The Automated Clearing House (ACH) Network is the core payment system in the United States. In Q1 of 2026, there were 403 million same-day ACH payments, which is 23.6% higher than in Q1 of 2025. The total value of those transactions is $1.1 trillion.
At this scale, even a few unresolved transactions can create significant disruptions. To reduce confusion around rejections and failed transactions, the clearing network uses return codes. One such return code is ACH Return Code R23.
If you encounter this error code, then this article is for you. It explains what ACH Return Code R23 means, why it occurs, how to resolve it, and how to prevent it from happening again.
What is an ACH Return Code R23?
ACH Return Code R23 is a NACHA-defined return code that indicates a credit entry has been refused by the receiver. It means that an ACH credit, such as a payout, refund, or vendor payment, was sent to a recipient’s bank account, but the recipient chose not to accept it.
Unlike other ACH return codes that are triggered by technical or server issues, R23 is intentional and purely receiver-driven. It applies only to ACH credit entries where money is deposited into an account, not to withdrawals.
Why R23 Return Happens
Although R23 (Credit Entry Refused by Receiver) can occur in various situations, it is almost always related to a specific customer-initiated rejection. These are the main cases where R23 is typically utilized:
- Refused Payment by Customer: Most often, the reason for R23 is the receiver giving direct instructions to their RDFI not to accept a credit. This happens if the payment is unexpected, the customer doesn’t know the sender, or the receiver has a policy of refusing payments from that originator.
- Account Closed Before Funds Posted: The recipient’s account may be closed at the time the credit is delivered in some cases. Normally, the receiving bank would return the transaction as R02 (Account Closed) if the account is closed. However, if the customer explicitly refuses the credit and the bank chooses to treat it as a receiver-driven refusal rather than a status issue, the transaction may be returned under R23.
- Payment Disputes: R23 may be utilized when the recipient thinks that the payer was not obligated to pay or that the paid amount did not correspond to the due amount. This situation may occur in B2B trades, returns, or reward disbursements in which the payment conditions are disputed.
- Duplicate Payments: Say a payment gets sent more than once, either because of the originator’s mistake or a system fault; the receiver might reject the duplicate credit. The RDFI may return it as R23 to avoid the risk of over-crediting the account.
- Fraud Concerns: Some recipients decline credits when they have a strong suspicion that the source of funds is fraudulent or linked to illegal activity. In these instances, R23 allows the RDFI to decline the credit within the allowable return period, and the bank may initiate additional fraud investigation measures in line with its compliance policies.
How ACH Return Code R23 Affects the Business
In most cases, R23 is a serious issue for a business, as the payment is rejected by the recipient. From a transaction perspective, this indicates a break in the ACH credit lifecycle.
For businesses and finance teams, an R23 return highlights a receiver-driven issue that requires immediate attention before retrying the payment.
How to Resolve ACH Return Code R23
To resolve an R23 return, it’s more important to verify why the credit was refused than to just retry the payment. Some practical steps are given below:
- Check NACHA Returns: First, check out the return information that NACHA provides. It mainly specifies the transaction amount, trace number, and SEC code. Such data can be used to verify the legitimacy of the return and at the same time give you a storyline for a deeper probe.
- Find the Originator: Figure out the corporate or retail originator a returned entry is referring to. Usually, this means matching the trace number with records at the core banking system or the payment gateway.
- Contact the Source: Let the originator know at once that the credit was denied by the receiver. Find out the purpose of the payment and check if the receiver was anticipating the funds.
- Make the Right Payment: Once you have verified the new recipient details, if the payment is still valid, then reissue it. If not, then conduct the payment via another method of settlement, for example, a wire transfer, physical check, etc., in order to finish the transaction on time.
- Keep an Audit: Record everything you say, the actions taken by the system, and the steps leading to the solution. Doing so will help you stay prepared for audits and meet the requirements of NACHA and your organization’s internal governance.
- Set Clear Corporate Expectations: Give the corporate originator clear and useful instructions, stating the exact return reason and preventive measures, so that repeated R23 cases can be avoided.
Ways to Prevent Future R23 Return Codes
Proactive validation efforts combined with working closely with originators are necessary steps to decrease the number of R23 cases. Banks can introduce operational safeguards at various points in the payment processing stages.
- Check account and routing numbers at the time of payment and suggest using pre-note transactions for corporate clients.
- Make sure the receiver agrees before sending credits for the first time or sending high-value credits.
- Provide training to corporate originators on NACHA return codes and the risks of receiving credits from unknown sources.
- Utilizing real-time risk filters can help to identify unusual, duplicate, or incorrect credits.
- Monitor R23 return patterns and resolve recurring issues through targeted communication with clients.
Steps to Reconcile ACH Return Code R23
A failed credit sends a negative signal to the financial records. Here is the step-by-step process to avoid discrepancies.
- Data Ingestion: Banks get the R23 return information through NACHA files, but reconciliation also means bringing together core-system exports, gateway reports, and settlement statements (usually in Excel, CSV, XML, or MT940 formats), which should be standardized and analyzed to ensure proper matching.
- Transaction Matching: Next, pair up the transaction that was returned with the initial ACH credit utilizing different IDs. After that, refer to the information obtained from systems affiliated with the Federal Reserve or the Clearing House to verify the accuracy of the reversal.
- Record Updates: Once confirmed, change internal records to show the reversal and make sure that customer-facing systems indicate the return status, reason code, and provide any related instructions to clients. This will allow customers to easily make decisions about subsequent actions.
- Exception Handling: Occasionally, R23 returns might come with missing or mismatched details; therefore, these exceptions need to be flagged, reviewed, and investigated, then escalated to proper teams in order to be properly resolved before closure.
FAQs on ACH Return Code R23
Here are some of the most common questions and answers about the R23 return code.
How does R23 differ from unauthorized return codes like R10 or R29?
R23 is only applicable to credit entries that are refused by the receiver. Other codes, like R10 (Unauthorized) and R29 (Corporate Customer Advises Not Authorized), apply to unauthorized debit transactions.
What role does the RDFI play in an R23 return?
The RDFI (Receiving Depository Financial Institution) receives the ACH credit and rejects it, based on the account holder’s request. It then initiates the return with code R23 and sends it back through the ACH network to the originating bank.
What is the time limit for processing an R23 return?
NACHA standards state that the RDFI must typically initiate an R23 return no later than two banking days after deciding to reject the credit entry, unlike the 60-day period allowed for some other credit returns.
Can R23 returns be disputed or reversed?
R23 return is a refusal initiated by the receiver, so it can only be a reflection of the refusal and cannot be disputed or reversed through the ACH network. If the payment was valid, it can be resent as a new entry after confirming the details with the receiver.
What happens if an R23 return is not resolved?
If an R23 return is not resolved, it may cause reconciliation differences and/or a breakdown of business connections. Moreover, when unresolved returns become a repetitive feature, it is a typical indication of operational shortcomings.
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