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#402591 - 08/12/05 02:50 PM When is Reg E EFT error investigation "complete"?
Brad B Offline
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We send our EFT errors to a third party consumer dispute center (CDC) to resolve them. We provisionally credit the consumer and then wait for the CDC to either refund us or not. Can we wait until we get a "case closed" report from the CDC to consider our investigation closed, even if we have been refunded earlier through a "first chargeback"?
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#402592 - 08/12/05 03:59 PM Re: When is Reg E EFT error investigation "complete"?
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Generally REG E requires that your investigation must be completed 45 calender days from the date you were first notified of the error by you customer. (It's 90 calender days if it is a foreign charge or a new account.) You must close your investigation in this time frame whether or not you have heard from your dispute center. If the reject the claim after the 45 days, you CANNOT revoke provisional credit.
You can always close an investigation sooner, but again, once you notify the customer that the case is closed, you cannot go back and reopen it.
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#402593 - 08/12/05 04:50 PM Re: When is Reg E EFT error investigation "complete"?
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The question is when would a case be considered closed, not how long we have to investigate. Would the case be considered closed upon first chargeback? Or, since there is a chance of representment by the merchant, would the case be considered closed at the end of 45 days or when we receive a 'closed' report from our third party processors?

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#402594 - 08/12/05 08:33 PM Re: When is Reg E EFT error investigation "complete"?
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I would definitely wait to close the case when you hear from your processor. Suppose the processor gets a representment and the documentation clearly shows that your customer did in fact authorize the disputed charge. If you have already closed the case you cannot go back and debit the customer.
Basically, you decide when the investigation is closed as long as it meets the time frame set forth in Reg E.
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#402595 - 08/17/05 04:46 PM Re: When is Reg E EFT error investigation "complete"?
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You can delegate your authority to the CDC, but you cannot delegate your responsibility. As noted above, the timeline under Reg. E is on you and has nothing to do with any vendor or the time it takes a merchant to respond.
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#1989777 - 01/20/15 08:30 PM Re: When is Reg E EFT error investigation "complete"? Brad B
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Can a bank delay the completion of an unauthorized EFT dispute until the 45th/90th day in every scenario because the merchant may re-present during that timeframe? Seems to conflict with the “spirit” of 1005.11(c). For example, a financial institution shall investigate promptly… and …the institution may take up to 45 days (90 if POS transaction) from receipt of a notice of error to investigate and determine whether an error occurred… It just doesn’t seem like an institution should be able to just sit and wait 45/90 days with every dispute just because a merchant “may” re-present.

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#1989921 - 01/21/15 02:28 PM Re: When is Reg E EFT error investigation "complete"? Brad B
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I would not delay every investigation because it may be reversed. The system is not fair, but where do your facts lead you? If you hit a black and white result, there you go. If it is gray and you believe there may be issues based on your investigation that will come up, then don't finalize it. The latter should not be "the rule" but the exception.
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#1990012 - 01/21/15 04:45 PM Re: When is Reg E EFT error investigation "complete"? Brad B
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Two thoughts: First, the error resolution rules in 1005.11 were written long before debit cards became popular. Some tweaks have been made to accommodate the longer investigation times needed for POS transactions, but Regulation E hasn't really been adapted to the modern realities of the MasterCard and Visa world.

Second: Don't get confused by the MasterCard or Visa investigations you may be handling that are not "errors" as defined in 1005.11 of Regulation E. For those, you don't have to stick to the 1005.11 rules on timing, etc.
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#1990227 - 01/21/15 10:18 PM Re: When is Reg E EFT error investigation "complete"? Brad B
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Your investigation is complete when you have enough information to determine that the transaction is authorized or not. The fact that you receive credit from your processor for a chargeback may not be sufficient reason to close your investigation. If there is the possibility during the 45 day period that the merchant may supply additional information to demonstrate that the cardholder authorized the transaction, don't close your investigation because you don't have all the facts.

As Andy says this does not give you carte blanche to keep every investigation open while waiting for the merchant. If I am disputing a fraudulent transaction and you can clearly see based on the pattern of transactions that it is a case of fraud, then you should finalize my credit and close the Reg E investigation even if you are still attempting to recover the funds for the bank via the chargeback process.
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#1990554 - 01/22/15 11:03 PM Re: When is Reg E EFT error investigation "complete"? BrianC
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Originally Posted By: BrianC
Your investigation is complete when you have enough information to determine that the transaction is authorized or not.


I'm going out on a limb here, but I believe the question still on the table is,

"Can the bank sit on its hands after receiving credit from the merchant via the service provider until the 45/90 day and do nothing while waiting to see if the transaction is reversed?"

