The Impact of NACHA’s WEB Debit Account Validation Rule

Automated Clearing House (ACH) payments are electronic payments that pull funds directly from a customer’s checking account. ACH can be used for automatic payments if the customer authorizes funds to be pulled every time a bill comes due, or for on-demand payments. ACH payments are quick and convenient. As with all electronic payments, however, there is the risk of fraudulent transactions. In use since the 1970s, ACH volume reached $6.8 billion in the third quarter of 2020, an increase of 9% from the same period in the previous year. NACHA, a nonprofit organization that administers and sets guidelines for the ACH payment system, has strengthened their fraud prevention requirements by establishing a new rule, the “WEB Debit Account Validation Rule” (the “New Rule”). 

What is NACHA’s WEB Debit Account Validation Rule? 

NACHA has always required that businesses have commercially reasonable fraud detection systems in place.  However, the new Web Debit Account Validation rule now explicitly requires businesses initiating consumer ACH debits via the internet or a mobile device to validate the consumer’s account prior to the first debit transaction. Essentially, businesses must check the submitted account to make sure it is a valid account before an ACH transaction can take place. 

The rule was established on March 19, 2021. Although enforcement is delayed to March 2022 because of the COVID-19 pandemic, businesses that do not adhere to the new rule can expose themselves to liability in the interim. NACHA encourages businesses to work towards compliance as soon as possible. 

How does the new rule impact financial institutions?

Organizations or banks that only ask their customers to enter account and routing numbers for an ACH transaction but do not perform an account validation will not be compliant with the new rule. Today, many businesses perform the account validation step manually, after the customer has signed and submitted an agreement. A manual validation can be time-consuming and error-prone. In addition to the manual effort, organizations have to ask customers to submit a new agreement if there are errors or incomplete information, which delays the next step in the process and detracts from the customer experience. 

What doesn’t NACHA cover? 

The new NACHA Web Debit rule focuses on first-time consumer web transactions via ACH. It does not cover payments by business/corporate/government entities or payments using credit or debit cards, nor does it cover consumer payments when the account number has been successfully used for a prior payment to the business.  

First-time consumer payments taken and initiated via methods that do not use the internet or a mobile device or recurring payments after the first payment are also outside the scope of the New Rule. 

How can Docusign help? 

Docusign Data Verification, an eSignature add-on, is a solution designed to provide account validation required under the new NACHA Web Debit rule, in real-time.

Data Verification helps you connect your NACHA preferred partners to eSignature so that you can verify a customer’s account information during the signing session. Our solution helps you comply with NACHA’s new Web Debit Account Validation Rule and offers pre-built integrations with preferred partners Plaid and GIACT, as well as ways to connect with other NACHA vendors, so you can perform validation during the signing session. 

Once organizations implement Data Verification, they can verify account information  during the signing session, remove manual work, and complete the agreement confident that the info they need to complete the next step of the business process is correct.

Learn more about the new WEB Debit Account Validation Rule here.

Manas Baba
Financial Services Industry Expert