Changes are coming to the way ACH Network participants use Micro-Entries following approval of a new Nacha Rule—one you should be looking to adopt even before it takes effect.
“We know Micro-Entries happen in the ACH Network and they’re a good tool for account validation. But they were not defined within our Rules. So, this is defining a practice that the industry has had in place which helps with account validation,” said Debbie Barr, AAP, CTP, Nacha Senior Director, ACH Network Rules Process & Communications.
This new Rule is to some extent a follow-up to a Rule that went into effect in March 2021, which made it explicit that account validation for WEB debits is part of a “commercially reasonable fraudulent transaction detection system,” though it is neutral when it comes to any specific methods or technologies for accomplishing it.
Micro-Entries have been around for a long time. In one common scenario, a Financial Institution will send two small ACH credits, followed by one debit which pulls back the total amount.
“This puts a framework around it that should be consistent with what many in the industry are already doing,” said Barr.
Under the Rule, Micro-Entry credits must be less than $1 each, and any debits that are sent cannot exceed the total value of the credits. Credits and debits must be transmitted to settle at the same time.
Additionally, the formatting of a Micro-Entry will be standardized, with “ACCTVERIFY” required in the company entry description field. For Receiving Depository Financial Institutions (RDFIs), Barr said this will enable them to “easily identify Micro-Entries.” At the same time, it will help Originating Depository Financial Institutions (ODFIs) with their new requirement to watch for significant changes or fluctuations in the number of Micro-Entries they send.
Consumers will notice changes as well. When they see Micro-Entries, the company name that goes with them will have to be easily recognizable. That company name also has to be the same, or similar, to what consumers will see on future ACH entries from that company.
On Sept. 16, 2022, the first phase of the Rule takes effect. It will define “Micro-Entry” as ACH credits of less than $1, and any offsetting ACH debits, used for account verification. The “ACCTVERIFY” description will also become required. On March 17, 2023, phase two will require Micro-Entry Originators to use commercially reasonable fraud detection, including volume monitoring. But there’s no reason to wait.
“We encourage the industry to start using the definition, the monitoring, and the description as soon as possible, because it benefits everyone,” said Barr.