We have a customer who is disputing some recurring debit card transactions. The original transaction took place in December 2019 with a statement date of Dec. 31, 2019. The cardholder is just now (May 2020) reporting the transaction. The transaction has been coming out of the account every month since then. According to Reg E & Mastercard, what transactions (if any) can we dispute?

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.

What if the customer states they authorized the first transaction in December but they were unaware that it would be coming out monthly?

If that is the case I would see if I can find the terms and conditions on the merchant's website. I see this frequently with free trials where the customer does not know they will continue to be charged if they failed to cancel. If I can obtain documentation showing what they agreed to, then I have a basis to deny the entire claim as the transactions were authorized.

OK, thank you!

I'm late to the game but Brian is exactly on point. It is common to get a free trial and miss the "cancellation requirement and place a claim. It will likely require a time by which they had to cancel, and how. If the customer can show proof or a confirmation they did, they may have a valid claim. If they cannot, and the company says it has no record, the debits were authorized. Add to that the customer received some product or service and you have a valid denial.

I have a situation where the customer advised today that he had an unknow charge. Upon contacting the merchant, he was told he had been charged monthly since April, so he want to dispute them all. The merchant was only willing to credit him the most recent charge. I know the bank is limited probably to the April, May, and June charges. If I decide to dispute (VISA)) one of the recent charges to see the merchant documentation, how would that impact the final settlement?

If the documentation shows fraud would the customer be entitled to the three months, plus credit for the one I disputed? If we receive any settlement funds, are you allowed to offset them against the first three month charges?

Sorry, I have been away from disputes for awhile, but am helping out due to a leave, so any help is appreciated.

No. If you initiate a chargeback, you must provide the funds to the cardholder.

Visa Rule 1.11.1.1 Attempt to Settle
Before initiating a Dispute, the Issuer must attempt to honor the Transaction.

If the attempt fails and the Issuer has already billed the Transaction to the Cardholder, the Issuer must credit the Cardholder for the disputed amount.

The Issuer must not be reimbursed twice for the same Transaction.

A Cardholder must not be credited twice as a result of both a Dispute and a Credit processed by a Merchant.

Thank you!