Return reason code R10 has been used as a catch-all for various types of underlying unauthorized return reasons, including some for which a valid authorization exists, such as a debit on the wrong date or for the wrong amount.  In these types of cases, a return of the debit still should be made, but the Originator and its customer (the Receiver) might both benefit from a correction of the error rather than the termination of the origination authorization.  The use of a distinct return reason code (R11) enables a return that conveys this new meaning of “error” rather than “no authorization.”

R10 is defined as “Customer Advises Originator is Not Known to Receiver and/or Originator is Not Authorized by Receiver to Debit Receiver’s Account” and will be used for:

• Receiver does not know the identity of the Originator

• Receiver has no relationship with the Originator

• Receiver has not authorized the Originator to debit the account

• For ARC and BOC entries, the signature on the source document is not authentic, valid, or authorized

• For POP entries, the signature on the written authorization is not authentic, valid, or authorized

R11 is defined as “Customer Advises Entry Not in Accordance with the Terms of the Authorization.” It will be used by the RDFI to return an entry for which the Originator and Receiver have a relationship, and an authorization to debit exists, but there is an error or defect in the payment such that the entry does not conform to the terms of the authorization. This will include:

• The debit Entry is for an amount different than authorized
• The debit Entry was initiated for settlement earlier than authorized
• The debit Entry is part of an Incomplete Transaction
• The debit Entry was improperly reinitiated
• For ARC, BOC, or POP entries:
  • • The source document was ineligible
    • Notice was not provided to the Receiver
    • The amount of the entry was not accurately obtained from the source document

R11 was currently defined to be used to return a check truncation entry. There have been no forward transactions under check truncation entry programs since 2014.

• R10 and R11 will both be used for consumer Receivers or for consumer SEC Codes to non-consumer accounts

• R29 will continue to be used for CCD & CTX to non-consumer accounts

R11 returns will have many of the same requirements and characteristics as an R10 return, and are still considered unauthorized under the Rules

• Incorrect EFTs are subject to the same error resolution procedures under Regulation E as unauthorized EFTs
• RDFIs’ effort to handle the customer claim and obtain a WSUD remain the same as with the current obligations for R10 returns
• The RDFI will be required to obtain the Receiver’s Written Statement of Unauthorized Debit
• The return timeframe is 60 days
• R11 returns will be included within the definition of Unauthorized Entry Return Rate
• R11 returns will be covered by the existing Unauthorized Entry Fee
• The new definition and use of R11 does not include disputes about goods and services, just as with the current definition and use of R10

An Originator that has received an R11 return may correct the error or defect in the original Entry, if possible, and Transmit a new Entry that conforms to the terms of the original authorization, without the need for re-authorization by the Receiver.

• The new Entry must be Transmitted within 60 days from the Settlement Date of the Return Entry
• The new Entry will not be treated as a Reinitiated Entry if the error or defect in the previous Entry has been corrected to conform to the terms of the original authorization
• The ODFI warranties and indemnification in Section 2.4 apply to corrected new Entries

• Initiating an entry for settlement too early
• Debiting for the wrong amount
• A debit as part of an Incomplete Transaction
• An improper Reinitiated Entry

• The Originator did not provide the required notice for ARC, BOC, or POP entries prior to accepting the check, or the notice did not conform to the requirements of the rules
• The source document for an ARC, BOC or POP Entry was ineligible for conversion

No. Since separate return reason codes already exist to address this particular situation, RDFIs should return these entries as R37 - Source Document Presented for Payment (60-day return with the Receiver’s signed or similarly authenticated WSUD) or R39 – Improper Source Document/Source Document Presented for Payment (2-day return used when the RDFI, rather than the consumer, identifies the error).

The rule will become effective in two phases.  On April 1, 2020, the re-purposed R11 return code becomes effective, and financial institutions will use it for its new meaning.  Other provisions in the rules that apply to unauthorized returns will become effective at this time with respect to R11s – i.e., Unauthorized Entry Return Rate and its relationship to ODFI Return Rate Reporting obligations.

On April 1, 2021, the re-purposed R11 return code becomes covered by the existing Unauthorized Entry Fee.  This part of the rule will be implemented by the ACH Operators, and as with the current fee, is billed/credited on their monthly statements of charges.