In 2020 there were several announcements made by Nacha about upcoming rules that would become effective in 2021. However, in consideration of the pandemic, Nacha has provided some leeway for compliance with these rules. So, what does this mean for your organization’s 2021 plans? Just because there have been changes from Nacha, that doesn’t mean you should delay your efforts. Here is our take, broken down by rules that stood out last year:
The Expanding Same Day ACH rule expands access to Same Day ACH by allowing Same Day ACH transactions to be submitted to the ACH Network for an additional two hours every business day. The new Same Day ACH processing window will go into effect on March 19, 2021. This date is still firm, with no notes about extensions for enforcement.
The Expanding Same Day ACH rule is a clear indication of how the industry is moving toward faster payments, and is likely in response to the rise in popularity of The Clearing House RTP® Network. Same Day ACH availability expanding by two hours is a significant step in the evolution of the ACH market and means that even more payments will accelerate in the ecosystem which is good for everyone.
Other changes include reducing administrative requirements associated with obligations to obtain or provide payment-related documentation, and adopting a specific timeline for financial institutions to handle claims of unauthorized payments. The new rules also more clearly define scenarios where reversing ACH payments are not valid.
The effective date for the Supplemental Fraud Detection Rule for WEB Debits (WEB Account Validation) rule will still be effective on March 19, 2021. However, “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.”
This rule requires that originators (anyone who accepts an electronic payment) must use a commercially reasonable means to determine that the account number to be used for the debit is a valid account. Note: although Nacha will not enforce this rule until next year, this is in respect to ‘covered entities that are working in good faith toward compliance.’ If you haven’t already, it’s important to decide what method you will use to comply—an ACH prenotification, ACH micros-transaction verification, or a commercially available validation service (such as Alacriti’s Orbipay Instant Bank Account Validation).
Since this initiative is part of a larger goal to protect against fraud on the ACH Network and financial institutions from posting fraudulent/incorrect unauthorized payments, this initiative should remain a top priority for your organization in 2021. A safer, more secure ecosystem benefits all participants and elevates the payment experience, which is key as the U.S. rapidly adopts faster payments.
The Supplemental ACH Data Security rule, which requires ACH originators and third-parties to protect account information used in ACH payments by rendering it unreadable when stored electronically, now has an effective date of June 30, 2021. This rule affects parties who send out more than 2 million transactions or more in ACH payments per year. Originally, phase one (6 million or more ACH payments per year) was supposed to begin last year, with phase two (2 million or more ACH payments per year) following in 2021. The effective date has been extended by one year for both. Phase one begins on June 30, 2021, and phase two on June 30, 2022.
This will have the same treatment as the Supplemental Fraud Detection Rule for Web Debits. It will not be enforced for one year from the effective date for covered entities that are working in good faith toward compliance. Working towards compliance with this rule as soon as possible makes good business sense, as it better secures consumer account data. Payments technologies will continue to evolve, which means account data protection has to evolve as well to keep pace.
While it’s convenient that Nacha is providing more leniency, it is important to keep your organization moving forward. With the demand for faster payments growing and the market moving to mass real-time payments adoption, it makes more sense to be proactively diligent about compliance instead of putting it on the back burner, especially in regards to fraud prevention. Staying on top of compliance, even before enforcement becomes a reality, is necessary to achieve true payments modernization and protect against fraud.
