Earlier this month, NACHA (the National Automated Clearinghouse Association) sent its Government Relations Advisory Group on its annual pilgrimage to Capitol Hill. The purpose of Capitol Hill Day is to provide updates and continued education to Congressional representatives and staff regarding the ACH Network, payments, and operating rules.
NACHA’s Bill Sullivan gave the recap to PYMNTS CEO Karen Webster. As always, Sullivan said, the event was popular for NACHA’s member institutions, since its outcomes directly affect every large, medium, or small bank and credit union in the nation.
Sullivan said that NACHA was pleased with the conversations that took place on Capitol Hill Day, which continued the tradition of cooperative interplay between NACHA and the federal government. The day is an annual opportunity for NACHA to “showcase boots on the ground across the country” and to act as a thought leader in the payment space, he said.
The ACH Network, conceived in the 1970s to replace paper checks for payroll, provides the backbone for the electronic movement of money and data in the U.S., now processing more than 24 billion Direct Deposit and Direct Payment transactions annually – a total of more than $41 trillion.
“What NACHA has done that no one else in the U.S. has done successfully is deliver ubiquity,” said Webster, opining that getting the country’s 10,000 to 15,000 banks and credit unions all on the same page was “no small feat” and may be the greatest testament to NACHA’s success over the years.
It certainly seems to have earned the respect of government officials. This year, NACHA was up against fierce competition for attention on Capitol Hill Day, with members of Congress busy debating the Financial CHOICE Act on the floor in preparation for a vote. Plus, the hearing for former FBI Director James Comey was scheduled for that morning. Yet not a single member missed their scheduled NACHA meeting.
The CHOICE Act rolls back regulations that Sullivan said can pin down a community bank and prevent it from serving its function.
“Community banks are spending more money and resources on hiring compliance people than they are on lending to their community,” he said.
Webster agreed: “We need to give banks some credit for doing a lot of things right, and a lot of things that they can’t do right are because they’re spending a lot of money on compliance instead of lending money or doing things that are innovative.”
Sullivan said the train hasn’t left the station for banks, because at the end of the day, even with all this exciting new technology, people still trust their banks more than they trust Apple or Google. That conclusion was supported by the recent VISA study about paying through connected devices.
Discussion topics on the Hill this year ranged from APIs and same-day ACH to bitcoin and banking marijuana sales.
Clarifying Legality and Enforcement Action Reasoning Act, a.k.a. the CLEAR Act, is a bill that amends the Federal Trade Commission Act to require the Federal Trade Commission (FTC) to submit an annual report to Congress about its investigations concerning unfair or deceptive acts or practices in or affecting commerce.
Sullivan said the Act contained a provision that would restrict a regulator from ordering a deposit account to be closed without stating a material reason in writing. This would help protect legal businesses that might be banking in industries that aren’t always seen as “above board,” he said, raising firearms as an example.
NACHA is agnostic in its partnerships. As long as a business is operating within its rules, it doesn’t care what industry it’s a part of. But not everyone is so agnostic. The CLEAR Act will protect those businesses from what Sullivan called “choke point legislation.”
Going forward, the FTC will have to enumerate its investigations into unfair or deceptive acts in commerce, including those on which there was ultimately no agency action. In the latter case, the FTC will have to justify any continued investigation with material evidence of potential wrongdoing.
Distributed Ledger Technology
People had a lot of questions about “bitcoin,” which Sullivan said many are using as shorthand to refer to distributed ledger technology in general.
The WannaCry ransomware attack demanded that victims pay ransom in bitcoin. Very few paid up, and the attackers did not even collect their prize, perhaps realizing that the location from which the bitcoin was collected would not be anonymized, even if their identities were.
Sullivan said the ACH is “not a fan” of distributed ledger technology, but with interest in the alternative, crypto-based currency on the rise, the ACH has not closed that door, provided that people are creating products and services that abide by NACHA’s operating rules.
The API standards group has been working to identify pain points for not only financial institutions but for businesses and consumers and to consider how APIs could alleviate them. But introducing APIs will mean implementing cross-industry standards, and that will be no small feat. This is very much a developing topic, said Sullivan, with more to come at future meetings.
Faster Payments Task Force
NACHA is on the steering committee for the Faster Payments Task Force, which releases its final report in July. The irony? It’s taken so long for the recommendation to go through that the final report comes just 50 days before NACHA will be rolling out phase two of its same-day ACH transformation.
Still, NACHA does stand to benefit from the task force’s activity. The fruits of the task force may be vital in terms of making sure there are standards and rules that allow for ubiquity across these newer, faster payment systems, Sullivan said.
Faster payments protect organizations and the individuals they employ. To show how, Sullivan gave this example: “When we meet with Bruce Poliquin of Maine, in his district there are two very large paper mills. If the paper mill doesn’t get their payroll or there’s an error in the payroll, those employees still get paid. So it’s not dinging the company and its not hurting the employee.”
He added, “The Consumer protections are equal for same day ACH as they are for normal ACH, so we were able to add speed without sacrificing any protection for consumers.”
NACHA is making it mandatory to receive same-day ACH, and Sullivan reported that the banks have been prepared for the shift.
Banking Around Legalized Marijuana
Some regional banks are very concerned about this issue, said Sullivan. NACHA was prepared to let states that have legalized marijuana allow banking practices around it as long as there was no money laundering taking place.
But Sullivan doubts that the current federal administration and Congress will pass the legislation to bank marijuana. Currently, he said, these transactions get run through other fronts, such as bike repair shops. Webster added that the cash-only environment can be a magnet for criminals.
“We should have good enough compliance in place to be able to accommodate these kinds of transactions,” she said.
Source: http://www.pymnts.com – Payments
NACHA Talks Faster Payments, CHOICE Act At Capitol Hill Day