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NACHA's Settlement Date or Reg E's Statement Date?
by John Burnett & Andy Zavoina, BOL Gurus
Guru Bios
Question: Relative to Reg E, a client notified the bank that unauthorized charges were posted to his checking account on 1/12/06. The charges were posted 10-27, 10-28, 11-3, and the statement was cut 11-22. He notified us within 60 days of the statement, but NACHA states 60 days from settlement date. We originally provided provisional credit, but when the claim was denied from ACH, we took provisional credit back from the customer. I feel the bank is in error and a refund is due to the customer since regulation states 60 days from statement. Do you have an opinion?
Answer by Andy Zavoina: Liability for a consumer under Reg E is covered in Section 205.6. A common misconception is that if the consumer waits beyond 60 days of their statement date, they have all liability (i.e. unlimited). That isn't necessarily the case. That unlimited rule applies to amounts withdrawn AFTER that 60 day period. The amounts withdrawn before that revert to the other limits and are based on when you are notified and when the withdrawals were made. So it is possible that the consumer waits beyond 60 days to notify you, and they still have minimal liability because of when the transfer was made.
Also, NACHA rules or merchant refunds have nothing to do with your responsibilities under Reg E and your requirement to satisfy investigation requirements under §205.11. Your requirements are between you and your customer and the times required are not adjusted based on other rules you may have to follow. Reg E implements the Electronic Funds Transfer Act, a law, imposing very specific requirements on you.
Answer by John Burnett:
Another way to look at this question is to split up the two rules. Regulation E covers the relationship between you and your customer. Your customer's liability for unauthorized transactions will be determined under section 205.6. The NACHA rules on adjusting entries determine whether you will be able to send back a transaction that your customer has said is unauthorized. You refund to your customer based on Regulation E, and recover from the ODFI that which you are able to recover under the NACHA rules.
First published on BankersOnline.com 7/03/06
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