process might receive an ACH return. This serves as a notification to the institution that the funds could not be collected from, or deposited into, the relevant account.

In such cases, an ACH return acts as a message, usually sent by the Receiving Depository Financial Institution (RDFI), informing the Originating Depository Financial Institution (ODFI) that the ACH Network failed to collect or deposit funds into the receiver's account. An ACH return can be thought of as the electronic equivalent of a bounced check.

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The party responsible for the unsuccessful ACH transaction will be charged an ACH return fee, which typically ranges between $2-5 per instance. For example, a "lack of authorization" return often results in a fee for the RDFI, whereas returns due to insufficient funds are likely to incur a fee for the customer's account.

If an ACH payment gets rejected, it is generally returned within two business days. ACH returns can occasionally arise from unauthorized debits or authorized debits that have been subsequently revoked by the customer. In both cases, a written statement is necessary, and the processing of these returns can take up to 60 calendar days.

ACH Returns & Disputes vs. Chargebacks: What’s the Difference?

Some people mistakenly conflate ACH returns with chargebacks, even referring to them as "ACH chargebacks." However, ACH returns and chargebacks are two distinctly different concepts.

Cardholders and financial institutions are highly vigilant about the risks associated with card fraud. Consequently, cardholders can dispute credit card charges, often initiating chargebacks based solely on their word. Funds can then be withdrawn from the merchant's account without notice, even months after the transaction occurred.

Merchants do have a formal process available to contest chargebacks, and the card network may even be brought in to make a final decision. However, the outcome of this process isn’t a guaranteed win. 

In contrast, ACH transactions are cleared between banks automatically, even before the customer's bank confirms the account balance. If an issue arises, the amount must be refunded within two days. Sometimes, the ACH operator may hold the funds for 3-5 days, ensuring everything is in order before releasing the funds to the recipient.

With ACH returns, there is nothing to “charge back.” This is a straightforward return, typically without direct involvement from the customer or the merchant.

Responding to Active ACH Disputes

When an ACH dispute is filed against a company, time is generally of the essence. Merchants can typically respond to ACH disputes through their financial institution or bank. But, to do so effectively, they must follow these steps:

Contact The Bank

As soon as notification of the dispute arrives, merchants should get in touch with their financial institution. They will be guided through their specific process for handling ACH disputes and provide information on the required documentation.

Address the Dispute Claim

Depending on the nature of the dispute, merchants may need to take specific actions, such as:

  • Issue a refund or credit to the customer if the dispute is valid and warranted.
  • Provide proof of authorization, delivery, or service if the dispute is related to unauthorized transactions or non-receipt of goods or services.
  • Correct transaction details if there are discrepancies in the transaction information.

Review the Outcome

Depending on the cause of the disputed payment, merchants may need to take different actions to resolve the issue. This can include updating the customer's bank account information, resubmitting the transaction, or working with the customer to address any outstanding balance.

While all of this is important advice, keep in mind that not every ACH dispute can be avoided.

If ACH transfers are a main means of doing business, it’s fair to expect the occasional friction here and there. However, that isn’t to say that businesses can’t benefit from a few best practices, as we’ll see below.

8 Tips to Prevent ACH Disputes

Merchants should handle ACH disputes proactively and efficiently to maintain good customer relationships and minimize potential financial losses. Here are a few steps merchants should follow when dealing with ACH disputes:

#1 Establish Clear Policies and Procedures

Merchants should have well-defined policies and procedures in place for handling ACH disputes. This includes training staff, documenting processes, and ensuring that all team members are aware of their responsibilities.

#2 Comply with NACHA Rules

Merchants should be familiar with the NACHA Operating Rules and Guidelines (linked above) and ensure compliance with these rules in their ACH transaction processes. This will help minimize potential issues and disputes.

#3 Monitor Transactions

Regularly review and monitor ACH transactions for potential issues, such as duplicate transactions or incorrect amounts. Identifying and resolving these issues proactively can help reduce the likelihood of disputes.

#4 Maintain Accurate Records

Keep detailed and accurate records of all ACH transactions, including customer authorizations, invoices, receipts, and communication logs. These records will be crucial in the event of a dispute.

#5 Communicate Promptly

If a bank contacts the merchant regarding a dispute, respond quickly and provide any necessary information or documentation to support the investigation. Maintaining open and transparent communication can help resolve disputes more efficiently.

#6 Maintain Good Customer Service

Address customer concerns promptly and professionally, and ensure that they are aware of the steps taken to resolve the dispute. A positive customer service experience can help maintain good relationships with customers and reduce the likelihood of future disputes.

#7 Remember to Follow Up

There’s more to customer service than providing “service with a smile.” No matter how large or small an average transaction might be, it’s always a great rule of thumb to check back with the customer after payment is rendered and items have been delivered.

#8 Learn From Disputes

Analyze resolved disputes to identify trends, common issues, or areas for improvement in the ACH transaction process. Implement changes to prevent similar disputes in the future.

Taking a Broader Approach to Fraud & Disputes

Deploying an  advanced fraud detection strategy can help decrease the number of unauthorized transactions received and, by extension, decrease the overall number of ACH disputes. 

But… what about disputes and other issues that can’t be prevented?

Like we mentioned before, ACH disputes and chargebacks aren’t the same thing. However, treating the underlying issues that lead to ACH disputes can also help limit risk, decrease fees, and lower chargeback ratios. 

Remember: up to 60% of all chargebacks are caused by friendly fraud, a post-transactional threat that gets worse every year. In order to fight back effectively, a multi-layered chargeback management strategy is best.


Can you dispute an ACH transaction?

Yes. If an ACH transfer is initiated without a buyer's consent, they (or their bank) can submit a Written Statement of Unauthorized Debit (WSUD) to initiate an ACH dispute.

Can ACH funds be reversed?

If an ACH transaction fails to process, one of the banks involved in the process may receive an ACH return. This is a way of informing the institution that the amount in question either could not be collected from, or deposited into, the appropriate account.

How long does it take to reverse an ACH payment?

When an ACH payment is rejected, it is typically returned within 2 business days. Occasionally, ACH returns may be the result of unauthorized debits or previously authorized debits that the customer has since revoked. In either situation, a written statement is required, and processing these returns could take as long as 60 calendar days.

What happens when an ACH payment is reversed?

The party responsible for a failed ACH transaction will get hit with an ACH return fee, which typically ranges from $2-5 per occurrence. A “lack of authorization” return, for example, will often result in a fee for the RDFI. Returns that stem from insufficient funds, however, will likely mean a fee charged to the customer’s account.

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