The rate of unauthorized e-check transactions by telephone is down 88% over the last four quarters, reports the National Automated Clearing House Association. NACHA credits its ability to trace unauthorized phone payments to their source for the plunge in fraudulent e-check payments by phone to 0.15% of all third-quarter telephone e-check volume, compared with 1.27% a year ago. As a result, says the ACH association, telemarketers are switching away from e-checks and to demand drafts. Consumers have been able to make one-time e-check payments over the phone since Sept. 14, 2001, when new NACHA operating rules permitting the transactions went into effect. The rules, however, forbid the use of e-checks in outbound telemarketing to consumers with whom telemarketers do not have an existing relationship. NACHA estimates consumers will make 175 million phone-based e-check payments in 2003, up from 67 million last year, and about 18% of the 1 billion e-checks of all types expected this year. Phone-based e-checks totaled 51.1 million in the third quarter, nearly three times the volume in the year-ago period. A large part of these transactions are payments to mortgage, credit card, and utility companies. An e-check electronically captures the payment and routing information of a check in a recognized ACH format for processing. Additional rules safeguarding e-check payments are coming, NACHA says. Among these are requirements that financial institutions that originate telephone e-checks register with NACHA and name the companies and payment processors that use their services, as well as rules that bind third-party payment processors to NACHA requirements. The association says it will also craft a proposal that will put a cap on the volume of a financial institution's originations relative to its capital.
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