Nacha, the automated clearing house rules group, approved new rules aimed at enhancing fraud monitoring for ACH credit payments. The new rules are designed to enhance fraud detection from payment origination to receipt, enabling remedial actions such as payment returns and transaction monitoring, including for payroll transactions.
While liability for fraudulent payments remains unchanged under the new rules, financial institutions receiving ACH payments now have a defined responsibility to monitor transactions for fraud, marking the first explicit involvement in combating fraud for these institutions. The rise in ACH fraud incidents, especially in credit fraud, prompted Nacha's focus on managing credit risk fraud. Common fraud methods resulting in significant financial losses include business email compromise (BEC), vendor impersonation and payroll fraud. The FBI received numerous BEC complaints totaling billions of dollars in losses in 2023.
Jane Larimer, president and CEO of Nacha, emphasized the collective responsibility of all ACH network participants in reducing fraud occurrences. Educational resources and implementation guidance will accompany the new rules. Although the rules pertain specifically to ACH payments, their principles are relevant to various credit push payment types.
The LexisNexis true cost of fraud study revealed that merchants in the United States and Canada suffer a $3 loss for every $1 lost to fraud. With digital services expanding—driving more than half of retail revenues and one-fifth of transaction volume—cybercriminals are adapting, leading to increases in overall fraud levels for consumers and ecommerce and brick-and-mortar businesses, researchers noted. More than half of surveyed organizations reported a 6 percent increase in fraud, with digital channels responsible for 53 percent of overall fraud, they added.
Fraud impact extends to fines, fees, goods lost/stolen, and customer experience, affecting conversion rates for 75 percent of organizations participating in the study. Balancing customer experience with fraud prevention remains a challenge, exacerbated by emerging payment methods and rising fraud risks.
Scams drive a significant portion of fraud losses despite efforts to educate consumers. Buy now, pay later transactions account for 37 percent of fraud losses, but credit and debit cards contribute most to fraud losses due to their widespread use and data breaches. Most fraud occurs during new account openings due to identity theft. LexisNexis emphasized the importance of a seamless customer experience and agile risk assessment to combat emerging fraud trends and meet consumer expectations.
A federal judge's ruling on March 29, 2024, resolved a four-year dispute between PayPal Holdings Inc. and the Consumer Financial Protection Bureau regarding fee structures and disclosures for digital wallets and prepaid cards.
Judge Richard L. Leon agreed with PayPal that digital wallets are distinct from "general purpose reloadable (GPR) cards" and shouldn't be regulated similarly. James Huber from Global Legal Law Firm commended the decision, highlighting improved communication between the payments industry and the judiciary. The ruling underscores the courts' evolving understanding of digital payments, acknowledging the differences between digital wallets and prepaid cards despite similarities.
Judge Leon emphasized that digital wallets store credentials electronically, rarely hold balances and typically don't charge fees for account maintenance. PayPal maintained that the CFPB's fee disclosure requirements for digital wallets were unjustified, citing material differences between the products. The court rejected the CFPB's assertions that regulation was necessary due to potential future changes in digital wallet fees or characteristics.
Huber questioned the need for the CFPB's proposed rule, noting existing coverage under the Electronic Fund Transfer Act and Regulation E. He emphasized the importance of specificity in regulatory measures, advocating for a nuanced approach to the dynamic payments industry. 
This article contains excerpts from news stories recently posted under Breaking Industry News on our homepage. For links to these and other full news stories, please visit www.greensheet.com/breakingnews.php.
The Green Sheet Inc. is now a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals. Click here for more information.
Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.
Prev Next
