Credit unions are largely supportive of NACHA's proposal to speed up payments processing to same-day transactions, but both CUNA and NAFCU expressed concerns with some aspects of the proposal, not the least of which is whether consumers will be getting enough bang for the bucks that financial institutions will have to invest to bring this to fruition.
Under the NACHA proposal, financial institutions would have to improve their systems in order to facilitate same-day payments. In order to help offset costs related to the upgrade of technology, originating institutions would pay a fee of 8.2 cents per transaction to the receiving institutions.
In a comment letter to NACHA, NAFCU Senior Vice President of Government Affairs and General Counsel Carrie Hunt said credit unions are "generally supportive" of faster payments, but cautioned that any solution that speeds up payments "should thoroughly involve" all business, operations, risk, technical, fraud and innovation teams.
"In particular, there are still questions from our members regarding the new same-day ACH clearing windows and settlement times," Hunt wrote. "For many [members], there does not yet appear to be enough valid use or business cases identified to validate a clear cost-to-benefit analysis of such a network... While consumers will benefit from real-time funds transfers, the proposed solution will be 'next day' settlement for many regular consumer purposes. This marginal improvement may not outweigh the costs necessary to implement and support these new clearing windows and settlement times. While it is an incremental improvement for consumers, it comes with a major expense to financial institutions, as it will affect both the basic transaction processes in place and the technology that supports them."
Hunt also expressed NAFCU's members' concerns over fraud.
"It does not appear that the security and fraud risks related to shorter clearing windows settlement times have been fully analyzed or mitigated and the impact of possible NSF [Non-Sufficient Funds] fees for consumers."
Similarly, CUNA voiced concerns over potential costs to be incurred by implementation of NACHA's proposed changes.
In a statement, CUNA and its Payments Subcommittee, chaired by Jane Watkins, president and CEO of Virginia Credit Union, a $2.7-billion institution based in Richmond, said they continue to have significant concerns that "requiring all receiving financial institutions to receive and post same-day ACH payments would result in significant implementation, ongoing, and other costs, especially for smaller credit unions and other financial institutions."
As such, CUNA entreated NACHA to minimize costs on Receiving Depository Financial Institutions (RDFIs), Originating Depository Financial Institutions (ODFIs), as well as on corporate credit unions and other processors affected by these changes.
"NACHA should also continue to evaluate alternatives that could reduce costs associated with Same-day ACH, such as providing an exemption or opt-in process for small financial institutions," CUNA added. "While all RDFIs would incur costs, they generally would not be able to charge customers for the receipt of Same-day ACH transactions. ODFIs would also incur additional costs if they choose to offer Same-day ACH, but they can choose to offer new products and services that can generate revenue. We are very concerned about this imbalance between ODFIs and RDFIs."
CUNA further warned that smaller credit unions would bear a disproportionate burden of increased costs, including about 3,000 credit unions "that have five or fewer employees that must comply with numerous existing and upcoming regulatory requirements, while at the same time effectively manage the payment risks of their credit union."
Small credit unions would also bear additional costs related to processing and settlement, including some that currently pick up once a day.
"These credit unions would also face costs associated with risk management and assessment, software updates, disclosure updates, and staff training" CUNA warned. "Risk management concerns include a shorter window to process returns, monitor fraud, settle debits and credits, post and order transactions, and mitigate existing risks on ACH and other payment areas."
CUNA further warned about increased compliance costs related to NACHA's proposals, while recommending that certain higher-risk transactions be excluded from the same-day ACH services.
"We support the proposed exclusions for international transactions and individual transactions above $25,000," CUNA said. "These are higher-risk transactions and financial institutions will have less time to detect fraud and resolve problems with Same-day ACH. Financial institutions should also have the ability to add additional risk management procedures to limit their risks. In the future, NACHA and financial participants should re-evaluate whether these or other exclusions are appropriate."
But some other financial-related groups expressed more unreserved support for NACHA's proposals.
The Clearing House (TCH) and the Consumer Bankers Association (CBA) jointly described the new plan as "workable for all financial institutions and that will benefit all stakeholders."
"In particular, same day ACH will be advantageous to consumers who want to move funds the same day to other individuals or between their own accounts, or to pay bills the day they are due," TCH/CBA said in a comment letter. "Businesses that need faster crediting and funds availability will also derive value from this new ACH network capability."
TCH also lauded the proposal for promoting ubiquitous same day functionality by enabling financial institutions on both sides of ACH transactions to be compensated for implementation costs and to receive a fair return on their investment.
"This comprehensive proposal established the incentives necessary to help ensure financial institutions of all sizes have the ability to better meet consumer and business needs by taking advantage of same day ACH capabilities," said Dave Fortney, Senior Vice President for Product Development and Management at The Clearing House. "The proposal responsibly seeks to establish a phased-in approach and provides the functionality and flexibility necessary to accommodate customers no matter what time zone they are in. Adoption of same day ACH settlements will complement TCH's real-time payment system initiative. Together with existing ACH capabilities, same day ACH and real-time payments will provide new, distinct payment options for customers."
David Pommerehn, Vice President and Senior Counsel for the CBA, characterized the proposal as a "well-balanced plan" to begin the process of bringing the US payment system into the 21st century.
"Establishing a sound system for same-day ACH clearing and settlement is an essential step in moving payments faster. We believe the proposal will ultimately provide a wide range of benefits for consumers and businesses alike," Pommerehn added.
Similarly, The Consumer Financial Protection Bureau (CFPB) said it "welcomed" NACHA's proposal on same-day payments, since it will provide consumers with "faster availability of funds."
"In addition, same-day ACH may help alleviate some of the challenges consumers face today in trying to forecast when various types of credit and debit payment will post to their accounts and the complications that can arise from such uncertainty,: wrote David Silberman, CFPB's associate director, division of research, markets and regulations.
But Silberman emphasized that CFPB said the system of same-day payments should not stop here. "The U.S. lags other countries that have instituted near real-time payments systems, and we see potential benefits such systems may bring consumers here is accompanied by the current strong consumer protections of existing law," he wrote. "Thus, we urge industry stakeholders to move expediently to develop near real-time payment capabilities while keeping consumer's needs and interests among its top priorities.