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#188118 - 05/07/04 10:16 PM Reg E Bill Pay
Nancy G Offline
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Nancy G
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Posts: 18
Montana
Our bill pay system debits the customer's account and credits a bank DDA. A check is then cut on the bank's DDA and mailed according to the the customer's instructions. The customer's statement shows the transaction as going to the payment recipient.

Is this covered by Reg. E?

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#188119 - 05/08/04 12:06 AM Re: Reg E Bill Pay
John Burnett Offline
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Absolutely. Only if the bill pay system draws an actual check against the consumer's account and payable to his payee (and appropriate disclosures are made) will Reg E not apply.
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#188120 - 05/10/04 02:29 PM Re: Reg E Bill Pay
Nancy G Offline
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Nancy G
Joined: Mar 2002
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Montana
If the customer participating in the Bill Pay program types in an account number incorrectly or for some other reason the payee cannot determine what account to apply the payment to, the check comes back to the bank. The bank then contacts the customer to find out how they would like to handle payment - correct the account number and resend the check, or let the customer pay the bill in some other method are two possibilities. Is this considered a Reg E error since the bank took it to the consumer other than the other way around?

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#188121 - 05/10/04 03:03 PM Re: Reg E Bill Pay
John Burnett Offline
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Excellent question. When the bank itself discovers an error (or it discovers it based on an inquiry from the payee as in your case), the consumer didn't initiate the inquiry, and the provisions of 205.11 (error resolution) won't apply.
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#188122 - 05/10/04 03:15 PM Re: Reg E Bill Pay
Elwood P. Dowd Offline
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Just hauling a little water for John; from the Commentary 11(b)(1).5:

The error resolution procedures of this section apply when a notice of error is received from the consumer, and not when the financial institution itself discovers and corrects an error.
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#188123 - 05/10/04 05:52 PM Re: Reg E Bill Pay
Nancy G Offline
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Nancy G
Joined: Mar 2002
Posts: 18
Montana
Thank you. One day, I will learn to trust myself when I read the regs. So if a customer calls us and complains that we sent the wrong amount, or sent money to the wrong place, or didn't send it soon enough, we must follow Reg E resolution rules. But,if we show that we followed their instructions, then we are through and don't need to hand out money to anyone?

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#188124 - 05/11/04 04:12 PM Re: Reg E Bill Pay
Nancy G Offline
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Nancy G
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Posts: 18
Montana
I just can't seem to let this go.

Sometimes after a bill pay check has been sent, the customer realizes he requested it to be sent for the wrong amount or to the wrong address. Then customer will request that a stop pay be placed on the check and a new check be sent in place of the stopped check. Would this be a Reg E error since there isn't really any error that needs investigating?

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#188125 - 05/17/04 03:51 PM Re: Reg E Bill Pay
Anonymous
Unregistered

This has been an issue at my Bank as well. If an electronic (not paper) payment is initiated via a bank on-line transaction and the merchant never receives it, then is the bank required to resolve the issue with the merchant and provide provisional credit?
Our Bank on line administrator believes that this is not a dispute and that the Bank can provide a trace# for item and let the customer resolve the issue with the merchant. The administrator does not want to become involved in resolving payment issues between a customer and the merchant. Are other Bank's viewing these transactions as Reg. E covered? I want to make sure that procedures are developed to comply with the law. Thanks.

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#188126 - 05/17/04 04:12 PM Re: Reg E Bill Pay
Paragon Offline
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Paragon
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Reg E only kicks in only when payments are made via ACH. When a check is issued, at the request of a customer, and is not received, the customer needs to request information from the bank, must work with the merchant to resolve the situation, but must also initiate a stop payment, as necessary.

