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#2213185 - 05/09/19 02:05 PM Recurring Debit Card Transaction - Reg E?
mnbanker09 Offline
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Customer claims they cancelled a recurring EFT with the merchant, but the transaction posts (Debit Card in this case) Customer did not notify the bank of the cancellation. Does the bank have to honor this claim under Reg E if the customer does not have documentation or details of the cancellation? Looking for guidance on when this is considered an error under Reg E, when it isn't, and when it's just a merchant dispute. Thank you!

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#2213198 - 05/09/19 02:38 PM Re: Recurring Debit Card Transaction - Reg E? mnbanker09
burkemi Offline
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Keep in mind that Reg E very VERY consumer friendly and rarely (if ever) requires "proof" from the customer. In that sense, it's really no different than a fraudulent dispute. They cancelled the service but is still posting to the account (not authorized). You can ask, but cannot require, your customer to contact the merchant, bring in proof, etc., but it's on you to determine that these transactions are valid. If you can't, then the normal Reg timelines, provisional credit, and closing apply.

To the rest of your question - when it isn't a Reg E:
--I ordered "this" but haven't received it. It's an authorized transaction, so it's a merchant dispute.
--I didn't authorize this! But "this" is a free trial they signed up for and didn't cancel within the timeframe. You may still need to dispute under your card rules, but this isn't covered by Reg E.
--Recurring transactions your customer didn't cancel but wants to stop. Any transactions after that date are Reg E, any prior to are not.

Many many many other variables - but this is a few of the more common, in my experience anyway.
Last edited by burkemi; 05/09/19 03:05 PM. Reason: Clarification
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#2213215 - 05/09/19 03:27 PM Re: Recurring Debit Card Transaction - Reg E? mnbanker09
mnbanker09 Offline
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Thank you burkemi!
I reviewed a BOL thread with this type of situation that Brian C. responded to and stated it would fall outside of Reg E. I'm a bit confused, as I'm wondering what component of this example below excludes it from Reg E?

Response as follows: "The customer claims to have notified the merchant directly that they were cancelling services, but did not notify the bank and could not provide proof that they had notified the merchant. Consequently, the bank was free to treat this as a "merchant dispute" to be resolved outside of Reg E."

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#2213226 - 05/09/19 04:03 PM Re: Recurring Debit Card Transaction - Reg E? mnbanker09
burkemi Offline
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Brian is the recognized expert for all things Reg E. I guess I should have been a little more specific in my answer. When dealing with Reg E/not Reg E, I take a super conservative approach. As stated above, I have filed those disputes with varying degrees of success recuperating funds. 1005.2(m) spells out the piece of the Reg you're looking for:

(m) “Unauthorized electronic fund transfer” means an electronic fund transfer from a consumer's account initiated by a person other than the consumer without actual authority to initiate the transfer and from which the consumer receives no benefit. The term does not include an electronic fund transfer initiated:

(1) By a person who was furnished the access device to the consumer's account by the consumer, unless the consumer has notified the financial institution that transfers by that person are no longer authorized

This definition says "person," which is defined in (j) as a natural person or organization.

This is where I split from Brian's answer (which is no doubt correct). The reason is that I don't like the notion of "evergreen authority." Your customer said it was cancelled, which means it is not an authorized transaction. It's true that you have no idea if the cancellation actually occurred - but you also never know when a transaction was actually authorized, either. Your customer gave you everything you need to identify the transaction(s), the amount(s), his/her account, and the reason they feel an error occurred.

So, as I said - Reg E is very consumer friendly. I guess it really boils down to this, I much prefer to err on the side of the customer.

Does all this make sense?
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#2213239 - 05/09/19 04:59 PM Re: Recurring Debit Card Transaction - Reg E? mnbanker09
mnbanker09 Offline
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Yes, it does. Appreciate your feedback and comments!

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#2213254 - 05/09/19 06:07 PM Re: Recurring Debit Card Transaction - Reg E? mnbanker09
burkemi Offline
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You're welcome.

I'll add one more thing. If you simply ask "when did you cancel?," the answer (s)he gives will be just as valid as evidence as if it were written when the dispute was brought up.
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