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#2226851 - 12/05/19 06:59 PM Reg E Dispute Question
Bankwoman1 Offline
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Joined: Dec 2015
Posts: 550
Midwest
Can someone help me get something straight in my head? I get so confused about the time frames that a customer has to report an unauthorized transaction. Example: We have a customer who noticed an unauthorized charge on her September 10th statement. She called the merchant and was told that they would stop all future charges (according to the summary I received from our eBranch). When the customer received her November 10th statement, she noticed the charges were still coming out of her account. She called the bank on 11/19/2019 to dispute charges from July, August, September and October. Our eBranch investigated and concluded that there would be no credit given since she didn't notify us within 2 business days. In my mind, we should be going by the 60 days from the statement she first noticed the error on rule. So, she didn't notify us within 60 days of September 10th, so we would be responsible for July & August and she would be responsible for September 24th & October 24th. Her card was not lost or stolen, the charges were simply on her statement, so she wouldn't have notified us within 2 business days? Am I thinking this correctly or am I wrong in my thinking? Like I said, sometimes it gets very confusing.

Thanks!

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#2226853 - 12/05/19 07:03 PM Re: Reg E Dispute Question [Re: Bankwoman1]
BrianC Offline
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BrianC
Joined: Nov 2004
Posts: 5,198
Illinois
I don't have quite all the dates I need.

I assume the July statement cut on July 10th, but what date of each month did the recurring charge occur?
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#2226855 - 12/05/19 07:05 PM Re: Reg E Dispute Question [Re: Bankwoman1]
Bankwoman1 Offline
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Joined: Dec 2015
Posts: 550
Midwest
Sorry Brian! Yes, each statement cut on the 10th of the month. The charges occurred on 7/27, 8/26, 9/24, & 10/24.

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#2226858 - 12/05/19 07:23 PM Re: Reg E Dispute Question [Re: Bankwoman1]
BrianC Offline
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BrianC
Joined: Nov 2004
Posts: 5,198
Illinois
Thanks.

So the statement on which the first unauthorized charge appeared is 8/10/19. For the customer notice to be timely, they would have 60 days from 8/10/19 and the bank would be liable for everything between 7/27/19 and 10/9/19. We also have a customer who admits to discovering (one/two) of the charge(s) sometime after the 9/10/19 statement and she did not notify the Bank until 11/19/19.

Based on 1005.6(b)(3) (assuming we conclude the charges are truly unauthorized) the bank would be liable for the July, August and September charges and the customer liable for the October charge.

However, remember that the definition of "access device" in 1005.2 is very broad. It is a card, but it is also a "code or other means of accessing the account." This means that the card #, expiration date and CVV code would also combine to be an access device. The customer knew the card info was compromised in September, but did not notify the Bank until November. The next date I need to hammer down is whether or not the customer discovered the fraud before or after that 9/24/19 charge. If it is more than two business days before 9/24/19, then the $500 liability tier under 1005.6(b)(2) would apply to the 9/24/19 charge. Either way the customer is on the hook for the 10/24/19 charge and the bank is on the hook for the 7/27/19 and 8/26/19 charges.

Lastly, since the customer notice was not timely, 1005.11 does not apply which means we do not have to provide provisional credit or complete the investigation within the 45/90 day timeframes. If we decide we want to investigate rather than paying out, we could also attempt a chargeback on that 8/26/19 charge to see if we can conclude they are all authorized or try calling the merchant ourselves to get more information before handing over the money.
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#2226860 - 12/05/19 07:34 PM Re: Reg E Dispute Question [Re: Bankwoman1]
Bankwoman1 Offline
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Joined: Dec 2015
Posts: 550
Midwest
Brian, I wish I understood all of this the way you do! It makes so much sense once you explain it. So, I am auditing Reg E files from last month and this is one of the files I am looking at. The investigation has been closed and the customer received a letter stating there would be no refund due to untimely notification. What should be our next step? Do we reopen the case and try to get more information from the customer as to when she first noticed the charge on her 9/10/19 statement? I'm not sure if we tried to contact the merchant at all, seeing as how the summary that was written up only states that we denied the claim because the customer didn't notify us within 2 days. It seems we owe the customer at least 2 charges and possibly 3 and should have done a little more investigation.

I appreciate all of your help! Thank you!

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#2226861 - 12/05/19 07:38 PM Re: Reg E Dispute Question [Re: Bankwoman1]
BrianC Offline
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BrianC
Joined: Nov 2004
Posts: 5,198
Illinois
I agree with your assessment. Definitely an audit finding and we should voluntarily give the customer some money back rather than wait for an examiner to tell us to.

