I need a little input on the following scenario: Accountholder calls to report fraud/account takeover on a bill pay item. On day 1 we agreed it was unauthorized, were able to place a stop pay, and expect the funds to be returned from our bill pay vendor in 3-5 days. Have we "corrected the error" within one business day as Reg E is concerned by notifying the customer of the resolution and processing the return request? Or should we credit the customer's account now and then monitor until the bill pay credit hits debiting the excess credit at that time?

Why would the customer have to wait 5 days for a refund involving your product? The fact that you use some third party processor for this service is neither here nor there.

I had similar thoughts! Thanks for the confirmation Randy!

The timeline in the regulation is pretty clear. You have to correct the error within one business day after determining that an error occurred. Regulation E § 1005.11(c)(1).

Correcting the error means making the consumer whole, which requires reversing any fee resulting from the error, and restoring any interest lost because of the error.