The National Automated Clearing House Association is under fire for trying to carve out a coordinating role in the electronic benefits transfer industry.

Several key constituencies, including retailers and transaction processing companies, lined up against Nacha's plan to form a rulemaking body called the Electronic Benefits Transfer Council.

Undaunted, the clearing-house group officially launched the council last month, adopting a charter and electing officers.

Their goal is to set nationwide operating standards for delivering welfare, food stamp, and other government benefits through automated teller machines and point-of- sale terminals.

Nacha said it could fill a void in the nascent benefits-transfer area by drawing on its rulemaking experience with Social Security and other paperless payments and its ability to bridge the private and public sectors.

Bankers active in the trade group saw the initiative as a way to assure a voice for their industry in a potentially important area of payment- systems evolution.

But on such a politically charged issue as the processing of government payments through bank-owned networks, alliances are fluid and friendships - like Nacha's with the usually like-minded Electronic Funds Transfer Association - can fray.

"The new bureaucracy being established by the National Automated Clearing House Association is expensive, unnecessary, and has questionable statutory authority," H. Kurt Helwig, senior director of government relations for the Electronic Funds Transfer Association, wrote in a position paper on Nacha's new council.

Similarly Don Gilbert, senior vice president of information technology for the National Retail Federation, said it had "questions about Nacha's decision to move so hastily to create rules for which no urgent need has been established."

The critics contend that most electronic benefit transfer transactions can be processed under existing rules of regional electronic bankingnetworks. An exception - food stamps - is addressed in a draft standard published by the American National Standards Institute.

"What Nacha is doing is reinventing the wheel," said a government official who asked for anonymity. "Nacha says this forum for creating the rules is needed, but I'm seeing that the industry does not agree."

Yet Nacha's EBT council has benefited from government support - from the Federal EBT Task Force and from 35 states Nacha president Elliott C. McEntee regards as the "critical mass."

The council's newly elected chairman, James McCarthy, is executive vice president of systems and operations at Star System Inc., the San Diego- based ATM network. William Kilmartin, comptroller of Massachusetts, is vice chairman, reflecting the state-level support.

More than 80 organizations participated in the council's inaugural meeting Sept. 29 in Washington. Thirty of these organizations have paid substantial dues to become voting members of the council. The group also formed a rules committee, which expects to publish rules by yearend.

"The time schedule is fairly aggressive, but that schedule has been determined by the states," said Mr. McEntee. "Two groups, the Southeast Alliance of States and the Northeast Coalition, want to sign contracts by the end of the year, and they want to incorporate these operating rules into these contracts."

Many prominent EBT players have shunned the Nacha council entirely. They include Transactive Corp., the EBT processor for Texas and a contender for other big contracts, and its competitor Deluxe Data Systems, which manages EBT programs in Maryland and New Jersey.

A Transactive spokesman said the Texas program "has functioned successfully without these rules. We feel it is better for the market to drive the rules, and not an organization like Nacha, which has no EBT experience."

"We are not fully satisfied with the rules as they are currently written," said Jessica Shahin, EBT spokeswoman for the Texas Department of Human Services. "We understand that they are draft rules and we hope to incorporate some of the Texas perspective because we are one of the few states that has a statewide EBT program."

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