I have a question about the initial dispute timelines for fraud and non-fraud. We are currently using a sixty (60) day timeline but a new employee is indicating it needs to be one hundred twenty (120) days. This isn't my area of expertise but I was hoping that I could clarification on this.

Thanks.

What sort of fraud and non-fraud disputes?

Disputes originating from a prepaid card. Do you need more specific information Randy?

Well, prepaids cards would be covered under Regulation E, but there are some modified limitations on liability and error resolution requirements under 1005.18(e).


.18(e)(1)(ii) A financial institution may comply with paragraph (e)(1)(i) of this section by limiting the consumer’s liability for an unauthorized transfer as provided under § 1005.6(b)(3) for any transfer reported by the consumer within 120 days after the transfer was credited or debited to the consumer's account.

.18(e)(2)(ii) In lieu of following the procedures in paragraph (e)(2)(i) of this section, a financial institution complies with the requirements for resolving errors in § 1005.11 if it investigates any oral or written notice of an error from the consumer that is received by the institution within 120 days after the transfer allegedly in error was credited or debited to the consumer's account.

So if I'm reading this correctly the initial dispute timeline is one hundred twenty (120) days? Or is it a more complicated issue than that?

Well, much of this was added after I got out of looking at the deposit regs a lot. I am not sure that I have ever read 1005.18 from beginning to the end, let alone absorb its entire meaning. Maybe Brian will have some additional insight, but I think it depends on other factors and you have some options.

The standard liability timeframes in 1005.6(b)(3) state that a consumer is liable for all transactions that occur more than 60 days following the transmittal of a periodic statement on which the first error appears.

That liability schedule is potentially problematic for prepaid access issuers. 1005.18(c) allows an issuer to choose not to provide a periodic statement and instead offer a phone number to call or a website to access 12 months of account history. So if we follow "60 days from the transmittal of a periodic statement" when calculating liability, but then NEVER provide a periodic statement, suddenly the issuer could have liability from day the card is issued! (That may keep you up at night.)

Instead of opening ourselves up to a ridiculous amount of risk if we don't issue periodic statements, we can instead require that the customer notify us with 120 days of the transaction date to receive Reg E protections instead of following 1005.6(b)(3).

Also remember that while V/MC may separate chargeback rights into fraud and non-fraud, Reg E still covers all error types in 1005.11(a) which include some V/MC non-fraud claims such as incorrect amount, duplicate charge and cancelled recurring transactions. If Reg E defines the claim as an error, we would use the same 120 timeframe for all defined EFT errors.

Brian - I'm trying to get this down to some simple guidelines for our Deposit Ops team. Would it be correct to state that all initial dispute claims need to be resolved within 120 days (We do have a number our customers can call to dispute charges)?

The simple guideline is that if the transaction occurred more than 120 days prior to the date of notice, the cardholder is out of luck based on the section that Randy quoted.

".18(e)(1)(ii) A financial institution may comply with paragraph (e)(1)(i) of this section by limiting the consumer’s liability for an unauthorized transfer as provided under § 1005.6(b)(3) for any transfer reported by the consumer within 120 days after the transfer was credited or debited to the consumer's account."

For a claim that is received timely, it still must be resolved in the applicable 45/90 day timeframe in 1005.11(c).

So anything reported after 120 days of the date of notice can be pushed back onto the cardholder. Investigations need to be resolved in 45/90 day time frame outline in Reg. E 1005.11(c). So the 60 day timeline is not applicable then? Maybe I'm mistaken but I think I've seen this timeline discussed on BOL previously?

The 120 day alternative only applies to prepaid card transactions under sections 1005.15 and .18. Other EFTs covered by Reg E stick to the 45/90-day timeframes and the 60-day limits found in sections 1005.6 and 1005.11.

Thank you John, Randy, and Brian. Your help is very much appreciated.