Archery is an exact sport. Competitors must hit a 122 centimeter (4 foot) target from a distance of 70 meters or 230 feet. That's the distance of one and half Olympic size swimming pools or hitting the field goal posts from the 20 yard line on your opponent's side of the football field.
Hitting the bullseye is even more challenging at only 12.2 centimeters or 4.8 inches, from that same distance.
Debt collection agencies face similar challenges. They must find customers, get them to agree to payments, and then collect on those payments over time. All from customers who traditionally don't pay their bills.
New NACHA ACH Return Payments Changes
Recently, NACHA announced they are cutting the 4.8-inch bullseye in half. Instead of allowing for a 1% return in unauthorized debits, the number will be cut to 0.5 % of all transactions.
They have also reduced the acceptable occurrences of returned administrative debits due to closed or invalid accounts to 3%, and overall debit returns to 15%.
The goal of NACHA's changes is to improve ACH networks, but in the effort, they are driving the debt collection industry toward remotely created checks (RCCs) to bypass the new tighter standards, due to fewer tracking restrictions for remotely cleared payments.
When almost 100% of your clients struggle to hit the target at all, shrinking the size of the bullseye, hurts everyone involved. Consumers with late payments have money going out of their accounts faster than they are earning. Naturally creating a higher percentage of returned ACH payments.
Tighter scrutiny with regard to ACH returns will make it harder for consumers to make payments and much harder for the collection industry to remain compliant.
When the FTC banned RCCs in the telemarketing industry last fall it opened the door for a broader sweep of regulation potentially eliminating this payment arm in debt collections, just as agencies have an increased need for more RCC transactions, due to changes in NACHA regulations.
Collection agencies are facing a double-edged sword of tighter scrutiny in payment methods and new regulations reducing the acceptable ratio regarding the occurrence of returns, which are very common among this client class.
It is like punishing an archery supply company for carrying arrows. Regulators have lost sight of the important role debt servicing company’s play in the lending industry. When financial institutions are unable to collect payments, they stop lending to that class of consumer due to the profitability profile.
PDCflow can help you hit the compliance bullseye with our suite of products designed to drive inbound payments and keep you compliant all in one easy work flow.
Download our ACH Authorization Requirement Guideline or Contact PDCflow today to learn more. 877-732-4814