Or can the bank count this as its research time even if the bank dosn't know what the merchant is up to?

In my opinion, this does not meet the spirit of the regulation as a prompt investigation for the consumer, and the bank certainly isn't being proactive in the investigation by just waiting out the max time.

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#1990566 - 01/23/15 03:07 AM Re: When is Reg E EFT error investigation "complete"? Brad B
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Let's change up the scenario a bit.

Suppose that the disputed transaction is an ATM withdrawal. You contact the local police department or other bank to see if you can obtain video to determine if your customer made the transaction or not.

The police are busy with more important things such as gang shootings and drug stings so they take their sweet time assisting you with getting video. When is your investigation complete? Wouldn't you certainly wait to see what the police come up with provided you are still within your day 45 investigation period?

Don't mistake receiving credit from the merchant as having sufficient information to close an investigation. VISA/MasterCard rules require that the merchant be debited and the issuer credited when a chargeback is filed. You still don't have all the information to complete an investigation. Just like you are waiting for the police to get you a video, in this case you are waiting for the merchant to get you a sales receipt or a copy of an invoice or signed contract to show that the charge is authorized. Your chargeback is a request for information and you are using your investigation timeframe to wait for that information.

The staff interpretations to 1005.11 support this process.

POS transfers. When a consumer alleges an error involving a transfer to a merchant via a POS terminal, the institution must verify the information previously transmitted when executing the transfer. For example, the financial institution may request a copy of the sales receipt to verify that the amount of the transfer correctly corresponds to the amount of the consumer's purchase.
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#1990593 - 01/23/15 02:24 PM Re: When is Reg E EFT error investigation "complete"? Brad B
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Thank you for revisiting this old thread. I appreciate the information and opinions that were shared.

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#1990605 - 01/23/15 02:45 PM Re: When is Reg E EFT error investigation "complete"? Brad B
David Dickinson Offline
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This is a common issue with many of our clients. We commonly see banks that immediately give provisional credit, but wait until the 45/90th day to close the file.
We tell them Reg E requires a prompt investigation and they are to report the results to the consumer within 3 days after completing the investigation - including the provisional credit is final. Their argument is the investigation isn't complete just because they received credit from the processor, as the processors will occasionally reverse the credit right up to (or even after) the Reg E deadlines. Therefore, they want to wait as long as they can.

I don't think this meets the spirit of Reg E - to simply sit and wait the maximum time just in case. However, I understand the bank's dilemma.

Brian: I agree with your analogy about waiting on the police to get you a video, but these banks aren't waiting for anything. The fact is, most of the banks don't do their own investigation. They are outsourcing this to a processor who doesn't have to play by the Reg E rules. The bank is solely at the mercy of the processor as the banks don't do the investigation. They get no feedback from the processor after the initial credit - unless the processor comes back with a reversal, so the bank doesn't know if the investigation is still pending.

Minimee said it best: "
Quote:
"Can the bank sit on its hands after receiving credit from the merchant via the service provider until the 45/90 day and do nothing while waiting to see if the transaction is reversed?"

Or can the bank count this as its research time even if the bank dosn't know what the merchant is up to?

I also agree this isn't being proactive in investigating and doesn't meet the spirit of the regulation, but it's a tough "sell" to our clients.
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#1990626 - 01/23/15 03:46 PM Re: When is Reg E EFT error investigation "complete"? Brad B
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Thank you Brian & Dave for all your insight and examples. The information will be helpful when dicussing procedural improvements with our business units.

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#1990767 - 01/23/15 07:54 PM Re: When is Reg E EFT error investigation "complete"? Brad B
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It reminds me of a client that had a claim. POS transaction at Walmart in West Virginia for $250.00. Customer used their card the day before and the day after at the local Starbucks. Bank waited 90 days to close their investigation.

I ask them why did they even go through the trouble of issuing provisional credit when anybody with a half a brain knows this is a fraudulent transaction. I said it took me two seconds to complete my investigation and it took you 90 days????
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#1993148 - 02/03/15 06:02 PM Re: When is Reg E EFT error investigation "complete"? Brad B
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I personally consider the case closed as of the date I am certain the transaction is an error or is not an error. That is the date I consider the case closed and send the appropriate notifications to the consumer. More often this is well before the 45/90 day investigation period has expired.
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#1994354 - 02/06/15 10:30 PM Re: When is Reg E EFT error investigation "complete"? Brad B
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I've participated in several Card forum discussion about keeping the provisional credit window open for the dispute process. I've always held that for Reg E purposes, a transaction retrieval request is an investigative tool, a chargeback is a loss recovery action. You must give final credit once you've determined fraud has occured, but can attempt a loss recovery by initiating a chargeback. It's a different matter on a non-Reg E Debit Card customer dispute.

