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#2228448 - 01/07/20 09:21 PM Untimely Notice - Reg E
k8e Offline
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Can we require written confirmation when a notice of an error is made untimely? The regulation states that we need only comply with the requirements of 1005.11(b) if (1.i.) we receive a oral or written notice of error from the consumer no later than 60 days after the institution sends the periodic statement on which the alleged error is first reflected.

It seems that if the consumer is notifying us of an error 2 years after the first time the alleged error appeared on a statement, then 1005.11(b)(2), which prohibits us from delaying investigating the claim until after we receive a written confirmation of the claim, would not apply.

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#2228457 - 01/07/20 10:17 PM Re: Untimely Notice - Reg E k8e
Adam Witmer Offline
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The written notice really only applies to your ability to provide provisional credit. Since 1005.11(b)(2) doesn't apply since the notice wasn't timely, you don't need to provide provisional credit at all. What you do need to do (if the dispute applies to an unauthorized EFT) is to comply with the liability requirements of 1005.6 by conducting your investigation and return their money if your investigation results that way.

From the Commentary:

7. Effect of late notice. An institution is not required to comply with the requirements of this section for any notice of error from the consumer that is received by the institution later than 60 days from the date on which the periodic statement first reflecting the error is sent. Where the consumer's assertion of error involves an unauthorized EFT, however, the institution must comply with § 1005.6 before it may impose any liability on the consumer.
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#2228460 - 01/07/20 10:37 PM Re: Untimely Notice - Reg E Adam Witmer
k8e Offline
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Thank you for your response. With specific regard to delaying the investigation upon receipt of written confirmation, what are your thoughts on the commentary of 1005.11(c): Time Limits and extent of investigation
2. Written confirmation of oral notice. A financial institution must begin its investigation promptly upon receipt of an oral notice. It may not delay
until it has received a written confirmation.


I am aware that if a notice is made untimely, the timing restrictions to resolve the investigation no longer apply. Is it reasonable to conclude that the prohibition against delaying investigating a claim until after a FI receives written confirmation no longer applies as well?

Essentially, we would like to delay investigating oral notices for transactions that are no longer easily accessible on our systems (purged) until after the consumer confirms their dispute in writing. Would this be an option for us based on 1005.11 not applying to untimely notices?

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#2228493 - 01/08/20 02:49 PM Re: Untimely Notice - Reg E k8e
burkemi Offline
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The citation you provided answers your own question "...must begin investigation promptly..." "...may not delay..."

1005.11(b)(1)(I) provides a little more protection to the bank. You aren't required to investigate transactions that occur more than 60 days from the statement date on which the 1st fraudulent transaction occurred. I've noticed some confusion on that...it isn't counting backward 60 days from today, it's counting forward 60 days from that 1st statement date.
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#2228524 - 01/08/20 04:58 PM Re: Untimely Notice - Reg E burkemi
k8e Offline
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I understand that we must still investigate and liability is limited under 1005.6 regardless of a claim being timely/untimely, but I interpret the regulation to state that the none of the requirements under 1005.11 apply when a claim is not made timely (1005.11(b)(1):
[/i]A FI shall comply with the requirements of this section [1005.11] with respect to any oral or written notice from the consumer that: (i) is received by the institution no later than 60 days after the institution sends the periodic statement...on which the alleged error is first reflected;[i]

If we don't receive a claim within 60 days of us sending the periodic statement showing the first posting of the alleged error, then complying with 1005.11 would not be required (though determining liability under 1005.6 would be), and therefore, the 1005.11 citation I provided that states we must begin investigation promptly and may not delay until we receive written confirmation would not apply to an untimely claim. I understand that we are also excused from 1005.11's requirements regarding providing provisional credit, meeting the 10/45/90 investigation time frames and sending notices to the consumer.

Am I reaching too hard? If so, why would some of 1005.11 apply to untimely claims, but not others?

