In this article:
What Is a Chargeback?
A chargeback is a formal dispute of a credit card or ACH transaction. When a chargeback is filed, the funds are returned to the cardholder by their financial institution — not by ProPay. Chargebacks can happen for a variety of reasons:
Credit Card Disputes — A customer disputes a charge through their credit card provider or bank (e.g., fraud, services not rendered, not as described, paid by other means).
ACH Errors — A client enters incorrect information when paying via ACH (routing/account number, personal info, etc.), which results in the removal of pending funds from the ProPay account.
When a chargeback occurs, Propay will typically recover the funds by initiating a withdrawal from the merchant's bank account on file. This is generally a one-time debit for the full amount of the chargeback.
If the chargeback causes the Propay account to go negative, the merchant will be asked to contact Propay Collections immediately.
Chargeback Fee
Every chargeback incurs a $25 penalty/processing fee, assessed by the credit card brand. ProPay cannot issue refunds on this fee unless a full refund was issued by the merchant prior to the chargeback being filed.
ACH Rejections
ACH’s can be rejected for numerous reasons -
Incorrect bank information
Lack of funds
Closed or Frozen accounts
ACH Rejection Codes
Here are the most common rejection codes (this is not all):
ACH return code 01 (R01)
ACH return code 01 (R01) signifies "Insufficient Funds", meaning the recipient's bank account did not have enough money to cover the transaction. To resolve this, the payment originator must contact the account holder to confirm sufficient funds are available, then resubmit the payment after the account balance has been updated.
Contact the Account Holder: Reach out to the customer or account holder to inform them of the R01 return and confirm that there are enough funds in their account to cover the transaction.
Update Your Records: Keep a record of the failed payment and the reason it was returned.
Re-initiate the Payment: Once the account holder has confirmed sufficient funds, you can resubmit the payment.
ACH return code R03
ACH return code R03 signifies "No Account/Unable to Locate Account," indicating the transaction failed because the account number or routing information provided is incorrect or doesn't correspond to an existing, open account for the given name. To resolve an R03, the sender should contact the customer or account holder to verify and correct their bank account and routing numbers, then resubmit the transaction with the accurate information.
Causes for an R03 Return Code
Incorrect Account Number: The most frequent cause is a typographical error in the account number or providing an account number that doesn't exist.
Closed Account: The account may have been closed by the recipient, meaning it can't receive or process payments.
Invalid Account Type: Some account types, like certain loan or investment accounts, might not be eligible for ACH transactions.
Bank Mergers or Changes: Bank mergers or structural changes can lead to outdated account details or changes to account numbers.
Routing Number Error: An incorrect or outdated routing number can also cause the transaction to fail.
Inactive or Restricted Account: An inactive or dormant account cannot process transfers.
Account Holder Discrepancy: The name on the account may not match the name provided in the ACH transaction.
ACH Return Code R09
ACH Return Code R09, or Uncollected Funds, signifies that the receiving bank could not collect the funds for the transaction because there wasn't enough available money in the customer's account to cover the transaction. To address it, the originator can attempt to resubmit the transaction up to two times within a 60-day period.
Resubmit the Transaction: As per Nacha rules, you can attempt to resubmit the transaction.
Frequency: You are allowed up to two re-submissions.
Timeframe: The re-submissions must occur within 60 days of the original authorization.
Additional Codes
R02 (Account Closed): The account was shut down by the owner or the bank. You need to ask the customer for a new bank account.
R04 (Invalid Account Number): The account number has the wrong number of digits or fails basic math checks.
R07 (Authorization Revoked): The customer canceled their permission for you to take money from their account.
R10 (Not Authorized): The customer says they never gave permission for the charge, or they do not know who you are.