Why You Shouldn’t Sleep on Complying with Nacha’s WEB Debit Rule

Consumers today want instant gratification, particularly in the post-pandemic reality of having everything delivered to their doorstep on demand. To keep pace, payments were also required to evolve. 

However, fraudsters were neither sidelined nor caught off guard with this evolution. Instead, fraudsters too have evolved with their schemes, techniques, and technology becoming more and more complex, identifying businesses with little to no fraud measures in place. Prior to the pandemic, the National Automated Clearing House Association (NACHA) the governing body over the Automated Clearing House (ACH Network), was concerned with tackling the rise of digital payments fraud.

On December 01, 2020, NACHA announced that they would be amending the rules and regulations to follow. For anyone collecting payments across the ACH network, it is vital to understand the WEB debit rule and why early compliance is key to preventing fraud damages.

NACHA Basics

NACHA oversees the administration, development, and governance of the ACH – or the backbone of electronic payment. Without the ACH, trillions of dollars would not move electronically. Similarly, without NACHA, there would be no regulations on how that money can move. It is critical to remember that ACH is the method that makes it possible to electronically move money, and NACHA provides the rules for companies and financial institutions using ACH to follow.

WEB Debit Rules In 2021

As with any overseeing association, rules and regulations often become outdated or in need of updating. NACHA is no different. Their experts meticulously pour over the rules to see how they can better administrate, develop, and govern ACH. In 2021, the changes to the WEB debit rule include:

March 19: Supplementing Fraud Detection Standards for WEB Debits

With the old rule requiring users of ACH to screen transactions with a fraud detection system, NACHA created the WEB Debit Account Validation rule. This change enhances the original rule with an account validation of debit transaction being added to the “commercially reasonable fraudulent transaction detection system.” These changes will only apply to ACH debit transactions, the first time an account number is seen by a business, and when the information is collected through the web or internet.

WEB Debit Rule Details

While the rule itself may be challenging to understand, the details of who and what is affected, and the benefits make it much more straightforward.

Benefits

With fraud, an ever-growing threat, utilizing advanced technology helps to thwart it. Likewise, consumers want to make their online transaction experience as quick and easy as possible. The WEB Debit Rule provides confidence to the consumers and financial institutions that their ACH transactions will be fast, safe, and free from errors.  By validating the bank account prior to the ACH debit transaction businesses can be confident that payments will go through more successfully.  The addition of account validation in the payment process also benefits financial institutions of potential fraudulent types of transactions occurring.

Why Compliance Is Critical

Though the new NACHA WEB Debit Account Validation Rule was first enacted in March 2021, full compliance for financial institutions will not be enforced until March 2022 – as long as the entity can prove they have a compliance plan and are working in good faith to meet the deadline. The sooner that business and financial institutions work towards compliance means they will receive:

• Offset costs due to reduction of fraud and returns.
• Improved business and customer experiences.
• Safeguards for proving compliance with the rule.

ValidiFI And WEB Debit Rules

At ValidiFI, we pride ourselves on working with businesses and institutions to produce the best solutions for their success. Unlike other companies, we offer a variety of tiers and solutions to customize your plan. Our solutions include:

• Basic: Identification of the most basic data entry errors. Validation of bank routing and account number structures.  A check against known high-risk bank accounts.
• Standard: In addition to our Basic plan, ValidiFI confirms the status of both the routing and bank account numbers through its network of contributory banks and businesses.
• Enhanced: If your business or institution is seeking maximum coverage, this is the plan you should consider. Including the Basic and Standard solutions, ValidiFI will also supply additional risk attributes to identify risk beyond closed and invalid bank accounts.
• Advanced: For the most conclusive coverage, ValidiFI includes the previous tiers while providing an additional real-time status of the bank account.
• Bank Aggregation: For additional authoritative data attributes including determining a bank account’s ownership, consider utilizing a credentialed solution.
•  

If you have any questions about the evolving NACHA rules or our services, contact us today!