Coming Soon: New Account Validation Rule from NACHA

In November 2020, Nelnet Campus Commerce published a blog NACHA’s New Account Validation Rule. With this new rule going into effect on March 19, 2021, we wanted to give you a quick reminder of what this rule hopes to accomplish and how it will enhance the validation of ACH payments to your institution.

In a few short weeks, NACHA will be issuing a new rule for ACH payment processing. The rule will require everyone using WEB Debits (any ACH debit payment that is authorized online) to validate the consumer’s account information before accepting the first payment made.

The new NACHA rule seeks to accomplish two primary goals:

1. To protect the integrity of transactions flowing through the ACH system
2. To protect receiving banks (RDFIs) from posting fraudulent, incorrect, or unauthorized payments

2020 saw a rise in ACH payments, with over 27 billion payments made in the calendar year[1]. The use of ACH has been growing for the past few years, but with the increase in digital payments due to COVID-19, ACH and other non-cash payments may continue to be commonplace. With this, NACHA is ultimately hoping that the new rule tightens up security of online activity by adding another layer of verification. Since the entity being paid is the entry point to receive the account number, they are in the best position to prevent fraud. This means whoever accepts the account number is responsible for ensuring validation occurs.

This new validation rule only applies to first-time payments from the account and only validates if the account is open and will accept ACH entries. It doesn’t verify if funds are available in the account or validate account ownership. If an account has been accepted by your institution before March 19 you won’t need to validate them again (unless they change their payment account).

For a while, account validation has been presented as one way that organizations can detect fraud. The rule change simply makes account validation a requirement, rather than a suggestion. There are three types of validation methods: Pre-notification, Mirco Deposits, and Commercial Validation Services.

• Pre-notification uses prenotes to create a non-dollar line items in the ACH file that notifies the bank that a payment will be processed in the future. When using prenotes, you must delay processing your first payment for at least 3 business days to allow response to the prenote.
• Micro Deposits are like prenotes as they live in the ACH file; however, they are simply very small dollar amounts (often only a few cents) that are sent through the ACH network to verify that the account can send and receive ACH payments. Validation of micro deposits require the payer to confirm the amount of these dollar amounts in your system.
• Commercial Validation Services are outside companies used by institutions that sit outside of the ACH network to validate account information. These are usually real time solutions that can be embedded into a payment experience

To learn more about these validation types, visit our blog NACHA’s New Account Validation Rule.

To ensure that our partners are compliant with NACHA’s new rule, we’re partnering with Giact, a preferred validation partner of NACHA. Giact provides real-time validation at the time a bank account is provided for payment. This allows Nelnet to process payments for you immediately without introducing friction into the Nelnet payment experience. For partners using our Enterprise payment platform, you won’t need to take any action. Those who use the QuikPay version, an update will be available in March 2021.

Rest assured that no matter which product or version of our solutions you’re using, we’re dedicated to making sure that you’re compliant and prepared to offer secure, efficient payment processing.

Want to learn more about the new NACHA Validation Rule? Watch an on-demand webinar.

[1] https://www.paymentsjournal.com/record-ach-payment-growth-in-2020-to-26-8-billion-payments/