Nacha's 2023 Rules Updates: Are You Affected?

3/1/2023 - By Sallie O'Brien, AAP, APRP

Are you a Bank, Credit Union or Third-Party Sender that originates Micro-Entries on behalf of your customers?

With Micro-Entries (Phase 2), risk management requirements will be applied to all Originators of ACH Micro-Entries. Enforcement of this requirement begins March 17, 2023.

First, what are Micro-Entries?

Micro-Entries are often called test entries, penny deposits or micro-deposits. These entries help the Originator verify if an account is open and active. These entries are under $1, and the credit amount must be equal to or greater than the debit amounts transmitted. These entries must be settled simultaneously.

How does this affect you?

Existing screening requirements explicitly state that “account validation” is part of a “commercially reasonable fraudulent transaction detection system.”

Originators of Micro-Entries will be required to use commercially reasonable fraud detection, including monitoring Micro-Entries forward and return entry volume.
Monitoring volume for Micro-Entries will provide a baseline for everyday activity, however, the Originator will not be required to review individual entries, only the total volume.

As a reminder, additional Micro-Entry rules went into effect on September 16, 2022.

What requirements are included in this change?

The originator is required to use “ACCTVERIFY” in the Company Entry Description Field of the Company/Batch Header Record.
The name of the Originator must not be changed, as this will be how it is identified in future entries (with some minor adjustments allowed for accounting or tracking purposes).
ACH credits and offsetting debits used to verify the receiver's account are required to be less than $1. One or more of the debit Micro-Entries must not exceed, in total, the amount of the corresponding credit Micro-Entries.
Micro-entries must be in the same settlement file.
The originator may initiate future entries as soon as verifying process has been completed.

What are the impacts and benefits of this change?

Potential Impacts for ODFIs and their Originators/Third-Party Senders

Monitoring forward and return volume Micro-Entries.
Review and update current origination fraud detection software to verify compliance.
Verify that your Third-Party Service Providers are aware of this requirement.

Potential Impacts for RDFIs

Increased volume of Micro-Entry transactions.

Intended Benefits

Improve the quality of Micro-Entries in the ACH Network.
Reduce the number of fraudulently initiated Micro-Entries.

Questions?

Click here for more information on this Nacha Rules requirement. Please contact our Financial Instutions Consulting practice if you have any questions or need assistance with a Nacha compliance review, assessment of risk, or consulting.

About the Author | Sallie O'Brien, AAP, APRP

Sallie is a senior consultant in the Financial Institution Advisory Group at Saltmarsh, Cleaveland & Gund. She has over 19 years of experience working with financial institutions. Sallie specializes in risk-based Nacha compliance audits and provides ACH-consulting services to the firm’s financial institution industry clients. Prior to joining Saltmarsh, Sallie was a senior director of education at a regional consulting firm where she provided payment education and Nacha compliance programming for third-party providers.