Reg E Tips

Reg E has always been a hot topic on Bankers' Threads. There's a lot of banking wisdom tucked away in those discussions. We've gone through the messages, extracted some really useful information, and compiled a list of Reg E Tips.

If your Reg. E disclosures indicate that the consumer can use your i-banking service to effect a transfer of funds between the consumer's accounts at your bank, and they were delivered proximately to the time the customer is signing up for i-banking, you need not make those same disclosures again. Caveat: If there are any fees involved, make sure they are disclosed.
John Burnett Related Thread

If a customer has an ACH dispute and a POS dispute at the same time, what timeframe do we have to resolve the dispute? If it were ACH alone it would be 45 days but the POS transaction would be 90 days. Each transaction is treated as its own separate investigation, with the appropriate outside limits on completion. If you are able to wrap them up within 45 days, fine. But from a regulatory standpoint, separate them.
John Burnett Related Thread

The "trigger day" for Section 205.11 is always the business day on which the customer notifies the financial institution, providing enough information for the bank to be able to identify the customer, the account, and the transaction(s) in question, as well as the customer's reason for believing there is an error (or statement that the customer needs more information about the transaction). That holds regardless of whether the notice is oral or written, and you don't get to restart the count when the written notice of error is received.
John Burnett Related Thread

[Sweeps from a savings account to cover a checking overdraft would not trigger the sending of a periodic statement under Reg E if these are the only transfers made on an account.] They would not be covered transfers because they are automatic transfers by the institution. Since they require no affirmative action by the customer to authorize each transfer, they aren't EFTs.

Reference Regulation E, ?205.3(c)(5) (Exclusions from coverage):

"Automatic transfers by account-holding institution. Any transfer of funds under an agreement between a consumer and a financial institution which provides that the institution will initiate individual transfers without a specific request from the consumer:
(i) Between a consumer's accounts within the financial institution;
(ii) From a consumer's account to an account of a member of the consumer's family held in the same financial institution; or
(iii) Between a consumer's account and an account of the financial institution, except that these transfers remain subject to Sec. 205.10(e) regarding compulsory use and sections 915 and 916 of the act regarding civil and criminal liability."
John Burnett Related Thread

[Autopay Authorizations: The party that obtains the authorization must provide the consumer with a copy.] That can either be a second copy of the unsigned authorization form (with amounts, etc., completed), or a confirmation copy of the signed form. It makes no difference. The account-holding institution (presumably different from the party obtaining the authorization) is under no obligation to obtain a copy of the authorization from the third party. If the third party fails to obtain a written authorization, the account-holding institution does not violate Reg. E. The third party does. If the same institution holds both the loan account and the deposit account, Reg. E doesn't apply to pre-authorized transfers to pay the loan.
John Burnett Related Thread

In today's environment, all consumer deposit customers should be receiving Reg. E disclosures routinely as part of their opening package. Even if the bank never signs these customers up for an EFT product, the bank has virtually no control over what the consumer contracts for -- knowingly or unknowingly. The first TEL, WEB, ARC, or POP transaction that hits such an account triggers the need to have disclosed. Not to mention old faithful transactions like direct deposit and direct debit for things like insurance. The bank just isn't involved in signing customers up for EFT in many cases. Best get the disclosures out there in advance!
John Burnett Related Thread

[Upon debiting a provisionally credited amount, the financial institution shall:] (i) Notify the consumer of the date and amount of the debiting; (ii) Notify the consumer that the institution will honor checks, drafts, or similar instruments payable to third parties and preauthorized transfers from the consumer's account (without charge to the consumer as a result of an overdraft) for five business days after the notification. The institution shall honor items as specified in the notice, but need honor only items that it would have paid if the provisionally credited funds had not been debited. I do not find anything that suggests you cannot debit the account the same day you send the notification. (If it creates an overdraft, there would be no charge.) I also agree with his earlier observation that it may not be advisable to to give 10 days advance notice of the debit. Theoretically, as long as there are no NSF fees and you pay items you would have paid if the provisional credit were not reversed for the next five business days, there is no harm to the customer.
Ken Golliher, Pegasus Related Thread

If customer had revoked an earlier authorization then the customer is correct. The debits were unauthorized. They created the overdraft fees, which have to be refunded. Give back the money, close out the account, get it off your books, and move on.
John Burnett Related Thread

[To help you understand the two-business-day rule, note that] the two-business-day period does not include the day the consumer learns of the loss or theft or any day that is not a business day. The rule is calculated based on two 24-hour periods, without regard to the financial institution's business hours or the time of day that the consumer learns of the loss or theft. For example, a consumer learns of the loss or theft at 6 p.m. on Friday. Assuming that Saturday is a business day and Sunday is not, the two-business-day period begins on Saturday and expires at 11:59 p.m. on Monday, not at the end of the financial institution's business day on Monday.
Assuming Sunday is not a business day, if you will amend your statement to say the two business days ended at 11:59 on Tuesday. As for the amount of the consumer's liabiity, how much was withdrawn before 11:59 Tuesday and how much after?
Ken Golliher, Pegasus Related Thread

If the customer starts his dispute after the 60-day deadline, you need not follow section 205.11 rules. Therefore, no need to provide provisional credit. You must, however, determine whether the transactions were unauthorized, under Section 205.6. That may take some of the same effort you would apply to error resolution investigation, but you won't have the deadlines to contend with. If your investigation shows that the transactions were unauthorized, you apply the limits of consumer liability provisions of 205.6 to the final refund.
John Burnett Related Thread

Regulation E says what customers have to do to make a claim for unauthorized transactions via a debit card. And while you can expect a reasonable amount of cooperation in your investigation, you cannot require a Police report as a condition of paying a claim. It is that simple.
Andy Zavoina Related Thread

Although, Regulation E does not provide legal protections regarding EFTs affecting business accounts. Regulation E certainly places certain limits on what a business may do.

• A business cannot condition employment on EFT payroll directed to business-specified financial institution.
• A business cannot condition credit on agreement to repay by EFT.

John Burnett Related Thread

[Since the definition of 'error' excludes transactions more than 60 days after they appear on the first statement, yet the liability rules incorporate losses within the first 60 days, there is an apparent inconsistency in the minds of some bankers. Keep in mind:]

• ?205.11 doesn't define "error" in terms of when the customer enters a claim. It requires the customer to enter the claim within a deadline in order to make certain the procedures in ? 205.11 apply. An error is an error is an error. An error asserted more than 60 days after the statement on which the error first appears does not require the bank to act within the framework of ?205.11. ?205.6 determines whether a consumer will be liable for an unauthorized transaction. Here, the determining factor is when the consumer notifies the bank. If a consumer sends a notice after 60 days, the consumer has unlimited liability for the charges.
• In terms of it including any fees charged by the bank, note that first, the customer has unlimited liability for those UETs that occur after the 60 days. Liability for the period prior to that is under the $50 or $500 tier. Generally, the tiers of liability include any fees the bank will impose for the transactions. It is not unusual for the bank to refund these fees as a show of good faith, but there is no regulatory requirement to do so.

Andy Zavoina Related Thread

First published on BankersOnline.com 6/15/04