It's a business decision how to proceed. Depending on the dollar amount of these charges and due to the amount of time that has passed, Management can either decide to give all three charges back to the customer and skip the investigation if it would cost more in staff time to research than to simply reimburse, or we can take the time to dig a bit to try and save us from having to reimburse that second charge (e.g. look at the dispute letter to see if the customer told us when they contact the merchant) or dig a little deeper to see if we conclude the charges were truly authorized and save the entire amount.
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#2226862 - 12/05/19 07:43 PM Re: Reg E Dispute Question [Re: Bankwoman1]
Bankwoman1 Offline
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Joined: Dec 2015
Posts: 550
Midwest
Considering the amounts of each charge were only $18.95, I'm leaning towards simply giving the customer the 3 charges back and leaving it at that! It's a low enough amount in my opinion that there is no need to spend too much time investigating and digging deeper.

I appreciate you helping me with this. Considering I only look at these once a month, when I do an audit of the previous month, I find it hard to keep it all straight in my head!

Thank you so much for your help!

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#2226864 - 12/05/19 07:55 PM Re: Reg E Dispute Question [Re: Bankwoman1]
BrianC Offline
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BrianC
Joined: Nov 2004
Posts: 5,198
Illinois
Good training opportunity here. The top two Reg E issues I find:

1. Denying claims because the charges happened too long ago.
2. Denying claims because the customer doesn't provide copies of receipts, refuses to sign a form, refuses to contact the merchant, etc.
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#2226866 - 12/05/19 07:58 PM Re: Reg E Dispute Question [Re: Bankwoman1]
Adam Witmer Offline
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Which both also have potential UDAAP implications as well...
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#2226867 - 12/05/19 08:02 PM Re: Reg E Dispute Question [Re: Bankwoman1]
Bankwoman1 Offline
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Joined: Dec 2015
Posts: 550
Midwest
No matter how much Reg E training we take, I'm always up for more! This is definitely a good training opportunity - for both Reg E and (yes Adam) UDAAP.

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#2226869 - 12/05/19 08:09 PM Re: Reg E Dispute Question [Re: Bankwoman1]
BrianC Offline
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BrianC
Joined: Nov 2004
Posts: 5,198
Illinois
Some of my clients have actually brought me in for a 3-4 day "intensive" where I sit down with processors side by side to walk through active claims, evaluate dispute forms we get from branches to help them learn how to interview customers to make sure the processors get the info they need to investigate, look at fraud monitoring settings, etc. I love seeing the eyes open!
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#2226873 - 12/05/19 08:27 PM Re: Reg E Dispute Question [Re: Bankwoman1]
Bankwoman1 Offline
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Joined: Dec 2015
Posts: 550
Midwest
Oh....I think that would be excellent! That may be something to look at for future training....if I can get my supervisors to go for it! I think we all learn and understand better when we have someone sitting with us and actually working thru these types of things together.

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#2226883 - 12/05/19 10:08 PM Re: Reg E Dispute Question [Re: Bankwoman1]
Valley girl Offline
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Joined: Aug 2014
Posts: 172
TX
Brian,

Where my disconnect is comes from the "accepted access device" definition. I don't hold consumers liable according to the tiers unless the plastic card is lost/stolen. If someone steals the card number, CVV, expiration, to me it is not the "accepted access" device according to the access device definition and the conditions of liability.

(a)(1) “Access device” means a card, code, or other means of access to a consumer's account, or any combination thereof, that may be used by the consumer to initiate electronic fund transfers.

(2) An access device becomes an “accepted access device” when the consumer:

(i) Requests and receives, or signs, or uses (or authorizes another to use) the access device to transfer money between accounts or to obtain money, property, or services;


(a) Conditions for liability. A consumer may be held liable, within the limitations described in paragraph (b) of this section, for an unauthorized electronic fund transfer involving the consumer's account only if the financial institution has provided the disclosures required by § 1005.7(b)(1), (2), and (3). If the unauthorized transfer involved an access device, it must be an accepted access device and the financial institution must have provided a means to identify the consumer to whom it was issued.

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#2226898 - 12/06/19 02:23 AM Re: Reg E Dispute Question [Re: Bankwoman1]
Adam Witmer Offline
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Joined: Sep 2010
Posts: 2,256
Valley girl: Are you saying you don't hold them liable to the tiers in that you give them zero liability (i.e. your refund all of their money), or are you saying you don't refund them at all because they didn't have a covered access device?
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All statements are my opinion, not those of my employer, and should not be taken as legal advice.
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#2226899 - 12/06/19 02:32 AM Re: Reg E Dispute Question [Re: Bankwoman1]
BrianC Offline
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BrianC
Joined: Nov 2004
Posts: 5,198
Illinois
It sounds like they only use 1005.6(b)(3) because 1005.(5)(b)(1) & (2) only apply to accepted access devices and they only consider the access device to be the physical card they give the consumer.
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#2226923 - 12/06/19 03:47 PM Re: Reg E Dispute Question [Re: Bankwoman1]
Valley girl Offline
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Joined: Aug 2014
Posts: 172
TX
Adam - I give them the full refund amount (zero liability). I only use the tiers when the physical card has been lost. I guess I put my own twist on "discovery of card theft." We are a very small institution located in a small city with a lot of rural jobs. And it's very hard for me to find members liable when they are holding their card, given the sections of Reg E I included above. Most of our members still feel that reviewing their statement once a month is the tried and true method of a successfully monitored account.

