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TCH Comments on Nacha Proposal on Credit-Push Fraud and other Fraud and Risk Issues

The Clearing House Payments Company L.L.C. (TCH) submitted comments in response to Nacha’s proposals to amend the Nacha Operating Rules in relation to fraud and risk management issues (“Proposal”).

The Proposal would, among other things, establish a variety of new requirements intended to further Nacha’s risk management strategy to address credit-push fraud. As the private-sector ACH Operator, TCH supports efforts to combat fraud in the ACH Network and supported most aspects of the Proposal. Further, TCH agreed that it is important for financial institutions and other ACH stakeholders to remain proactive in addressing credit-push fraud and ACH network quality issues. TCH noted that the proposed requirements relevant to credit-push fraud would primarily apply to business email compromise and other scams targeting businesses. With this in mind, TCH raised concerns about Nacha’s proposed requirement for ODFIs and RDFIs to have “commercially reasonable fraud detection systems” and emphasized that this specific approach could have unintended legal implications under Article 4A of the Uniform Commercial Code, which applies to business-to-business (B2B) ACH credit transactions. TCH encouraged Nacha to consider the potential impact to the Article 4A liability framework for B2B credit entries and suggested alternative approaches to mitigate the risk of fraud.

TCH also offered feedback and requested clarification on a number of other components of the Proposal, such as proposed requirements to expand the ability to reverse ACH credit entries. Finally, TCH recommended that Nacha take a holistic view to the proposed effective dates and consider a staggered approach to the effective dates that accounts for industry feedback on the implementation challenges certain changes may raise.

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