NACHA votes for new fraud detection rules

The industry body has voted to establish procedures for investigating ‘outlier’ transactions. The move allows NACHA to scrutinize a companys activity on the clearing house, if it detects a high volume of charges that are returned without payment.

NACHA has also agreed to impose penalties on banks involved in originating the bad charges. The penalty, known as an ‘unauthorized entry fee’, is aimed at determining financial institutions to more closely monitor third-party payment networks.

The ACH Network Quality Rule defines the methodology for establishing an Unauthorized Entry Fee to be paid by an Originating Depository Financial Institution (ODFI) to a RDFI for the return of an unauthorized transaction. An Unauthorized Entry Fee will provide an incentive for ODFIs to implement processes and tools with their Originators that reduce the number of unauthorized transactions. The fee also will provide partial cost recovery to RDFIs for their costs in handling unauthorized transactions.

The adoption of the new industry rules comes as banks face pressure from regulators to scrutinize transactions involving payday lenders and other online merchants.

As components of NACHA’s long-term Risk Management Strategy, updated in 2012, the Rules amendments are aimed at improving the ACH Network for the consumers, governments, businesses and financial institutions that move their money via ACH.