In-House Developed ACH Application Cuts Errors, Work At Tower FCU

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Direct deposit data enhancements authored by Tower Federal Credit Union have earned national recognition-and increased member satisfaction, according to Bonnie Davis, supervisor of ACH and check operations.

Last week at the Payments 2002 Conference in Dallas, the $947-million CU received Herndon, Va.-based NACHA's 2002 ACH Quality Award as a receiving depository financial institution.

The 106,000-member credit union is the nation's only CU that has developed an automated program to review the more than 5,000 ACH payments received each day for data mismatches, said Davis. Implemented more than a year ago, the system allows Tower FCU to address any deposit problem on the day the deposit is received, eliminating delay or financial impact to the member.

"We're making the process transparent to members," Davis explained.

Called the Mismatch Name Review, the solution one-ups NACHA standards by checking incoming ACH records against members' names and generating daily reports, she said. NACHA only requires that financial institutions verify account numbers.

"We're relying now on names in addition to account numbers," said Davis.

Because of parallel account number structures at Tower, sometimes deposits had been posted to the wrong member's account.

"As long as the account number was valid, and without looking at the name, a deposit could go right on through to the wrong account," Davis continued. Errors weren't easy to catch.

Old System Dependent Upon Complaints

"We had to wait until a member came and said 'I haven't had my deposit for three or four months' or until a member started bouncing checks," before deposits could be redirected, Davis explained.

In the first six months of use, the program prevented more than $28,000 in delayed deposits, she said. "The amount of redirected deposits has significantly decreased since then, however, because we've done a clean up" to prevent faulty deposits.

Account flags help eliminate faulty deposits, and originating institutions are immediately informed of problematic account structures.

In addition to preventing delayed deposits with the Mismatch Name Review, Tower also implemented a direct deposit allocation program that automatically disburses funds received via the ACH network according to a member's predetermined instructions. The system reviews incoming direct deposits for changes to company information so that members' allocations are processed accurately.

"The big benefit is member satisfaction," Davis said. "We're taking the burden off of the member to inform us every time they get paid of any company changes," such as rescheduled pay days.

Award-winning electronic payments don't stop at direct deposit services for Tower Federal CU-online transaction origination is now on the horizon.

Members Expected To Want More

"I think our members are going to start looking for actual monetary transactions online," Davis predicted. "We may want to become an originator of sorts. We may want to originate a debit versus waiting for a bank to send us a credit."

Tower FCU was selected along with Capital One Financial Corp., WorldCom, Inc. and Wells Fargo & Co. as winners of the NACHA Award in recognition of their successes in implementing quality ACH processes. The ACH Network serves 20,000 financial institutions and is commonly used for direct deposit of payroll and government benefits such as Social Security, direct payment of consumer bills, business-to-business payments and federal tax payments. In 2000 there were 6.9 billion ACH payments made worth more than $20 trillion.

"The ACH Quality Award showcases best practices and forward-looking business practices among ACH participants," said Mary Ann Francis, Chair of NACHA's ACH Quality Task Force and a senior vice president at National City Corporation. "The 2002 ACH Quality Awards highlight both well established ACH products, such as Direct Deposit, and new ACH applications."

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