WEB is a new Standard Entry Class (SEC) code to be used for consumer debits authorized over the Internet. If you have an Internet banking product that offers a bill payment feature that utilizes the ACH, you need to be prepared for this change. Please keep in mind, the ACH Rules apply to transactions that are exchanged through the ACH system and not to on-us transactions.
How the consumer authorizes the debit is the key to applying the WEB SEC code. Recurring payments that have been authorized in writing, but are initiated over the Internet, should continue to be originated as PPD not WEB transactions. This means that you need to be able to identify WEB authorized versus non-WEB authorized payment instructions in order to create the proper ACH transaction. WEB is to be used for consumer debits and cannot be used to originate credit entries unless they are reversals of WEB debit entries. .
Why this new SEC code? Use of the Internet for creation of consumer debits, although convenient, has unique characteristics that warranted this rule amendment:
1) Unique opportunities for fraud
2) Potential for unauthorized access to consumer financial information
3) The volume of transactions and speed with which payments can be transacted
Because of these characteristics, it was determined to be in the best interest of all participants that specific security measures be incorporated for Internet-initiated ACH debits.
There are two types of entries to which this SEC code can apply:
- Single entry payments
- Recurring payments
An indicator code of "R" for recurring payments or "S" for single entry payments will be in the Payment Type Code Field (positions 77-78) in the Entry Detail Record. Receiving financial institutions need to be aware that the only return reason code exempt from use is R07 (authorization revoked) and only on single entry WEB transactions. All other return reasons are valid for single entry and recurring payments. Return entries for WEB transactions will be subject to the same time frames as all other return entries. Both single entry and recurring WEB payments are subject to the NACHA Rules, Electronic Funds Transfer Act and Regulation E.
Financial Institutions originating WEB entries for Originator's should make sure their agreements are amended to include new Originator responsibilities such as:
1. Having a fraud detection system
2. Validating routing numbers - with recommendation of account number structure validation also
3. Security of Internet sessions - minimum level equivalent to 128 bit SSL encryption technology
4. Audits of Website security
Also, Originating financial institutions must establish specific exposure limits for Originators that are initiating WEB entries and should include these limits in their agreements. They are to be reviewed and monitored just as all other exposure limits are reviewed and monitored
The Originator, prior to initiating a WEB debit entry, must obtain authorization from the consumer. This authorization:
1. Must be displayed on the computer screen
2. Should be printed and retained by the consumer
3. Must be submitted by the consumer and not by a third-party on their behalf.
4. Must be similarly authenticated, which means it must provide assurance of authentication similar to that of a paper-based signature.
The audit requirements for Originators are extensive and are listed in their entirety in the 2001 ACH Rules.
Corrected Returns
This rule amendment changes the time frame in which a Corrected Return (reason code R74) can be transmitted. A Corrected Return must be transmitted by a Receiving financial institution within two days of the Settlement Date of the dishonored return entry. The time frame was previously five days, and has been changed to two days to make it consistent with all other contested dishonored return transmission deadlines.
September 14 ACH Rules Change Adds Telephone Initiated Entry
With the exception of the Standard Entry Class Code, the format of the TEL transaction is the same as a PPD. TEL transactions are subject to all Return Reason Codes except Authorization Revoked by Consumer (R07). The consumer may place a stop payment on a TEL transaction. Due to the time constraints involved, consumers are unlikely to be able to meet the three-day advance notice requirement. The NACHA Operating Rules specify that the stop payment order must be placed in "such a time and manner that allows the RDFI a reasonable opportunity to act on the stop payment order prior to acting on the debit entry".
Financial Institutions that originate TEL transactions have new warranties and liability -
1) You warrant that each Originator has employed commercially reasonable procedures to verify the identity of the Receiver and
2) That each Originator has utilized commercially reasonable procedures to verify that each routing number is valid.
This transaction opens a new avenue for utilizing the ACH. The speed and ease with which a Single Entry debit can be initiated provides an opportunity for Originators to offer a new payment alternative when telemarketing to consumers with which they have existing relationships
For financial institutions utilizing our CAP2000 ACH Core Processing product, the update to allow for processing TEL transactions will be coming to you soon, if you haven't already received it.
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