Ok, can't decide how to handle this one and looking to see what others would do.....customer called and said that another bank has begun pulling her loan payments with auto debit and she did not sign up for this service. The payments are made via ACH out of her account with all the correct account number, name etc...two of the payments are within our 60 return time frame so we're going to return those, but she's also disputing earlier payments outside of the 60 days. She been paying on the loan since 2013 and has been sending them a monthly check to make the payment but in March they began auto debiting her account for much smaller amounts and in different increments in addition to her sending the monthly checks. She called the company to dispute the auto pay and they said that she did enroll in the service and won't return the payments.

So my questions are...do we treat the ACH payments as unauthorized per Reg E? Are we liable for covering the earlier payments that can't be returned? Would you try to contact the other bank and obtain documentation of the authorization for auto-debit? It just doesn't seem like this would be something we would be liable for if the other bank correctly applied the payments to her loan.....

As always, any advice is much appreciated!

I would request the authorization from the ODFI. If they can not provide it, they should allow you to return it R06. If they do provide it, you obviously don't have to give credit to the customer.

Thank you for the response!

Also look at Reg E after you hear about the validity of the authorization. The varying payment amounts confuse me, but the definitions (m) for unauthorized tell us that if your consumer received benefit of the transfer, it's not necessarily unauthorized.

https://www.bankersonline.com/regulations/12-1005-002

One would also assume the borrower is prepaid on the loan. If this is how the other lender handles business, perhaps offering a loan app to refi would be in order.