What is an ACH prenote?

What is a prenote?

A prenote, or prenotification entry, is an ACH entry with no money in it. The Treasury's rules for its own ACH payments describe it as "a zero-dollar ACH entry" that helps find problems before a real payment is sent. The Federal Reserve's ACH operating circular lists prenotifications among non-value messages.

The prenote travels the same path as a real payment. It goes from the originator's bank (the ODFI), through an ACH Operator, to the receiver's bank (the RDFI). The receiving bank checks the account number against its records.

How does a prenote work?

1. The originator collects the customer's routing and account numbers.
2. It sends a zero-dollar prenote to that account.
3. If the account is closed, doesn't exist or the number is wrong, the receiving bank sends back a return. If a detail needs fixing, it sends a notification of change.
4. If nothing comes back by the end of the return period, Nacha's guidance says the originator can assume the account is open and can accept ACH entries.
5. The originator then sends live payments.

Nacha's rules also set a waiting period after a prenote before live entries can follow (Article Two, Subsection 2.6.2). Your bank or processor will tell you how it applies.

Why do businesses send prenotes?

Mostly to catch a bad account number before a real payment fails. A failed payment on a closed or mistyped account comes back as a return, often days later. A prenote finds the problem with no money at stake.

There is also a rule behind it. Nacha's WEB debit rule, effective March 19, 2021, requires originators to validate first-use consumer account information for debits authorized or started online. The rule doesn't require a specific method. Nacha lists three options: a prenote, ACH micro-entry verification or a commercial validation service.

Is a prenote enough to validate an account?

Nacha says a prenote "meets the minimum standard of the Rules for validating that an account is open and can accept ACH entries." It adds that for some originators, depending on their line of business and risk, a more rigorous method may be appropriate.

A prenote has limits worth knowing:

• It confirms the account is open, not that it has enough money for a payment.
• It doesn't confirm the customer owns the account.
• "No news is good news" means you wait for the return period to pass before you know.

Micro-deposits work differently. The customer has to confirm the amounts, which shows they can see the account.

Can a prenote be sent after payments have started?

Yes, since June 21, 2024. Before then, Nacha's rules allowed prenotes only before the first live credit or debit to an account. Nacha removed that limit so originators can re-check accounts that have gone inactive or dormant before using them again. Many originators were already doing this.