Notice of Return (NOR)
Overview
A Notice of Return (NOR) is a formal notification sent by a receiving financial institution to the originating financial institution when an ACH (Automated Clearing House) transaction cannot be processed successfully. This mechanism is a critical component of the ACH network's risk management system, providing timely feedback about failed transactions.
NOR Process Flow
Return Timeline
- Standard ACH Returns: Must be initiated by the RDFI within 2 banking days of settlement date
- Notification: Merchants typically receive NOR notifications within 3-5 business days after initial transaction processing
Common Return Reasons
| Return Code | Description | Action Required |
|---|---|---|
| R01 | Insufficient Funds | The customer's account does not have enough funds to cover the transaction |
| R02 | Account Closed | The account used for the transaction has been closed |
| R03 | No Account/Unable to Locate Account | The account number provided is invalid |
Business Impact
- Payment Collection Disruption: Failed ACH transactions delay payment collection and impact cash flow
- Additional Processing Fees: Many financial institutions charge fees for returned ACH transactions
System Handling
When a Notice of Return is received for a transaction:
- The payment status is automatically updated to reflect the failure
- The associated payment method is designated as an Invalidated Payment Method for certain return codes.
- System notifications are generated for both internal teams and the merchant
- The return reason is logged for reporting and analytics purposes