Beginning March 19, 2021, NACHA (National Automated Clearing House Association) will require enhanced validations for ACH debits with the WEB Standard Entry Class (SEC) code. A Standard Entry Class Code (SEC Code) identifies a specific payment application. Consumer transactions include a shortcode to identify a type of payment. The WEB shortcode is for single or recurring debits authorized via the Internet. The WEB code helps address risk issues inherent to Internet Payments through requirements for additional security procedures and obligations.
Currently, ACH Originators of WEB debit entries must use a “commercially reasonable fraudulent transaction detection system” to screen WEB debits for fraud. This existing screening requirement will be supplemented to make it explicit that “account validation” is part of a “commercially reasonable fraudulent transaction detection system.” The supplemental requirement applies to the first use of an account number or changes to the account number.
These new rules apply only to WEB debits or ACH transactions consumers authorize using electronic means.
NACHA states to “validate the account,” the Originator must use commercially reasonable means to determine if the account is open and can accept ACH entries. The Originator is NOT required to verify account ownership or that the recipient’s name matches the account’s name. In response to these forthcoming changes, IntelliPay will provide account validation services meeting the minimum compliance standards through its platform. NACHA will not enforce this rule for an additional period of one year from the effective date (March 19, 2021).
How It Works and Impact
Submitted transactions will be checked to see if this is the first time the particular account has been targeted. Transactions with valid accounts will process normally, while transactions with invalid accounts will result in a decline. For transactions posing a risk of return, a merchant level setting will determine whether to process or decline the transaction. Transactions submitted through APIs will receive the appropriate response codes for declined transactions. If transactions are submitted through file upload, merchants will receive on-screen information for declined transactions.
Costs for the creation and operation of the WEB verification service will result in increased fees. Potential fees may include an implementation fee and a per verification lookup fee. More to come later.