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#188127 - 05/18/04 01:45 PM Re: Reg E Bill Pay
John Burnett Offline
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If the payment is electronic and is not received by the payee, the customer's complaint rises to the level of an error-resolution claim under 205.11. The bank is required to complete an investigation, and to include within that investigation any third parties with which the bank has a contract. If the transaction left the bank or its vendor as an ACH item, the bank need not pursue the investigation further than the ACH file that went "out the door." If it is the customer who erred in providing incorrect address information or routing information, the customer will bear the onus of correcting the problem.
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#188128 - 05/18/04 01:47 PM Re: Reg E Bill Pay
John Burnett Offline
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Quote:

Reg E only kicks in only when payments are made via ACH.




Actually, if the check isn't drawn on the consumer's own account, the transaction remains subject to Regulation E even though the payment to the merchant is made via paper check.
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#188129 - 06/10/04 03:12 PM Re: Reg E Bill Pay
Anonymous
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John:
If the transaction from the consumer's account is electronic but the vendor pays the merchant by check, would the only EFT be the one from the consumer's account to the vendor? Also, where do you find in the regulation that the bank's investigation should include the investigation of the status of the check?

In other words, you stated that if the transaction left the bank or its vendor as an ACH item, the bank need not pursue the investigation further than the ACH file that went "out the door". If the vendor makes the payment by check, does the bank need to pursue the investigation any further than when the check was sent to the merchant?

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#188130 - 06/11/04 08:27 PM Re: Reg E Bill Pay
John Burnett Offline
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I agree that the piece of the transaction made by check is arguably not subject to Regulation E's 205.11. However, most e-bill payment agreements provide that the customer can expect some support in determining the fate of the check. This will fall into the realm of contract obligations rather than Reg. E.

The inclusion of these transactions within Reg. E's scope was done rather artlessly in the Commentary to section 205.3. It refers to payments made by bill payers under a bill payment service. But the Commentary does not differentiate between the electronic piece of the transaction (from account to bank or to bill payment service) and the paper piece (from bill payment service or bank to vendor/payee).

So, although I agree with your splitting of hairs on this question (it's one of my favorite pastimes), a court might interpret the Commentary more liberally in favor of the consumer.
Last edited by John Burnett; 06/11/04 08:39 PM.
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#188131 - 06/22/04 06:41 PM Re: Reg E Bill Pay
SusyG Offline
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From a previous thread on this same subject that John and several others were involved in, this is what I concluded:

Since our vendor directly debits our customers account either electronically or by paper check (has customer name, account number, etc. on it) with no "clearing" account at the bank in between, all the transactions are Reg E transactions. If we wanted the paper checks to not be considered Reg E transactions, we would have to disclose all the merchants that accepted paper checks and that is virtually impossible. Also, wouldn't all Bill Pay transactions be considered Reg E anyway because they were initiated through an electronic terminal for the purpose of debiting an account?

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#188132 - 06/23/04 01:41 PM Re: Reg E Bill Pay
John Burnett Offline
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Quote:

Also, wouldn't all Bill Pay transactions be considered Reg E anyway because they were initiated through an electronic terminal for the purpose of debiting an account?




If you review the Commentary to Regulation E, section 205.2, you'll see that "home banking equipment" is excluded from the definition of electronic terminal. The Fed Staff reasoned that the home banking equipment is a form of telephonic device, since it uses telephone equipment to communicate with the bill paying system.

Before we start a discussion on whether someone using a cable modem (as opposed to dial up or DSL) is using a telephonic device, let's consider that at some point the communication will flow over telephone company wiring. The Fed's Staff used the telephone definition as a way to rule that home banking equipment isn't an electronic terminal. Let's not worry about the reasoning. Let's gratefully accept the outcome.
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#188133 - 06/23/04 03:05 PM Re: Reg E Bill Pay
Anonymous
Unregistered

Thanks for the clarification John. If after a customer inputs the merchant name, our Bill Pay system indicates that the merchant will be paid by paper check or that merchant will be paid electronically, is that considered disclosure so that we would not have to consider the paper checks Reg E transactions?