By the same token, I investigate all of our debit disputes fully, and have moderate success keeping friend and family fraud to a minimum. I probably still read the regulation once a week and have been "dabbling" in doing everything correctly for about 6 years.

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#2226933 - 12/06/19 05:32 PM Re: Reg E Dispute Question [Re: Bankwoman1]
Adam Witmer Offline
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Joined: Sep 2010
Posts: 2,256
That's what I figured but just wanted to confirm as I wasn't sure. wink
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Adam Witmer, CRCM

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

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#2226936 - 12/06/19 05:48 PM Re: Reg E Dispute Question [Re: Bankwoman1]
CompliantOkie Offline
Gold Star
CompliantOkie
Joined: Dec 2013
Posts: 393
OOOOOOklahoma
Reg E is the bane of my existence. This was a great discussion. Thanks for your knowledge Brian!

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#2226974 - 12/07/19 01:37 AM Re: Reg E Dispute Question [Re: Bankwoman1]
BrianC Offline
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BrianC
Joined: Nov 2004
Posts: 5,198
Illinois
Thanks Okie. For folks on the threads who remember KenPegasus before he retired, he once posted that we wanted to create a Reg E forum separate from EBanking or Deposit Compliance or General Discussion and just fall it “Debit Cards for Brian” because these types of questions crop up for so many. That was a humbling post for me to read as I just want to help everyone succeed at what they do.
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#2227132 - 12/10/19 08:59 PM Re: Reg E Dispute Question [Re: Bankwoman1]
Valley girl Offline
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Joined: Aug 2014
Posts: 172
TX
I have one other question on the tiers and card in cardholder's possession. Member is filing dispute for 40 Walmart transactions starting October 17th (so he is under the 60 days from the statement date). Only 3 of the transactions are large enough to dispute (most are under $10). If I hold him liable under the tiers, do I then provisionally credit him for the 3 transactions I can dispute and based on the outcome, either make provisional credit final or revoke it?

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#2227136 - 12/10/19 09:10 PM Re: Reg E Dispute Question [Re: Bankwoman1]
BrianC Offline
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BrianC
Joined: Nov 2004
Posts: 5,198
Illinois
In order to answer you question, we need to know when the cardholder discovered the fraud and when it was reported to the bank after it was discovered.
Last edited by BrianC; 12/10/19 09:11 PM.
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#2227138 - 12/10/19 09:26 PM Re: Reg E Dispute Question [Re: Bankwoman1]
John Burnett Offline
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John Burnett
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Cape Cod
The claim is for the whole ball of wax, and you are investigating the whole ball of wax, using the three disputable transactions as your investigative tools. You goal is to determine whether the transactions covered by the claim (all of them) were authorized or not. You can't make that decision or complete your investigation until you get the results of your dispute, and that won't happen within 10 biz days.

So the consumer gets provisional credit for (you guessed it) the whole ball of wax, and when you make your determination you either make it final or revoke it. If an access device is involved and you've complied with 1005.6(a), you can withhold $50 from the amount of the provisional credit.

Alternatively, you could decide to break the claim down into disputable and undisputable transactions, and provide final credit on the undisputable ones, and investigate only the disputable ones. You'd then provide provisional credit (less $50) on the transactions under investigation, and make it final or revoke it once you determine whether those transactions were authorized or not. But if you take this route, and decide those disputable transactions were authorized, you can't undo the final credit already given on the undisputable transactions.
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#2227186 - 12/11/19 04:52 PM Re: Reg E Dispute Question [Re: Bankwoman1]
Valley girl Offline
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Joined: Aug 2014
Posts: 172
TX
Thank you John!

Brian - on this dispute nothing has been easy. He first called us a month ago and stated he believed the transactions were fraudulent. After going over each transaction with our rep, he said the amounts were done by him - he has multiple financial institution debit cards and he said that he had probably inadvertently used our debit card instead of the one he uses daily (he works at Walmart). He received his bank statement in early December and then determined that none of these charges were his. We did not freeze or cancel his card a month ago because he said the charges were his.

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