I am currently performing a Reg E review,and I have noticed I have seen several Revoke Authorizations filled out by our customers stating they have revoked authorization with a specific company and our bank did not return the customers money to them. I am under the impression that Reg E error resolution covers not only access card disputes but unauthorized drafts/ACH entries. I am quite sure that Reg E trumps ACH Rules, I believe that is why the ACH Rules have changed so much in the last 2 years is to comply with Reg E. So heres the question should we give the money back from the transaction in question and block all future ACH's from this company, or block all the ones that attempt to pass thru in the future?

Did the customer revoke their authorization and then the transaction posted anyway? If so, then IMO you'd need to handle the Reg E claim, return the transactions R07 and credit your customer. If the customer tells you they revoked their authoriztaion and the date of the revocation is after the most recent transaction, then your only obligation is to ensure no future transactions from that originator post.

Thats the problem, our forms do not have a place to put a date that the customer revoked their authorization with the company in order for a clear dispute. Our box the customer checks simply states: I revoked the authorization I had given to the party to debit my account before the debit was initated. The person responsible for these disputes are just giving the money back to a few of the customers and some she is not. I question this procedure and she tries to state the ACH rules. This has nothing to do with the ACH rules, just that a dispute is being filed for that particular transaction. I can't get anyone to think outside of the box at this bank.

Purex- I'm thinking she's not using the form on a disputed item. She may be using that statement to support a Stop Payment request on future recurring transactions per the ACH rules. The new NACHA Stop Payment rules have a provision that on a Stop Payment request to block all future transactions, the RDFI may ask the Receiver for a confirmation in writing they revoked the authorization with the Originator.

We use a similar form with our Stop Payment requests, and use a WSUD for actual disputes, which according to NACHA should be completed after a transaction has posted to an account. You would see a credit to the customer only in the latter scenario.

Your form is clear enough; it's the implementation that needs work. If the customer states that he or she revoked the authorization before the debit was initiated, the bank is being told that the transaction was not authorized. Regulation E requires the bank to determine whether the authorization was valid for the transaction or not. If not, regulation E would require that there be a refund to the customer, subject to the rules on customer liability in §205.6.

Notice that not once yet have a referred to the ACH rules. Those rules permit the bank to recover funds for a transaction from an Originator if certain time and documentation parameters are met. View them as a way to recover for the bank some or all of the funds you had to pay your customer under Regulation E. But the ACH rules do not limit your customer's ability to file a claim or recover funds from an unauthorized EFT under Reg E.

John I agree with you totally. I feel if the customer fills a revoked authorization out they are seeking recredit on that item stating they have revoked it prior to the debit entry. I believe she understands her guidelines on the ACH rules but does not truly understand Reg E. It for the protection of the consumer not the bank and that timeframes in the ACH Rules allow for the bank to send these items back. There is a gray area that would give more protection to the customer under Reg E. I just might have her brush up on her Reg E requirements for customer disputes, and write the department up for not properly recrediting the customers for their disputes. I thank you all for your help.

I think you are moving in the right direction. You mentioned in your post "I can't get anyone to think outside of the box at this bank." In this case, try getting them to conceptualize TWO boxes, one with Reg E rules and the other with NACHA rules. One box is for the customer, and the other is for the bank.

Sounds like an opportunity for another Banker's Tool!

John

I was reading your post about Reg E and unauthorized ACH and I am a little confused. Are all unauthorized ACH transaction (consumer) claims, Reg E claims and do they have to be treated just like other Reg E claims?

When ever a consumer makes such a claim, we would just have them complete a WSUPP, we credti their account and return the ACH item. I am skipping some timing requirements but that is generally how we handle these claims. We keep the WSUPPs on file in case there is a dispute with the return.

In the case of an ACH how is the bank supposed to determine if an ACH was authorized and if it was authorized but authorization was revoked, there is actually no way to prove this. We would have to contact the Originator via the ODFI and demand a copy of the signed authorization form in order to determine if the transaction was authorized but even if such a form is provided, the customer is claiming they revoked authorization, the bank or Originator will probably not admit to having a revoking authorization letter from our customer and it turns into a he said she said scenario which is why we have the WSUPP.

As long as we credit the customer does it matter how the claim is processed? In my opinion, if it weren't for the ACH rules and the WSUPP, most banks would have to credit the customer under Reg E and the bank would would have a loss unless the ODFI failed to provide a siged authorization form from the originator. Under these rules could the customer refuse to sign the WSUPP and under Reg E we would have to credit the customer?

I just don't understand what we are required to do under Reg E, should we just have a log for the ACH disputes with notations that it was resolved under ACH rules, would that make everyone happy.

thanks for any further info on a complex issue.
cj

Regulation E sets the minimum standard for addressing claims under section 205.11. You are always free to exceed that standard. One way in which most banks exceed the standard is (when the consumer customer makes the claim promptly enough) simply accept the WSUD (fka WSUPP) and immediately close the case, credit the customer and enter the adjustment reversal transaction to recover the funds. Because the Originator can't counter the claim, the matter becomes one between the Originator and the Receiver/consumer, with the bank out of the picture. The RDFI's Reg E claims log would reflect that the claim was resolved by using the ACH returns process.

If, however, the customer's claim is too late to use the NACHA reversal (for example if the customer today, on August 2, 2010, claims that four ACH entries from 2009 were not authorized), the RDFI still has to comply with Reg E under section 205.6, whether or not the bank can use the NACHA returns process to recover funds. If necessary, the bank can require the ODFI to require that the Originator produce evidence of the authorization. If the bank/RDFI determines that the transactions were not authorized by its customer, it applies the rules in 205.6 on assigning liability, refunds the amounts it is required to, and decides whether to attempt to recover funds based on the Originator and ODFI's warranty that the transactions were authorized.

John

ok, thanks for the clarification.

gosh they changed the name again, affadavit was too scary, under penalty of perjury was even worse, what does the D stand for, duress.<g>

thanks again
cj

WSUD

Written
Statement
(of)
Unauthorized
Debit