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Customer's Time Limit on Unauthorized ACH Entries
by John Burnett, BOL Guru
Guru Bios
Question: I attended a seminar Wednesday 1-11-06 on ACH returns. I have a question regarding customer notice to the bank of unauthorized ACH entries. You say the customer must notify the bank within 15 days of statement delivery, but what we are reading in Reg E indicates the customer has 60 days to report unauthorized entries. Please clarify.
Answer: Reg E controls the bank's relationship with the customer. NACHA rules govern the bank's relationship to the other players in the ACH network.
Your consumer/customer is entitled to enter a claim with you that an entry was unauthorized at any time (the 60 day limit in section 205.11 only covers the customer's right to the procedures in that section, not the customer's liability for unauthorized transfers, which is found in section 205.6). If the transaction is unauthorized, the customer is entitled to a refund unless the transaction is one in a series and took place more than 60 days after the statement was available that showed the first unauthorized transaction in the series.
That has nothing to do with NACHA's rule, which determines whether or not your institution can use the ACH mechanism to send the transaction back. There are two dates in the rule -- the 15th day following the date the statement showing the transaction was made available to the customer, and the first banking day following the 60th calendar day after the Settlement Date of the transfer.
The "60+1" rule is black and white -- the ODFI knows if you make it or not. The 15 day deadline is on paperwork that you retain. It is subject to audit, and the ODFI has a right to obtain a copy if it wishes to.
If the WSUPP, or the return are dated too late, you still have the right to pursue the Originator and ODFI on their warranties that the transaction was authorized, but not with the ACH return mechanism. That gets expensive.
First published on BankersOnline.com 2/6/06
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