Question: We had a customer who issued a bill payment
which was appropriately and timely debited from their account. The payment was sent to the vendor at
the address provided by the customer. However, the payment had not cleared after 14 days. The customer
called the bank and requested a “stop and refund.”
a) Is the fact that a bill payment had not cleared within a certain amount of time an “error” for Reg E
purposes? b) If so, and the customer requests a “stop and refund” be issued, can we charge our normal fee,
or do we have to waive the fee because it was a Reg E error?
Answer: In most such situations, there is no agreement between the bank and the third party to whom
the payment is sent. Commentary paragraph 2 to §205.11(c)(4) indicates that the investigation of such
bill payments need not go beyond the bank’s records. It reads:
“When an alleged error involves a payment to a third party under the financial institution’s telephone billpayment
plan, a review of the institution’s own records is sufficient, assuming no agreement exists
between the institution and the third party concerning the bill-payment service.”
However, if a customer contacts the bank to allege that the third party has not received the payment,
that inquiry falls within the seventh definition of “error.” (§205.11(a)(1)(vii)). This error allegation,
however, can quickly be investigated and closed to comply with the regulation by determining that the
debit posted to the customer’s account, and the check was addressed according to the customer’s order.
Regulation E doesn’t address whether a fee may be assessed for stopping payment on the bill payment
check. That is a question that should be addressed in the bank’s bill-payment service contract with the
customer.
The original version appeared in the September/October 2004 edition of the Oklahoma Bankers Association Compliance Informer.
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