In early 2021, NACHA will be changing compliance standards for routing number and account verification used for internet payments (WEB debits). The current iteration of the WEB Debit Account Validation Rule (Article Two, Subsection 2.5.17.4) states that originators of WEB debit entries must use a “commercially reasonable fraudulent transaction detection system” to screen for fraud. Beginning March 19, 2021, the wording of the rule will update to require “account validation” to be part of fraud screening systems.
Better Fraud Protection for Online ACH Transactions
As consumer demands grow for faster payments online; new methods for protecting against fraud become a necessity. According to NACHA, the future fraud detection changes were prompted by multiple “risk events” though social media channels. It became apparent that numerous ACH Originators did not have any screening systems in place for WEB debits. NACHA rule changes will help play an important role for protecting both consumers and businesses. Verifying who is authorized in making an ACH payment will help prevent unauthorized use.
When the NACHA rule changes take effect, merchants that process WEB debits may need to revise their fraud detection system. Applicable ACH originators will need to have account validation within their fraud detection system. It would be advisable for ACH originators to validate specific business applicability.
Fortunately, the rule change does not apply retroactively to account numbers that have already been used for WEB debits. Customer accounts that have previously had valid transactions, do not need to be validated again. Only the first use of an account number or a change in account numbers will fall under the new screening requirements.
Fraud and chargebacks can be costly to both businesses and consumers. Companies that already have a screening system to validate accounts know the value in risk and cost reductions. Those needing to add account validation will be required to do so prior to this rule taking effect in 2021. The downside of adding account validation for WEB debits could mean an increase in costs for these transactions. There is also the costs for companies that need to implement new or change existing fraud detection system to remain compliant. The overall costs for implementation changes should be outweighed by the added protection.
Preparing for Account Validation
Now is the time for companies processing ACH payments online to prepare for these compliance changes. Whether businesses have existing fraud systems in place or not; protecting customers from internet fraud is more important than ever. Evaluate existing or new fraud systems that ensure NACHA compliance and help prevent fraud. Work with a NACHA compliant company that provides compliance solutions for integrating account validation.
To determine if your business falls under upcoming NACHA changes or to find out more information visit:
https://www.nacha.org/rules/supplementing-fraud-detection-standards-web-debits