Companies authorized to automatically deduct online payments from consumers' checking accounts are now required to install security software and ensure the checking account numbers are encrypted before the information is sent over the Internet. Other requirements include verifying that the bank account that will be debited comes from a valid bank, and conducting annual audits to determine that security procedures are in place.
"We wanted a standard set of rules for companies to follow...and more merchants may want to offer this payment system now that they know which rules to follow," said Elliott McEntee, chief executive of the National Automated Clearing House Association.
NACHA, based in the Washington, D.C., suburb of Herndon, Va., is a trade organization that sets regulations for using the Automated Clearing House Network. The group said it found that it needed to establish rules for online payments because its previous regulations did not address issues unique to the Internet. And with the explosive growth of online payments, the issue has become even more pressing.
The new regulations are designed to benefit consumers who authorize companies, such as utility operators or subscription-based services, to deduct money directly from their checking accounts. But the new rules do not apply to consumers using their debit cards or check cards to conduct transactions, McEntee said.
While credit card theft involving Internet transactions has been widely reported, theft of checking account numbers has been largely nonexistent, McEntee said. Problems that have arisen primarily involve fraud, he noted.
And resolutions similar to those involving credit card companies are available to consumers using the Automated Clearing House Network. The company that supplied the product or service will have to eat the cost of any incorrect transaction that stems from deductions out of a checking account, he said.