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#2016558 - 05/28/15 02:59 PM Reversal of Credit - REG E
52OPS Offline
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If a cardholder contacts the bank and tells us to reverse a provisional credit because they received reimbursement from the company, does the REG E letter we mail to the cardholder stating that the provisional credit has been reversed have to include the verbiage "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."

or can the institution just inform that customer by letter that the provisional credit has been reversed and the dispute has been finalized.

Last edited by 52OPS; 05/28/15 03:04 PM.
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#2016571 - 05/28/15 03:18 PM Re: Reversal of Credit - REG E 52OPS
NSF, CRCM Offline
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VA
1005.11(d)(2) states

Upon debiting a provisionally credited amount, the financial institution shall:

(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.


The regulation and commentary provide no exemptions for this notice, thus, when this happens at our institution, the notice is included in the letter sent to the customer.
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#2016681 - 05/28/15 05:42 PM Re: Reversal of Credit - REG E 52OPS
John Burnett Offline
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However, if you take the position that you are (1) making the provisional credit final and (2) reversing the credit received directly from the merchant (a thoroughly defensible position, IMO), that requirement won't apply.
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#2019183 - 06/09/15 01:11 PM Re: Reversal of Credit - REG E 52OPS
fslic banker Offline
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Another good point John that I had never considered. I would have guessed there might have been more discussion on this point. I guess I had never considered there were two equal alternatives. Option 1 on a merchant credit would be to assume the bank was finalizing its provisional credit and if so the close-out letter to the consumer must contain the verbiage quoted above by NSFW. In this situation, the bank would be reimbursing itself (thru a GL entry) for the merchant credit posted to the consumer's account. In option 2, the merchant entry posted directly to the consumer's account and the bank would need to reverse it's initial provisional credit in order for its books to balance. In this situation, the language cited by NSFW would not necessarily need to be shown on the letter to the consumer. My guess is that very few bank's Reg E error resolution written procedures go into such depth on the issue of provisional credits and potential reversals.

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#2019433 - 06/10/15 12:45 PM Re: Reversal of Credit - REG E 52OPS
happyauditor Offline
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happyauditor
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NY
Excellent alternative John Burnett!
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#2032935 - 08/11/15 05:41 PM Re: Reversal of Credit - REG E 52OPS
Compliance504 Offline
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Posts: 689
Tennessee
I understand that if we send a letter stating our investigation is complete and provisional has been made final, we cannot then reverse provisional credit for any reason.....

How do you handle a situation where a very honest customer has requested a debit of the final credit because they received a check payment from the merchant?

Are we obligated to keep the final decision final....or can we debit the amount along with a letter stating "per your request, we are debiting X.XX due to your receipt of a check payment from the merchant"

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#2032961 - 08/11/15 06:19 PM Re: Reversal of Credit - REG E 52OPS
BrianC Offline
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Illinois
To avoid any question relating to provisional vs. final credit,
I would write the letter this way:

"Dear customer, We received your correspondence stating that you received a duplicate credit from the merchant. Per our conversation dated MM/DD/YYYY we are debiting the duplicate credit from your account."
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#2032964 - 08/11/15 06:21 PM Re: Reversal of Credit - REG E 52OPS
Compliance504 Offline
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Tennessee
Thanks so much, Brian.....

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