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What is COMMERCIALLY REASONABLE?

COMMERCIALLY REASONABLE – A system, technology, practice or procedure frequently practiced among originators conducting similar types of business.

This is one of the most frequently asked questions with respect to the ACH Network.
The NACHA Operating Rules require WEB Originators to employ commercially
reasonable methods of authentication to verify the identity of the Receiver, commercially
reasonable fraudulent transaction detection systems, use commercially reasonable
procedures to verify that routing numbers are valid, and maintain commercially
reasonable security technology to establish a secure Internet session.
A commercially reasonable system, technology, practice or procedure is one that
corresponds to commonly accepted commercial practices among commonly situated
Originators conducting similar types of transactions.

The concept of commercial reasonableness means that an Originator, given the facts of a
specific transaction, acted in a way that other similar Originators would have acted.
Why is Commercially Reasonable Important?
The concept of commercial reasonableness provides some flexibility to the broad
spectrum of Originators who may want to include WEB Entries as a payment option. If
the NACHA Operating Rules were to specify a particular system, technology, practice or
procedure that system, technology, practice or procedure would become a standard for
all WEB Originators, thereby potentially limiting the types of Originators that could
effectively utilize WEB entries.

By specifying that the system, technology, practice or procedure be commercially
reasonable, the rules provide some flexibility in allowing commonly situated Originators
to utilize similar methods. In other words, an Originator who sells lower dollar goods or
services to repeat customers is expected to maintain systems, technologies, practices and
procedures similar to other Originators selling lower dollar goods or services to repeat
customers. In the same respect, an Originator that sells high-end electronic equipment to
individuals with whom they have no prior relationship would be expected to maintain
methods similar to other Originators selling high-end goods, which would logically
need to be more sophisticated.

How is Commercially Reasonable Determined?

To determine if an Originator has fulfilled their obligations to perform in a commercially
reasonable manner circumstances would be evaluated including any or all of the
following:
Transaction amount;
• Volume of payments originated;
• Type of goods or services sold;
• Whether or not the parties have an existing relationship; and
• Weighing the cost to the Originator to employ a particular technology or
procedure against the level of protection it affords the Originator and other
ACH Network participants.

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