There are several return reason codes and they exist to provide information to the merchant as to why a transaction didn’t go through. Some are used more often, and some provide more insight than others.
Currently, code R11 is used when returning a check truncation entry and should only be used if no other return code is appropriate. Due to this, the code has seen little use. But this code is about to be updated to have a more specific use that will help merchants understand the return reason better.
What Will Code R11 Do?
As of right now, the code R10 acts as a broad catch-all for unauthorized return reasons, even if some of those might have been authorized but are being returned for another reason.
Reasons for an unauthorized return code include:
- The customer doesn’t know the merchant
- The customer did not authorize the merchant to debit the account
- The signature is not authenticated or authorized for ARC, BOC or POP entries
However, debits that had errors separate from these reasons are still grouped under the code R10. This lack of information keeps merchants from being able to find the root of the issue and provide a solution with the customer. Examples of this would include debits that were put through on the wrong date or for the wrong amount.
The new definition of the R11 code will alert the originator that there was an error in the debit, rather than lumping it under the umbrella of unauthorized payments.
The new return reason code R11 will cover the following instances:
- The debit was made for an incorrect amount
- The debit was made earlier than authorized
- The debit is part of an incomplete transaction
- The debit was improperly reinitiated
- For ARC, BOC, or POP entries:
- The source document was ineligible
- Notice was not provided to the customer
- The amount of the debit was not accurately obtained from the source document
The new code R11 will be similar to the code R10 in regards to requirements and characteristics. The key difference is that under R10, a merchant would be able to correct the issue and submit a new debit without requiring a new authorization.
What Impacts Will R11 Have?
There are several benefits to the repurposed code, including a clearer understanding of the reason for returns as well as the ability to address them. It will also allow merchants to collect more refine data on the reasons for returns.
In order to be prepared for this change, you will need to educate clients and front line staff on how to correctly implement, use and track the new code R11.
You should also be aware that the two-day return timeframe will be expanding to 60 days and you may need to update your system to account for this. You should reach out to your core processor to make sure that your system is prepared for the changes.
When Will R11 Take Effect?
The new code R11 will be launched in two phases. In the first phase, financial institutions will begin using the code for its new purpose and provisions in unauthorized return rules would apply. This will take effect on April 1, 2020.
In the second phase, the new tax code will be covered by the existing Unauthorized Entry Fee, and will be implemented by ACH Operators and billed on their monthly statements. This will take effect a year after the first phase on April 1, 2021.
It’s important to be educated and prepared before the first phase takes effect for a smooth transition.