Good Morning:

We have a customer that has filed several disputes along with a police report stating his card was stolen. After we provided him with provisional credit, his story changed with both us and the police. We know the disputes will be denied. Does the bank have any right to hold the provisional credit because of him falsifying statements?

First, did he truly provide false statements or did he provide statements that were to the best of his knowledge then, but has subsequently learned more that changed the story?

Second, you say you know the disputes will be denied. Are you saying you've made a determination that the transactions were not unauthorized? If you are saying you have made a determination that the transactions are not unauthorized, you can (and should) revoke the provisional credit. You must communicate the results of your findings to the customer within 3 business days of completing your investigation.

I don't believe you can just revoke the provisional credit. You technically deny the claim, and provide the 5 business day debiting notice under §205.11(d)(2).

Andy, of course, is correct. I should have been more specific on how to follow through with revoking the provisional credit, and that is in accordance with 204.11(d)(2). But even under that provision, you can debit the provisional credit immediately upon determination that no error occurred - you don't have to wait five days to debit the account. You just have to honor any checks, drafts, or similar instruments payable to third parties and preauthorized transfers from the consumer's account that would have been paid if you hadn't debited the account.

Another thought on this -- You say you know the disputes will be denied. Does that statement refer to merchant chargebacks that you know will be denied for some reason? Does that reason reflect that your customer actually authorized the transactions (or authorized someone else to use the card to make transactions)? Or are your referring to your own back office's decision to deny the customer's claims?