January 13, 2014

Enhanced ACH network security, efficiency urged by NAFCU

Jan. 14, 2014 – NAFCU submitted two comment letters on Monday to NACHA on its proposals regarding clearinghouse network risks and enforcement topics and improving ACH network quality.

NACHA invited input to two proposed rules that seek to rein in the level of ACH exceptions and provide economic incentives to help improve origination quality. The proposals are part of NACHA's risk management strategy. Their aim is to protect the safety, security and integrity of the ACH network and the consumers, governments, businesses and financial institutions that move their money via ACH.

The proposal regarding ACH network risks and enforcement topics expands NACHA's authority to initiate enforcement proceedings against originators that introduce unauthorized transactions into the network and sets additional standards for the use of the network to collect debits returned for insufficient funds.

NAFCU Regulatory Affairs Counsel Angela Meyster, in a comment letter, told NACHA that the association "generally supports NACHA's efforts to enhance ACH security and reduce the incidence of fraudulent and erroneous entries." However, she expressed concern that some provisions related to third-party senders could cause an unnecessary burden for originating depository financial institutions, or ODFIs. NAFCU also requested that NACHA postpone the effective date for its increased enforcement authority until March 20, 2015 so that ODFIs may have sufficient time to implement these new processes.

Another NACHA proposal on improved ACH network quality would establish economic incentives for ODFIs and their originators to improve origination quality and provide partial cost-recovery to receiving depository financial institutions, or RDFIs, for handling exceptions. Meyster wrote that NAFCU supports this proposal "to the extent the proposed fees shift the costs associated with exceptions to the appropriate ACH participant." However, she asked for greater clarity on how these fees will be shifted and urged against withholding any portion of the fees.

NAFCU continues to work with NACHA on ensuring the security and efficiency of the ACH system, particularly in light of recent data breaches and cybersecurity issues.