Banks may soon bear more responsibility for raising red flags about the conduct of businesses that use the automated clearing house payments network.
Nacha, the industry-owned group that establishes the rules for the network, is proposing new requirements designed to prevent fraud and other returned transactions.
The proposals come amid regulatory pressure on banks to apply more scrutiny to transactions involving online consumer lenders that charge high interest rates.
Under the proposals, the thresholds for triggering scrutiny of a particular business would tighten. For example, if at least 0.5% of a company's debits of customer accounts came back as unauthorized, that would trigger scrutiny by the bank. Under the current rules, that threshold is 1%.
Perhaps more importantly, the new rules would introduce an overall debit return rate threshold of 15%. That would mean that a business would face heightened scrutiny if at least 15% of its attempts to debit customer accounts were unsuccessful.
That could be bad news for online lenders whose customers live paycheck-to-paycheck and who frequently don't have enough funds in their accounts to pay their bills, says Mark Furletti, a lawyer with Ballard Spahr.
"They're going to have to tighten their underwriting criteria and won't be able to offer credit to these consumers," Furletti says.
A longer version of this story will appear on American Banker.