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#2162653 - 01/31/18 08:57 PM Reg E vs NACHA - investigating disputes
BAY Offline
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Posts: 147
Regulation E does not permit a financial institution to require a signed affidavit or the Written Statement of Unauthorized Debit (WUSD) under NACHA in order to investigation a Reg E dispute. Nor can a financial institution delay, deny or discourage error resolution without such written statement. According to the CFPB's Summer Highlights 2017, examiners are observing that financial institutions are prematurely closing investigations and denying claims when consumers have failed to submit supplemental information (such as the written statement) beyond what is required by Regulation E.

NACHA on the other hand requires the signed affidavit and failure to provide violates NACHA rules. From what I understand, if the ODFI requests a copy of the WUSD and the Bank cannot provide it, the ODFI can file a Possible Rules Violation against the Bank and that numerous complaints can go to a WACHA panel.

So here's my questions:

1. How do you investigate ACH disputes? Are there specific items that you look for to determine if the ACH transaction is indeed unauthorized? Or do you simply return the item?
2. Do you require a signed affidavit or WUSD? What do you do if the client does not provide the written statement or signed affidavit? Do you deny the claim or return the item?
3. Do you provide provisional credit for ACH and then complete the investigation?

Any information regarding how you are balancing Reg E vs NACHA would be greatly appreciated.

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#2162727 - 02/01/18 04:10 PM Re: Reg E vs NACHA - investigating disputes BAY
David Dickinson Offline
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David Dickinson
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Since, I'm not a bank (I'm a consultant), I can't tell you how I do #1 & #3, but I can tell you what you should do for #2:

You can't require anything to be signed. You can request it. If you request it but they don't provide a signed affidavit or WUSD, you still process the claim under Reg E (§1005.6). If you can't get reimbursed under NACHA, it's a business loss, but the customer is still made whole. Unfortunate, but that's the rules.
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#2162747 - 02/01/18 05:28 PM Re: Reg E vs NACHA - investigating disputes BAY
ItNeverEnds CRCM Offline
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Looking for my sanity
Like David says, you can't require the WSUD and you can't return the item unless you have it. But that has no bearing on the customers claim.

If I don't get or can't get a signed WSUD, I will contact the ODFI and ask for the originators name & phone number. Then I call them and see what info I can get, sometimes they're happy to answer your questions and you can ask them to send you the authorization they have for the debit.
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#2162778 - 02/01/18 07:10 PM Re: Reg E vs NACHA - investigating disputes BAY
John Burnett Offline
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What the Bureau neglects in its concern over banks that have shut down Reg E claims on ACH debits is that the regulation's own wording and commentary say you don't need to go beyond the information you have in-house (and information a third-party service bureau might have) for ACH claims. For what it's worth, I agree with reaching out to a third party notwithstanding the regulatory text, if you fee there's some chance you can do something more helpful than telling the customer "Sorry, but you'll have to contact the Originator of that ACH item for the documentation. We can't help you."

§ 1005.11(c)(4): Investigation. With the exception of transfers covered by § 1005.14 of this part, a financial institution's review of its own records regarding an alleged error satisfies the requirements of this section if:
(i) The alleged error concerns a transfer to or from a third party; and
(ii) There is no agreement between the institution and the third party for the type of electronic fund transfer involved.

Comment 11(c)(4)-1: Third parties. When information or documentation requested by the consumer is in the possession of a third party with whom the financial institution does not have an agreement, the institution satisfies the error resolution requirement by so advising the consumer within the specified time period.

Comment 11(c)(4)-4: Agreement. An agreement that a third party will honor an access device is an agreement for purposes of this paragraph. A financial institution does not have an agreement for purposes of § 1005.11(c)(4)(ii) solely because it participates in transactions that occur under the Federal recurring payments programs, or that are cleared through an ACH or similar arrangement for the clearing and settlement of fund transfers generally, or because the institution agrees to be bound by the rules of such an arrangement.

Comment 11(c)(4)-5: No EFT agreement. When there is no agreement between the institution and the third party for the type of EFT involved, the financial institution must review any relevant information within the institution's own records for the particular account to resolve the consumer's claim. The extent of the investigation required may vary depending on the facts and circumstances. However, a financial institution may not limit its investigation solely to the payment instructions where additional information within its own records pertaining to the particular account in question could help to resolve a consumer's claim. Information that may be reviewed as part of an investigation might include:

i. The ACH transaction records for the transfer;

ii. The transaction history of the particular account for a reasonable period of time immediately preceding the allegation of error;

iii. Whether the check number of the transaction in question is notably out-of-sequence;

iv. The location of either the transaction or the payee in question relative to the consumer's place of residence and habitual transaction area;

v. Information relative to the account in question within the control of the institution's third-party service providers if the financial institution reasonably believes that it may have records or other information that could be dispositive; or

vi. Any other information appropriate to resolve the claim.
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#2238534 - 06/23/20 10:09 PM Re: Reg E vs NACHA - investigating disputes BAY
COMPL101TX Offline
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Bringing this back to life. As you might remember, USAA got in trouble for Reg. E violations, one of which was denying claims because the WSUD was not provided by the customer. USAA paid a $3.5 Million fine plus $12 Million in restitution.

John provided great information in investigating the disputes, but I wanted to ask what other banks are doing in these situations.

How is your bank investigating ACH disputes when you can’t return the ACH because you don’t have the WSUD?

https://www.consumerfinance.gov/abo...ureau-settles-usaa-federal-savings-bank/

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#2238604 - 06/24/20 06:36 PM Re: Reg E vs NACHA - investigating disputes BAY
John Burnett Offline
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John Burnett
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Cape Cod
I'll start the ball rolling -- You can reach out to the ODFI to request a copy of the authorization. The ODFI has ten days to provide it.
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