As much of the banking industry focuses on Internet bill payments, the National Automated Clearing House Association is developing a new method of paying bills over the phone.
The Herndon, Va., association, which sets operating rules for direct deposits and other paperless payments, is seeking out banks to test simplified telephone bill payment procedures.
Participants would join Chase Manhattan Corp. and Mellon Bank Corp. in a nine-month pilot test, beginning July 1, that would let billers debit checking accounts after the account-holder authorizes payment with a phone call.
Under current Nacha rules, all ACH debits to consumer accounts require a one-time advance authorization in writing.
The Nacha guidelines for the test are particularly suited to late- payment situations, when consumers would want their payments posted as quickly as possible. They could call their billers directly to authorize a single funds transfer simply by giving the biller their checking account number.
The goal is to remove the "up-front hurdle" of written authorization, said Phillip Ahwesh, a first vice president of Mellon Bank, who helped draft the guidelines.
"We are in the payments business," Mr. Ahwesh said, "and we are competing with other payments businesses."
Telephone authorizations would be a convenient alternative to writing and mailing checks and would give consumers a greater sense of control, said Chase vice president Mary O'Toole.
"Consumers have shied away from preauthorized debits via the ACH," she said. Telephone authorizations offer "much more direct, up-front control on the timing of the transaction."
To initiate payments, people would have to tell billers the transit and account numbers at the bottom of their checks.
Unauthorized ACH activities would be protected by a Nacha rule that gives consumers 60 days to reverse debit entries.
Federal Reserve Regulation E also requires billers to obtain signed consumer authorizations for recurring ACH debits. However, a 1996 modification allows password-protected transmissions associated with Internet banking services to serve as authorizations.
Elliott C. McEntee, president and chief executive officer of Nacha, said Reg E is silent on one-time, nonrecurring payments.
Nacha expects the new payment method to help make telephones a more convenient bill-paying channel.
The telephone's popularity for payment services has "taken a lot of banks by surprise," Mr. McEntee said. It has caused "requests from banks and companies to modify our rules to allow telephone authorizations under certain circumstances."
The Nacha pilot test would gauge consumer and corporate reactions, cost savings, fraud incidents, and frequency of return items. A new rule would result if the test identifies a need among ACH users, Mr. McEntee said.