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#2239753 - 07/17/20 03:11 PM Reg E?
burkemi Offline
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I am reviewing some Reg E files.

We have a customer that willingly provided his checking account number to a fraudulent site. 2 People Pay transactions then occurred from his checking account. He has disputed these transactions as unauthorized and fraudulent. We closed the account and issued credit to the new account he opened.

It's different since this didn't occur through his debit card, but I don't think this actually qualifies as a Reg E claim. The dispute is long closed, so I'm not asking if we can revoke the credit, but is my thinking correct?...That this doesn't actually fall under the Reg E umbrella?
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#2239754 - 07/17/20 03:16 PM Re: Reg E? burkemi
burkemi Offline
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On further thought, I think I have changed my mind. He willingly provided his account number to the site, but that doesn't mean the site had authorization to perform People Pay transactions.
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#2239794 - 07/17/20 08:47 PM Re: Reg E? burkemi
Andy_Z Offline
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Correct on the second count. The information was provided, but not with the intent that any transaction occur. (Aggravated ignorance isn't a crime on the customer's part but it may lead to a claim.) Perhaps they impersonated the bank and asked to verify an account number or something and then used the info. That is different than someone calling and promising to "repair their PC online" and connecting to it and doing about nothing and charging $50. That is dissatisfaction with a product or service and an authorized charge.
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#2239818 - 07/20/20 01:53 PM Re: Reg E? burkemi
burkemi Offline
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Thank you Andy.
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#2239873 - 07/20/20 08:26 PM Re: Reg E? burkemi
burkemi Offline
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Let me take this in a different direction.

I know our ability to recover funds from a disputed transactions means nothing against Reg E. I assume, then, that NACHA doesn't trump Reg E either.

So if an unauthorized ACH transaction occurred in January of this year but the customer disputes it today, we are still on the hook for the amount of the transaction, correct? That assumes we can't reasonably prove it was authorized.
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#2239880 - 07/20/20 09:19 PM Re: Reg E? burkemi
BrianC Offline
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we are still on the hook for the amount of the transaction, correct?


Yep. Even though Section 11 does not apply. The liability schedule in Section 6 still does. When I review denied claims, its a common audit finding for institutions that deny claims due to untimely notice without going back to calculate liability. A single ACH transaction cannot occur more than 60 days after the date of the statement on which the first unauthorized charge appears since it is the first and only transaction. See the commentary to 1005.11(c).

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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#2239983 - 07/22/20 05:53 PM Re: Reg E? burkemi
John Burnett Offline
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And here's the "kick me when I'm down" situation -- Suppose you do get one of these claims that the last 6 months' ACH debits by XYZ company weren't authorized by your consumer depositor, and you apply the 1005.6(c) liability rule to assign liability for the most recent three of those debits to your customer because they occurred more than 60 days after the statement showing the first unauthorized entry. But the customer gave you a signed WSUD, and you send back the two latest debits using Nacha's extended return rule. You can't take the funds from the two debits you returned and apply them to the amounts you charged off for the oldest unauthorized debits. Any funds you get from the returned debits must be returned to your customer's account.
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#2240011 - 07/23/20 01:39 PM Re: Reg E? burkemi
burkemi Offline
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Thank you Brian and John.
Truly appreciate the responses!
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