What is Changing?
The new Nacha guidance, the WEB Debit Account Validation Rule, has specified a need to pre-transaction screenings of consumer debit accounts. In other words, in an increased effort to prevent fraud and ensure payments are going through to the correct accounts, merchants must use some means of verifying bank accounts before payment.
In the past, many vendors offered some types of safeguards for ACH payments, such as retyping an account number to ensure it is keyed in properly. The difference between this existing method and Nacha’s new requirements is that now, vendors must also offer means of verifying account information as well.
It should be noted that this rule only applies to WEB debit payments (either one-time or recurring payment schedules initiated on the internet).
Benefits of the Change
This updated requirement for debit ACH payments offers many benefits for both your business and your consumers:
- Greater payment security - the reason Nacha has agreed upon this requirement is to decrease fraud and unintended keying of incorrect account numbers by consumers. By creating another level of account verification, consumer accounts are protected and companies that accept ACH avoid payment issues.
- Fewer payment issues - Advanced account verification methods can help your company avoid chargebacks, corrections and ACH returns – and the potential fines associated with these failed payments. This also benefits your company’s administrative return rate (and in turn, your overall return rate) which will naturally decrease with enhanced account verification.
- Saves staff time - Along with the costs of a chargeback, incorrect bank accounts can cost your business more money in terms of staff time. Every missed payment requires an agent to reach back out and reinitiate a payment. Sometimes, this will cause confusion and negative feelings with consumers who don’t believe their payment failed. Other times, you may never be able to reach the consumer again, missing out on that payment entirely.
- Removes accidental payment failures - Providing instant feedback to your consumers if their bank account fails enhances the customer experience. This extra level of verification benefits consumers who may key in wrong information in error. They won’t be surprised later by being told they haven’t paid their bill, which decreases misunderstandings and builds trust with your business.
What is the Deadline?
Who is Impacted?
Any merchant accepting WEB ACH debit payments are expected to follow the upcoming Nacha guidelines. However, the extra measures your company must take will only apply to the first time you take a payment from each consumer’s account.
For example, if you take one-time payments from a repeat customer, you will only need to verify their payment information the first time they use this payment method. This rule also applies to recurring payments. You are expected to verify the bank account information for the first payment in the schedule that this account is used. Afterward this, your current ACH payment processes will be sufficient.
Consequences of Noncompliance
According to their website, “Nacha will not enforce this rule for an additional period of one year from the effective date with respect to covered entities that are working in good faith toward compliance, but that require additional time to implement solutions. Nacha strongly encourages all such covered entities to work towards compliance as soon as possible.”
What can be assumed from this statement is that if companies begin as soon as possible to comply with this rule, they may not be penalized. However, this isn’t a free pass to put off compliance for a year. After the rule goes into effect, non-compliance violations can be reported to Nacha by Depository Financial Institution (DFI) or ACH Operators.
What is PDCflow Doing to Help Companies Comply?
To help businesses that accept ACH WEB payments, PDCflow has created a real-time account validation process for our customers. Here’s how it works:
- Your customer pays by ACH on an online payment portal or any other method submitted with an SEC code of WEB
- Their bank account will be validated before the transaction is submitted for processing
- If their account details fail verification, they instantly receive that feedback
- If their account details pass, the transactions move forward with no additional steps needed
- You can access your company’s ACH reports to view transaction statuses and updates
If you are interested in using ACH Verify to comply with the upcoming Nacha rules, contact a PDCflow account executive at firstname.lastname@example.org.
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