[alexey-salmin]

Can you reference a law saying that the bank is obligated to force an overdraft on a non-overdraft account when the transaction is reversed? This was a screw up by neither the bank nor their client, I see all reasons to bounce it back and let the wrong party figure it out. Furthermore I saw that exact case IRL in another country and the payroll company had to settle it with the employee (not with the bank) in court.

I understand that US banking can be very different here but neither googling nor chatgpt was able to provide any specific proofs.

Some people claim online that a bank can never refuse an ACH transaction but it's obviously false, they do it easily when the account is closed, blocked or overdrawn beyond a certain limit.

[tptacek]

This is in the article.

https://f16c0eccd54007287fb794f9a3d05f2a.cdn.bubble.io/f1698...

[alexey-salmin]

I read that. It's an inverse of what you describe above: bankruptcy is ongoing, all accounts are already frozen. However the debtor asks the court to unfreeze them, resume the normal operation, resume all ACH operations except for chargebacks because they suspect fraud. It never says the bank was obliged to honor reversals with insufficient funds out of pocket, it's not even close. Accounts in question have sufficient funds.

Now here's a legally binding document that actually controls reversals and returns of ACH entries: NACHA: A Complete Guide to the Rules Governing the ACH Network [1] All newer versions are paywalled but for a question you claim is essential to the US banking the 2005 version should suffice. Here's what I see after reading it for two hours.

> Except as otherwise provided for in subsection 6.1.3 (Restrictions on Right to Return), an RDFI may return an entry for any reason.

I didn't find any restrictions that disallow immediate return of the REVERSAL entry with reason code "R01 Insufficient Funds". Reversal entry of a credit entry is a normal debit entry with a word "REVERSAL" in it.

Now the originator can potentially dishonor the return:

> An ODFI may dishonor a return entry (1) if it can substantiate that the RDFI failed to return the entry within the time limits established by these rules, thus causing either the ODFI or Originator to suffer a loss, or (2) if the return entry contains incorrect information, does not include all information required by Appendix Five (Return Entries), or otherwise fails to comply with the requirements of Appendix Five. To dishonor a return entry, the ODFI must transmit a dishonored return entry complying with Appendix Five to its ACH Operator within five banking days after the Settlement Date of the return entry.

However the possible reasons for dishonoring is very limited and doesn't include "we really need that money" reason. Besides filling errors the only real reason is the time limit that doesn't apply here.

So, I can't find any concrete proof that the receiving bank must always honor the reversal ACH entry, especially at loss. The topic of losses from erroneous entries is mentioned multiple times but never in such context.

It maybe a confusion of ACH network rules with Visa/MC rules that do have this requirement in some cases, don't know.

[1] https://archive.org/stream/gov.law.nacha.ach.2005/nacha.ach....