Thread Options
#2198913 - 11/21/18 07:43 PM Reg E Provisional Credit Reversal timeframe
Felica Offline
New Poster
Joined: May 2017
Posts: 2
Is there a timeframe for reversing provisional credit on a Reg E item that the merchant has refunded the customer?

Return to Top
eBanking / Technology
#2198933 - 11/21/18 09:34 PM Re: Reg E Provisional Credit Reversal timeframe [Re: Felica]
David Dickinson Offline
10K Club
David Dickinson
Joined: Nov 2000
Posts: 18,463
Central City, NE
No. If you found an error, you have 1 business day to correct it and 3 days to report it to the consumer [§1005.11(c)(2)].
If you find there is no error (or a different terror), §1005.11(d) requires you to provide notification that you are reversing the provisional credit and then honor that amount for 5 business days.

But if the merchant has already refunded the customer and you have provided provisional credit, the customer is "doubled up" and you're not reversing the credit because there was no error. I think you can immediately reverse the provisional credit. They aren't being shorted. Just notify them and do it (or do it and notify them).
_________________________
David Dickinson
http://www.bankerscompliance.com

Return to Top
#2199260 - 11/28/18 03:25 PM Re: Reg E Provisional Credit Reversal timeframe [Re: Felica]
Andy_Z Offline
10K Club
Andy_Z
Joined: Oct 2000
Posts: 26,745
On the Net
The bank has the option to provide an advance notice and then take back the PC, or take back the PC and cover 3rd party items that would have paid without a fee, as David noted. (I never provided advance notice as I wouldn't trust that the funds would be there.)

Here is a twist many don't consider, because in compliance we live in a technical world. If you formally deny the claim and revoke the PC, you'd technically have to honor those 3rd party items for 5 days or provide advance notice and then pull the money. But if you state that during the investigation, it was found to be valid and the PC is now permanent, but that a duplicate credit was made by the merchant, the bank actually/technically reverses that double credit with a debit. There is no monitoring of accounts required, no OD fee reimbursements, etc. It technically makes the claim cleaner in my opinion.
_________________________
AndyZ CRCM
My opinions are not necessarily my employers.
R+R-R=R+R
Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell

Return to Top
#2199263 - 11/28/18 03:29 PM Re: Reg E Provisional Credit Reversal timeframe [Re: Andy_Z]
Adam Witmer Offline
Diamond Poster
Joined: Sep 2010
Posts: 1,948
Originally Posted By Andy Z
But if you state that during the investigation, it was found to be valid and the PC is now permanent, but that a duplicate credit was made by the merchant, the bank actually/technically reverses that double credit with a debit. There is no monitoring of accounts required, no OD fee reimbursements, etc. It technically makes the claim cleaner in my opinion.

I agree with Andy on this approach. Said another way, you make the provisional credit final but take out the duplicate refund. This makes things much easier from a Regulation E perspective and provides a cleaner paper trail for auditors and examiners.
_________________________
Adam Witmer, CRCM

All statements are my opinion, not those of my employer, and should not be taken as legal advice.
www.compliancecohort.com

Return to Top
#2199354 - 11/29/18 02:09 PM Re: Reg E Provisional Credit Reversal timeframe [Re: Adam Witmer]
burkemi Offline
Gold Star
Joined: Nov 2013
Posts: 281
Originally Posted By Adam Witmer
Originally Posted By Andy Z
But if you state that during the investigation, it was found to be valid and the PC is now permanent, but that a duplicate credit was made by the merchant, the bank actually/technically reverses that double credit with a debit. There is no monitoring of accounts required, no OD fee reimbursements, etc. It technically makes the claim cleaner in my opinion.

I agree with Andy on this approach. Said another way, you make the provisional credit final but take out the duplicate refund. This makes things much easier from a Regulation E perspective and provides a cleaner paper trail for auditors and examiners.


Just throwing my 2 cents in here as well. I very much agree with Andy and Adam, but I'll take it 1 step further. Really, it comes down to crossing T's, dotting I's, and technicalities, but once you have finalized provisional credit you cannot take that provisional credit back. So instead, you debit the amount of the "unjust enrichment" of the merchant refund.

Scenario (based solely on technicality and wording):
You've finalized a $100 fraudulent dispute. After the fact, the merchant then refunds the customer $100. Same amount, so it's all in wording. You take back the refund, not the credit you provided.

Scenario 2 (why that technicality is important):
You've finalized a $100 fraudulent dispute. After the fact, the merchant then refunds the customer $95 due to some arbitrary fee. Here, you still must take the amount of the refund, which means you're still out $5.
_________________________
I reject your reality and replace it with my own.

Return to Top
#2199510 - 11/30/18 04:22 PM Re: Reg E Provisional Credit Reversal timeframe [Re: Felica]
John Burnett Online
10K Club
John Burnett
Joined: Oct 2000
Posts: 37,902
Cape Cod
Note also that Andy's approach can outlast the 90-day investigation period. So, for example, if you provided final credit (or made final a provisional credit) because you were running up against the 90-day deadline for completion of your investigation, and the merchant finally gets around to refunding the amount in question on day 110, you can still recoup that merchant credit under the unjust enrichment approach.
_________________________
John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
Bankers' Threads User #8

Return to Top
#2200094 - 12/07/18 03:00 PM Re: Reg E Provisional Credit Reversal timeframe [Re: Felica]
The Inquisitive One Offline
New Poster
Joined: Aug 2017
Posts: 9
I'd like to tag a question to this post:
If it is determined an error did not occur and provisional credit is reversed. What is our requirement to send out the final letter?
I understand it to be within 3 business days of completing the investigation and when provisional credit is reversed it can be concluded that the investigation is complete, I have a colleague who disagrees with this view.

Return to Top
#2200106 - 12/07/18 04:17 PM Re: Reg E Provisional Credit Reversal timeframe [Re: Felica]
Adam Witmer Offline
Diamond Poster
Joined: Sep 2010
Posts: 1,948
I'm not sure I fully understand your question, but to clarify, there isn't technically a "final letter" in the rule. You are required to report the results of your investigation to the consumer within three business days after completing your investigation. These results could either include a statement that the provisional credit is final, or a statement that you are revoking the provisional credit. The statement that the provisional credit is final can be an oral statement or a written letter (my recommendation) while the statement for revoking provisional credit must be a "written explanation."

"(1) Written explanation. The institution's report of the results of its investigation shall include a written explanation of the institution's findings and shall note the consumer's right to request the documents that the institution relied on in making its determination. Upon request, the institution shall promptly provide copies of the documents."

I'm not sure what your colleague disagrees with, but you shouldn't reverse the provisional credit if your investigation isn't complete.
_________________________
Adam Witmer, CRCM

All statements are my opinion, not those of my employer, and should not be taken as legal advice.
www.compliancecohort.com

Return to Top

Moderated by:  Andy_Z