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#188134 - 06/23/04 04:13 PM Re: Reg E Bill Pay
John Burnett Offline
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In order for them not to be subject to Regulation E, they have to pass two tests:


  1. The service provider issues the checks directly against the consumer's checking account, and not its own account.

  2. The service provider discloses which payees (or which classes of payees, or that all payees) will receive paper checks drawn on the consumer's account.


If the checks are drawn against a central account of the bank or service provider, Reg. E still applies to the bill pay transaction. What's not terribly clear is whether it will apply to the whole two-step transaction (debit customer's account, then issue the check) or just to the piece of it affecting the consumer's account directly.
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#188135 - 06/23/04 04:25 PM Re: Reg E Bill Pay
Anonymous
Unregistered

Thanks so much, John!

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#188136 - 06/24/04 04:41 PM Re: Reg E Bill Pay
Anonymous
Unregistered

John,

Under this scenario, what would be the banks obligation if any?

The paper checks aren't considered Reg E transactions and because of a processing error at the Bill Pay Service Provider, duplicate checks were issued on the customers account. Let's say my electric company received two checks, same number, same amount, etc. and posted both to my account at the electric company. The error was not detected soon enough to be caught in the bank processing and both checks have posted to the customers account.

Our bill pay service just sends an e-mail telling the customer they will have to work it out with the electric company since they have already received benefit of the funds. Is this adequate?

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#188137 - 07/14/05 02:12 PM Re: Reg E Bill Pay
Anonymous
Unregistered

Quote:

If the payment is electronic and is not received by the payee, the customer's complaint rises to the level of an error-resolution claim under 205.11. The bank is required to complete an investigation, and to include within that investigation any third parties with which the bank has a contract. If the transaction left the bank or its vendor as an ACH item, the bank need not pursue the investigation further than the ACH file that went "out the door." If it is the customer who erred in providing incorrect address information or routing information, the customer will bear the onus of correcting the problem.



This is from a post about a year ago. I just want to know if I understand this correctly. If a bill pay is electronic, then a Reg E investigation is required. However, if its a ACH then as long as the bank can show it went out the door no Reg E investigation is required. Can anyone point me to the Reg cite or commentary information that backs this up? I would appreciate any insight. Thanks.

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#188138 - 07/14/05 03:44 PM Re: Reg E Bill Pay
John Burnett Offline
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Since I think I wrote what you've quoted, I will try to explain.

An ACH item is an EFT subject to Reg. E if it involves a consumer's account. If the bill payment is made via ACH, and it's not received (or the consumer claims some other form of error under 205.11), a Reg. E investigation most certainly IS required. But the extent of the required investigation is limited to the bank's own records.

If the bill payment is made by check, but the check is drawn on the bank's account rather than the consumer's account, the transaction is considered an EFT subject to Reg. E (assuming the bill payment was ordered or originated electronically). If the check isn't received (or the consumer has another error claim under 205.11), the bank's Reg. E investigation need go no farther than confirming the fact that the check was issued to the payee and mailed to the address provided by the consumer. It might also include checking whether the check has been paid.
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#188139 - 07/14/05 04:55 PM Re: Reg E Bill Pay
Anonymous
Unregistered

Thank you for that explaination! Is the extent of the investigation identified in the regulation?

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#188140 - 07/14/05 05:01 PM Re: Reg E Bill Pay
John Burnett Offline
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You'll find it most clearly explained in the Commentary to section 205.11.
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#188141 - 07/14/05 05:35 PM Re: Reg E Bill Pay
Anonymous
Unregistered

Thank you!

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#188142 - 07/25/05 01:51 PM Re: Reg E Bill Pay
Anonymous
Unregistered

I understand that for bill pay items whether ACH or papercheck (drawn on the Bank's DDA) that an error investigation need go no further than the payment was made and confirm the address provided by the customer. Must you mail the customer notification as stated under 205.11 (c) and (d)?

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