Along those same thought lines,the issuer seldom has chargeback rights on fraudulent card-present (swiped)transactions. Even the Card Association rules have changed so that you can only do retrieval requests under certain circumstances.
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#1995060 - 02/10/15 09:22 PM Re: When is Reg E EFT error investigation "complete"? Brad B
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That's why with a cut-and-dry card counterfeit case I like to provide final credit ASAP--we're not going to be able to charge it back and we probably can't even request a salesdraft.

Card not present are the trickier ones, you can't request a salesdraft on those, and many times if you call the merchant directly they may not be forthcoming with transaction information. So with the rare case that it isn't a blatant case of unauthorized purchase, you wind up waiting for a second presentment from the merchant that contains "compelling evidence" attached to it. And those have a nasty habit of coming in at the eleventh hour of the second presentment window. If only merchants were held to the same standards of "promptness" as FI's......
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#1995088 - 02/10/15 09:50 PM Re: When is Reg E EFT error investigation "complete"? Brad B
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But that wouldn't foster greater acceptance of the card at merchant locations, and that, folks is the sole significant driver of Visa/MasterCard policy. Short version: transaction volume is King.
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#1995090 - 02/10/15 09:51 PM Re: When is Reg E EFT error investigation "complete"? Brad B
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I understand what you're saying BetsyS but how do you comply with §1005.11(c) if you're always keeping the provisional credit window open? This section states (emphasis added):

(c) Time limits and extent of investigation—(1) Ten-day period. A financial institution shall investigate promptly and, except as otherwise provided in this paragraph (c), shall determine whether an error occurred within 10 business days of receiving a notice of error. The institution shall report the results to the consumer within three business days after completing its investigation. The institution shall correct the error within one business day after determining that an error occurred.

(2) Forty-five day period. If the financial institution is unable to complete its investigation within 10 business days, the institution may take up to 45 days from receipt of a notice of error to investigate and determine whether an error occurred, provided the institution does the following:

(i) Provisionally credits the consumer's account in the amount of the alleged error (including interest where applicable) within 10 business days of receiving the error notice. If the financial institution has a reasonable basis for believing that an unauthorized electronic fund transfer has occurred and the institution has satisfied the requirements of §1005.6(a), the institution may withhold a maximum of $50 from the amount credited. An institution need not provisionally credit the consumer's account if . . .

(iii) Corrects the error, if any, within one business day after determining that an error occurred; and

(iv) Reports the results to the consumer within three business days after completing its investigation (including, if applicable, notice that a provisional credit has been made final).


Most banks aren't investigating. They have turned it over to a 3rd party vendor and are sitting on it until the maximum time frame allowed by Reg E. Also, very few ever come back with a reversal.

That's the issue I think Brad (OP), Michelle and I are all asking about.
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#1995132 - 02/11/15 12:09 AM Re: When is Reg E EFT error investigation "complete"? Brad B
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I think you misunderstand my position David. I don't support keeping the window open, and I think many are confusing the chargeback process with completing an investigation.

The vast majority of unauthorized POS claims we are seeing are clearly counterfiet fraud. We do the exact same thing as mlindblom; give immediate final credit. There is seldom a need for an investigation. We may take additional steps on a CNP transaction, like calling the merchant, but we try to close these claims as quickly as possible as well. I view the chargeback process mostly as a recovery tool for a loss the bank has already taken. There are of course exceptions.

Since so few claims actually require an investigation, why not consider consider finalizing the credit when fraud is clearly indicated before turning it over to the 3rd party for the recovery efforts?
Last edited by BetsyS; 02/11/15 04:37 AM. Reason: Lost my previous edit
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#1995206 - 02/11/15 02:37 PM Re: When is Reg E EFT error investigation "complete"? Brad B
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I did misunderstand your position. Sorry.
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#1995251 - 02/11/15 03:39 PM Re: When is Reg E EFT error investigation "complete"? Brad B
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Not a problem. I could have been clearer in my first post.
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#2199318 - 11/28/18 09:50 PM Re: When is Reg E EFT error investigation "complete"? Brad B
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Our processor requires signed statement from the depositor before they will investigate any claim. We don't handle the investigations. What are our obligations if the depositor won't return the signed statement?
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#2199319 - 11/28/18 10:00 PM Re: When is Reg E EFT error investigation "complete"? Brad B
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What your processor requires is between you and the processor. Your duty to follow the Reg E liability and resolution requirements is what is between you and the consumer.
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