There is no statute of limitations for a customer to make a claim of an electronic funds transfer error. Reg E 1005.6(b) limits how much a customer can be held liable based on when the notified you. Whether you have chargeback rights via Mastercard or not is immaterial to your obligation to investigate & reimburse a customer according to 1005.6(b).
Things to consider:
1. Reg E 1005.11(b) states that for the notice of error to be timely, it must be received within 60 days of the transmittal of the statement on which the first error occurred (so 60 days after 12/31/19).
2. Since the notice was received more than 60 days after 12/31/19, 1005.11 does not apply (however 1005.6 does).
3. Since 1005.11 does not apply, you do not have to provide provisional credit or complete your investigation in 90 days.
4. 1005.6(b)(3) states that the customer is liable for transactions that occur more than 60 days after the transmittal of the statement on which the first error appeared (60 days after 12/31/19) This means that the bank is liable for any unauthorized charges between December and 60 days after 12/31/19 which likely means the December, January and February recurring charges.
5. Mastercard only accepts chargebacks within 120 days of the transaction date so we'd have chargeback rights for transactions between 1/17/20 and 5/15/20 if we get them filed today.
6. Even though Reg E says the customer is liable for transactions after the 60 days period, Mastercard requires any recoveries of the later transactions be given to the customer. (We can't offset recoveries of the April / May transactions against transactions from December and January for which we had no chargeback rights.)
So operationally how do we approach this?
1. Depends on the dollar amount. If the transactions are small, it may be easier to just reimburse the three charges from December, January and February and call it a day.
2. For larger transactions, we may want to file a chargeback on some of the more recent transactions to see if we can obtain information to show that the transactions were actually authorized so we can deny the entire claim.
3. We can try and contact the merchant directly to see what we can find out to save on the costs of filing chargebacks.
It's a business decision how we want to proceed with our investigation, but we have some flexibility since the notice was late. However, Reg E still expects us to reach a conclusion whether or not an error occurred. We can't drag our feet on the investigation just because the notice was not timely.
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