August 27, 2014

NACHA approves enhanced ACH network security

Aug. 28, 2014 – NACHA – The Electronic Payments Association announced Tuesday that its voting membership approved two new amendments to its operating rules in an effort to further improve clearinghouse network quality by reducing the incidence of exceptions and returns.

The rules 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.

One of the amendments has to do with ACH network risks and enforcement topics. The rule 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. Specifically, the amendment reduces the existing return rate threshold for unauthorized debits from 1 to 0.5 percent, establishes a 3 percent return rate threshold for account data quality returns, and a 15 percent overall debit return rate threshold.

The other NACHA amendment, approved Tuesday, relates to improving ACH network quality. The rule would establish economic incentives for originating depository financial institutions, or ODFIs, and their originators to improve origination quality and provide partial cost-recovery to receiving depository financial institutions, or RDFIs, for handling unauthorized transactions.

NAFCU, in comment letters to NACHA in January on the two rules, noted that it "generally supports NACHA's efforts to enhance ACH security and reduce the incidence of fraudulent and erroneous entries," while noting that some of the provisions related to third-party senders could cause an unnecessary burden for ODFIs.

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.