New, more stringent requirements for managing ACH payments take effect in March 2022. These requirements may cause some disruption for unsuspecting homeowners’ associations and property management companies because a growing share of homeowner assessments are paid online.
To get a deeper understanding of the payments compliance rules change going into effect, and how association management companies should respond, we had a conversation with FRONTSTEPS Payments Product Manager, Jenny Yang. Here is what we learned.
Q: What changes are taking effect, and why?
The rule change expands the requirements for all merchants who accept ACH payments online (via the internet or mobile device) to have “commercially reasonable” processes to screen for fraud. The change specifically pertains to consumer ACH payments and does not cover ACH payments by businesses or government entities.
The increased security will come by way of enhanced account validation. Account validations must happen prior to the first ACH payment transaction, meaning, businesses must make sure a consumer’s bank account is valid before submitting the first payment.
The methods of validation required by the new rule can include, but are not limited to:
- The use of third-party databases to verify if the bank account details are accurate
- Micro-deposits or pre-notification of a small or zero-dollar transaction into the bank account, intended to verify the account
- The use of account aggregators to verify the bank account using a homeowner’s financial institution account credentials
Q: Where do these changes originate?
A: ACH payments in the United States must comply with operating rules set forth by the National Automated Clearinghouse Association (NACHA). These new requirements were initially set to take effect on March 19, 2021, but were delayed until March 19, 2022 due to the COVID-19 pandemic.
Q: Do you anticipate any changes for FRONTSTEPS Payments homeowner behavior because of these new compliance requirements?
No. There are many factors prompting more homeowners to manage their assessment payments online, including the freedom to pay from anywhere, the convenience of recurring payments, and the instant nature of online ACH.
Homeowners using FRONTSTEPS Payments will continue to have a seamless payment experience, with no additional cost to the management company, HOA, or homeowners. Account validation will happen behind the scenes and won’t be noticed by homeowners.
Q: What questions should management companies be asking of their assessment payments software provider?
A: The important questions to ask are:
- What is being done to meet the expanded NACHA requirements for ACH transactions?
- How will the upcoming NACHA regulations impact ACH transactions for me or my homeowners?
- Are there any additional costs to me or my homeowners to meet these new NACHA requirements?
Payment providers can implement different solutions to meet the expanded account validation requirements. Some approaches may impact the workflow for you and your homeowners, and it might be at an additional cost.
Q: What actions should we consider if our existing homeowner portal cannot support these new compliance requirements?
A: It may be time to evaluate a provider that specializes in payments technology, such as FRONTSTEPS. It will become increasingly difficult for general purpose HOA software providers to keep up with tightening financial payments compliance requirements.
Q: How should we communicate these changes with our boards and homeowners?
A: It is important for board members and homeowners to understand the changes for online ACH payments and how it will impact them. If you discover that one or more existing payment methods no longer complies with the requirements, communicate the discontinuance of that payment option widely to affected community associations and homeowners, and ensure that you have another reliable online payment optional available for their use.
Interested in learning more about FRONTSTEPS Payments? Request a free demo today.