Risk alert: ACH booster payment fraud is increasing in frequency, severity

CUNA Mutual Group has issued a risk alert warning of ACH booster payment fraud, saying that losses are growing both in frequency and severity.

Some members are freeing up credit by making payments on their credit union-issued credit cards via ACH either through online banking or a service offered by the card processor, and then immediately using up the credit limits through cash advances and/or gift card purchases before ACH payments are returned as non-sufficient funds or account not found, according to the alert.

To help credit unions mitigate losses from such ACH booster payment fraud, the alert provides suggested controls for payments on credit-union issued cards via ACH debit, including to:

  • limit payments to the lesser of the balance due, or credit limit;
  • limit payment frequency to once per month or billing cycle;
  • cap available balance to the credit limit for accounts with credit balances;
  • delay availability of credit limit freed up by ACH payment;
  • generate/review large payments, returned payments and credit balance reports daily; and
  • supplement loss controls with insurance coverage for ACH booster payments.

If members can make payments on other credit union loans via ACH, the alert suggests that credit unions:

  • prohibit large or unusual amounts from being paid via ACH;
  • avoid loan payoffs via ACH if the payment amount is more than the normal monthly payment;
  • limit the origination of ACH debits to recurring payments only, where members are required to provide proof of ownership of the funding account; and
  • avoid large, one-time payments that might be indicative of fraud.

CUNA Mutual Group’s risk alerts may be accessed on their Protection Resource Center. Log-in is required.

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