New ACH Micro-Entries Rule For Organizations That Send Challenge Deposits (Micro-Entries) to Customer Accounts to Validate the Account
This Rule will define and standardize practices and formatting of Micro-Entries, which are used by ACH Originators as a method of account validation.
This New Micro-Entries Rule Will:
- Define “Micro-Entries” as ACH credits of less than $1 and any offsetting ACH debits, used for the purpose of verifying a Receiver’s (customer’s) account
- Standardize the company entry description and company name requirements for these entries
- Establish other Micro-Entry origination practices
- Apply risk management requirements to the origination of micro-entries
This New Rule Will Be Implemented in 2 Phases
Phase 1 – September 16, 2022
- The term Micro-Entry will be defined, and Originators will be required to use the standard Company Entry Description and follow other origination practices
Phase 2 – March 17, 2023
- Originators of Micro-Entries will be required to use commercially reasonable fraud detection, including the monitoring of Micro-Entry forward and return volumes
Amount Requirements Established by the Rule
An organization that utilizes Micro-Entries is not required to create Micro-Entry debits, but if it does, the total dollar amount of the Micro-Entry credit transactions must be equal to or greater than the value of the Micro-Entry debits. In other words, the result cannot be a net debit to the customer’s account.
The Rule Will Standardize Formatting for Micro-Entries
One of the most important updates is that Micro-Entries must use “ACCTVERIFY” in the company entry description field.
The sender’s name must be readily recognizable to the customer as the organization they are doing business with, and be the same or similar to the name that will be used in future transactions. The senders are permitted to have minor variations to accommodate processing needs.
Sending Practices Established by the Rule
If an organization uses Micro-Entry debits to offset Micro-Entry credits (optional), it must send the debits and the corresponding credits at the same time and use the same Effective Entry Date. This ensures that all the transactions will reach the customer’s account at approximately the same time, limiting the impact on the account balance.
Furthermore, an organization that uses Micro-Entries may send future transactions to its customer’s account as soon as the process for validating the Micro-Entries has been completed.
An originator that is using debit Micro-Entry offsets must send the debits and the corresponding credit Micro-Entries simultaneously for settlement at the same time. This better enables the simultaneous delivery of credit Micro-Entries and corresponding debit Micro-Entry offsets to RDFIs in the same file.
What is the Impact of the New Micro-Entries Rule?
For RDFIs and their Receivers:
- Better enables identification of individual Micro-Entries
- Better enables RDFIs to apply desirable processing routines and other controls
- Better enables the receipt of corresponding debit and credit Micro-Entries to the same account at the same time
- Reduces the potential of receiving fraudulently-initiated Micro-Entries
For ODFIs and their Originators:
- Better effectiveness of the Micro-Entry process for account validation
- Better customer experience due to standardization of some aspects of the process and the standardization of the description
For the ACH Network as a whole:
- A more effective Micro-Entry process for account validation through the ACH Network
- Addressing pain points of Originators, ODFIs and RDFIs
- Improve the quality of this type of Entry in the ACH Network
Originators will have to adopt the formatting conventions for Micro-Entries:
- Company Entry Description of “ACCTVERIFY”
- Company Name requirement
Originators will have to observe the required timing and waiting periods:
- Must send credit and corresponding debit Micro-Entries (if using) simultaneously
- Must wait to originate future Entries until the verification process is complete
Originators will need to conduct commercially reasonable fraud detection for Micro-Entries:
- Monitoring forward and return volumes of Micro-Entries
- Other desired velocity checks or anomaly detection
RDFIs should consider:
- Incorporating incoming micro-entry activity into existing fraud detection, AML, and money mule detection
- Treating corresponding credit and debit Micro-Entries the same when making post/no-post decisions (i.e., post both or return both)
- Automating return processing, especially for administrative return reasons such as account closed or no account
If you have any questions, please contact our ACHWorks and VCI support at firstname.lastname@example.org or email@example.com.