diff --git a/CHANGELOG.md b/CHANGELOG.md
index 207d8fd8..0f80550d 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -2,6 +2,8 @@
 
 ## Unreleased
 
+- fixed: Correctly handle challenge errors during light account creation.
+
 ## 3.22.2 (2024-09-26)
 
 - fixed: Spinner showing on pin dots before biometric is read
diff --git a/src/components/modals/ChallengeModal.tsx b/src/components/modals/ChallengeModal.tsx
index 8e6e89c2..5fad1505 100644
--- a/src/components/modals/ChallengeModal.tsx
+++ b/src/components/modals/ChallengeModal.tsx
@@ -22,13 +22,13 @@ interface Props {
  * and the user successfully solves the challenge.
  */
 export async function retryOnChallenge<T, C>(opts: {
-  task: (challengeId?: string) => Promise<T>
-  onCancel: () => C
-  onSuccess?: (challengeId: string) => void
+  cancelValue: C
+  saveChallenge?: (challengeId: string) => void
+  task: (challengeId: string | undefined) => Promise<T>
 }): Promise<T | C> {
-  const { task, onCancel, onSuccess } = opts
+  const { cancelValue, saveChallenge, task } = opts
 
-  return await task().catch(async error => {
+  return await task(undefined).catch(async error => {
     const challengeError = asMaybeChallengeError?.(error)
     if (challengeError != null) {
       const result = await Airship.show<boolean | undefined>(bridge => (
@@ -37,9 +37,9 @@ export async function retryOnChallenge<T, C>(opts: {
           challengeUri={challengeError.challengeUri}
         />
       ))
-      if (result == null) return onCancel()
+      if (result == null) return cancelValue
       if (result) {
-        onSuccess?.(challengeError.challengeId)
+        saveChallenge?.(challengeError.challengeId)
         return await task(challengeError.challengeId)
       }
     }
diff --git a/src/components/scenes/OtpErrorScene.tsx b/src/components/scenes/OtpErrorScene.tsx
index 6a6b8827..a6864f9e 100644
--- a/src/components/scenes/OtpErrorScene.tsx
+++ b/src/components/scenes/OtpErrorScene.tsx
@@ -104,6 +104,7 @@ export function OtpErrorScene(props: Props) {
     inModal.current = true
     const handleSubmit = async (otpKey: string): Promise<boolean | string> =>
       await retryOnChallenge({
+        cancelValue: lstrings.failed_captcha_error,
         async task(challengeId) {
           const account = await attemptLogin(
             context,
@@ -117,9 +118,6 @@ export function OtpErrorScene(props: Props) {
           )
           dispatch(completeLogin(account))
           return true
-        },
-        onCancel() {
-          return lstrings.failed_captcha_error
         }
       }).catch(error => {
         // Translate known errors:
diff --git a/src/components/scenes/PasswordLoginScene.tsx b/src/components/scenes/PasswordLoginScene.tsx
index ab705b60..06f028b1 100644
--- a/src/components/scenes/PasswordLoginScene.tsx
+++ b/src/components/scenes/PasswordLoginScene.tsx
@@ -189,6 +189,7 @@ export const PasswordLoginScene = (props: Props) => {
 
     setSpinner(true)
     retryOnChallenge({
+      cancelValue: undefined,
       async task(challengeId) {
         Keyboard.dismiss()
         const account = await attemptLogin(
@@ -203,9 +204,6 @@ export const PasswordLoginScene = (props: Props) => {
         onPerfEvent({ name: 'passwordLoginEnd' })
         onLogEvent('Pasword_Login')
         await dispatch(completeLogin(account))
-      },
-      onCancel() {
-        return undefined
       }
     })
       .catch(async error => {
diff --git a/src/components/scenes/newAccount/NewAccountUsernameScene.tsx b/src/components/scenes/newAccount/NewAccountUsernameScene.tsx
index d44f7295..930ffa99 100644
--- a/src/components/scenes/newAccount/NewAccountUsernameScene.tsx
+++ b/src/components/scenes/newAccount/NewAccountUsernameScene.tsx
@@ -176,12 +176,12 @@ export const ChangeUsernameComponent = (props: Props) => {
 
       setIsFetchingAvailability(true)
       retryOnChallenge({
+        cancelValue: undefined,
+        saveChallenge(challengeId) {
+          dispatch({ type: 'CREATE_CHALLENGE', data: challengeId })
+        },
         async task(challengeId = lastChallengeId) {
           return await context.usernameAvailable(text, { challengeId })
-        },
-        onCancel() {},
-        onSuccess(challengeId) {
-          dispatch({ type: 'CREATE_CHALLENGE', data: challengeId })
         }
       }).then(
         isAvailable => {
diff --git a/src/hooks/useCreateAccount.ts b/src/hooks/useCreateAccount.ts
index 33b10b33..cfd264c7 100644
--- a/src/hooks/useCreateAccount.ts
+++ b/src/hooks/useCreateAccount.ts
@@ -8,7 +8,8 @@ import { useImports } from './useImports'
 export const useCreateAccountHandler = () => {
   const { context, accountOptions } = useImports()
   const dispatch = useDispatch()
-  const challengeId = useSelector(state => state.createChallengeId) ?? undefined
+  const savedChallengeId =
+    useSelector(state => state.createChallengeId) ?? undefined
 
   const handleCreateAccount = useHandler(
     async (createAccountParams: {
@@ -19,7 +20,8 @@ export const useCreateAccountHandler = () => {
       const { username, password, pin } = createAccountParams
 
       return await retryOnChallenge({
-        async task() {
+        cancelValue: undefined,
+        async task(challengeId = savedChallengeId) {
           const account = await context.createAccount({
             ...accountOptions,
             challengeId,
@@ -36,8 +38,7 @@ export const useCreateAccountHandler = () => {
           dispatch(loadTouchState())
 
           return account
-        },
-        onCancel() {}
+        }
       })
     }
   )