The Treasury Department is proposing that the government follow most of the banking industry's rules for electronic payments via the automated clearing house network.

The change by the Treasury's Financial Management Service would narrow the differences between the government's and the private sector's approach to the ACH system, which handles more than $12.1 trillion of paperless payments annually.

The government is hoping to stimulate electronic payments and minimize the regulatory burden on banks that handle federal ACH payments.

"The ACH is the primary payment mechanism that we are using to execute EFT '99," said Cynthia L. Johnson, the Financial Management Service's director of cash management. She was referring to the mandate of the Debt Collection Improvement Act that almost all federal payments be disbursed electronically by 1999.

"The ACH is the most cost-effective, efficient, and widely available system" for making electronic payments, she said.

Industry officials were heartened that the government appeared to be committing to the National Automated Clearing House Association rules, which many regard as a prime example self-regulation.

"Making Treasury regulations consistent with the Nacha private-sector operating rules is a step in the right direction," said William B. Nelson, executive vice president of the association of clearing houses. "Banks, companies, and consumers that deal with the federal government will have the same warranties and liabilities that they have in dealing with everyone else."

Elliott C. McEntee, chief executive officer of Herndon, Va.-based Nacha, added, "The big issue is how Treasury will treat changes that we make to our rules."

Both association leaders said they had yet to read the fine print of the proposal, which was published Monday in the Federal Register.

"Now we have two sets of training, two sets of books, and two sets of processing rules, depending on whether it is a (commercial) ACH or a government transaction," said Philip C. Ahwesh, manager of electronic services in Mellon Bank Corp.'s global cash management division.

"The closer the rules come together, the more consistent we can be and the less mishaps we will have," said Mr. Ahwesh.

Industry groups had been pressing for parity. Although the government jump-started the ACH with its Social Security direct deposit program in the 1970s, federal funds transfers were outnumbered in 1996 by those originated by banks, 3.3 billion to 625 million.

Under the proposed policy, the key government exception to Nacha rules would pertain to reclaimed items such as Social Security benefits disbursed after a recipient's death.

Nacha allows a five-day window for an initiator to request returns. The Treasury is proposing a 120-day window, but Ms. Johnson said currently there is no time limit.

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