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#2228530 - 01/08/20 05:10 PM Re: Untimely Notice - Reg E k8e
Adam Witmer Offline
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Originally Posted by k8e
Is it reasonable to conclude that the prohibition against delaying investigating a claim until after a FI receives written confirmation no longer applies as well?

No, I don't think it would be "reasonable." Technically, that whole section doesn't apply in this case, but Reg E is very consumer friendly and delaying the investigation until you get written confirmation would IMHO be just asking for criticism (and possibly a UDAAP eyebrows) from an examiner. Plus, if they never get you written notification, you will have never completed the investigation and, therefore, would not have complied with the liability limits in 1005.6.

Also, great point by burkemi on clarifying what exactly applies here (60 days from that 1st statement date).
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#2228555 - 01/08/20 06:58 PM Re: Untimely Notice - Reg E k8e
burkemi Offline
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Take a look at the Official Interpretation 11(b) 7. Effect of late notice.

"An institution is not required to comply with the requirements of this section for any notice of error from the consumer that is received by the institution later than 60 days from the date on which the periodic statement first reflecting the error is sent. Where the consumer's assertion of error involves an unauthorized EFT, however, the institution must comply with § 1005.6 before it may impose any liability on the consumer.

If you do not investigate you are imposing liability to your customer. 1006.(b)(3) states that liability becomes unlimited for transactions occurring 60+ days after the statement date. Those within the first 60 days are still covered with liability limits established in 1006(b)(1) and (2).

I agree with Adam - failing to investigate is not going to be viewed favorably by any examiner. And given the consumer protection of financial harm, is likely going to raise UDAAP issues as well.

Remember you aren't obligated to reissue a card to your customer. That's your strongest protection if you feel this customer is up to no good.
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#2228574 - 01/08/20 08:29 PM Re: Untimely Notice - Reg E k8e
k8e Offline
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Thank you all, for your feedback. Ultimately, I completely agree with you. I had just never heard this argument before and I wanted to make sure I wasn't overlooking some huge "loophole."

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#2229063 - 01/15/20 03:16 PM Re: Untimely Notice - Reg E k8e
John Burnett Offline
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One observation that bears repeating -- literal compliance with a regulation like Reg E for Reg DD isn't enough in today's compliance environment. Two examples:

1. Ignoring the "prompt investigation" requirement when the consumer has missed the 60-day window for coverage by Regulation E's §1005.11 may be technically OK under §1005.11, but delaying investigations is at odds with the prohibition in §1005.6's liability of consumer rules when the issue is a UEFT (unauthorized EFT) claim. As "burkemi" points out, when your investigation under §1005.6 isn't prompt, you may be imposing liability on the consumer in violation of §1005.6 if the EFT is, in fact, unauthorized and occurred within the 60-day period prescribed in §1005.6(b)(3). So make your investigation prompt, even if you don't have to tick all the boxes to comply with §1005.11.

2. Regulation DD provides language in comment 4(b)(4)-5 that it says is sufficient to describe the circumstances under which an overdraft fee may be applied. The historical record is full of UDAP/UDAAP citations for incomplete descriptions of how overdrafts work that address matters like marketing and other customer communications, problems with "continuing overdraft fees," and other wrinkles in banks' overdraft services, despite technical compliance with comment 4(b)(4)-5
Last edited by John Burnett; 01/15/20 03:18 PM. Reason: improvement
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#2229136 - 01/15/20 09:09 PM Re: Untimely Notice - Reg E John Burnett
k8e Offline
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The counter argument I have gotten is that we would not be "imposing" liability because we wouldn't refuse the claim - we'd just require it in writing since the prohibition against making that a requirement under 1005.11 does not apply, and while I don't agree with this interpretation, that is their defense for this process and the Regulation doesn't provide a definition of the term so I am arguing semantics. I am inclined to be more conservative (along with you all) than some of my counterparts, and it will likely come down to risk appetite of the organization in determining the future course of action. Thank you all for your input - this has been a perspective I've never considered before and I definitely see their case although I don't support it.

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