Transparency, safety should be priorities for real-time ACH payments
November 24, 2014

Many businesses in the industry agree that it's time for the automated clearing house, one of the leading sources of inter-bank payments, to be updated to better serve the needs of customers. This means running ACH processing faster than it has been before. Many groups, including the National ACH Association and The Clearing House, are looking to address this problem by developing real-time and same-day payment processing, something the Federal Reserve is also keenly interested in. This type of system can help make payments more efficient for many customers. At the same time, there is a potential of risk in doing so, which is why another government agency is stepping into the discussion with its thoughts.

Faster speeds, slower returns
The head of the Consumer Financial Protection Bureau, Richard Corday, spoke at a lunch with members of The Clearing House, an organization representing the largest banks in the country. He voiced support for real-time ACH payments, calling it an "urgent priority," according to American Banker. However, at the same time, he expressed concern over the lack of enforcement of consumer safety measures that are currently in place by NACHA, which splits control of all ACH transactions with the Federal Reserve.

Corday relayed how a certain individual applied for a loan through a lender via online lead generation, and enabled ACH payments. However, an online payday lender that bought data from the lead generator used the person's bank information to deposit an unauthorized loan and used ACH to take money from her account. Corday says that banks aren't doing enough to protect against unauthorized transactions.

As a consequence, Corday is calling for better enforcement of rules already put in place, such as the Electronic Fund Transfer Act and NACHA's own regulations regarding ACH processing. In this manner, consumers will feel more protected against dubious business practices. More importantly, the new real-time ACH system should be accessible and beneficial to consumers as well. There should also be instant notification on any fees for transactions, so that people are aware of the total cost of the transaction. Another important aspect is, as mentioned before, greater protections against unauthorized debits. This will become important over time, as consumers will have less time to react to these charges because of the speed in which they're being completed. Finally, these features should be available to consumers from the start, rather serve as a better transaction channel to businesses and the wealthy.

Nexus: G-WEBCD2