A customer closed their account at the end of June but have now submitted a dispute of a transaction on their final statement. They are well within their statement +60 days so we have to process the dispute. How do we provide provisional credit if the account has been closed? Do we need to re-open the account for this one specific purpose?

Without a new account agreement I would be hesitant to reopen an account. Historically we have issued cashier's checks. The chances of recovery if you determine there is no error is basically zero, but is better than the alternative. Once the account is closed there no longer exists a valid account agreement.

I would not reopen the account. What are the chances that you give provisional credit, the former customer withdraws the funds, then the dispute is denied? Looks like your bank is out some money.

What were the circumstances that the account was closed in the first place? How much is the dispute? Does it sound like a reasonable dispute?

I'm following because I'd like to know how this is resolved.

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Reg E makes it clear than when providing provisional credit we must give the customer full use of the funds during the investigation. (1005.11(c)(2)(1). If the account is closed we have two options:
1. Provide a cashier's check for provisional credit as has already been suggested
2. Reopen the account while limiting transactions to the crediting and withdrawing of provisional credit. Since we no longer have a deposit contract we cannot impose any service fees, OD fees, etc. without obtaining a new account agreement.

Either way there is risk of the customer owing us the provisional credit back if the claim is denied and we would follow whatever reporting and collection procedures we would do on any delinquent deposit account in an attempt to collect. Reg E in a consumer protection regulation, not a bank protection regulation, and Reg E doesn't care about our risk of loss. This is the cost of business to offer electronic funds transfer services.

Be cautious in any case and ensure that the provisional credit goes to the same people as owned the account. That was recently on a CFPB list of Reg E problems. If A and B owned the account and you give the money to A, B has a case against you and the bank technically put the funds in the wrong account.

A cashiers check is FDIC insured, but it may be debatable if it is "an account." It does provide use but getting with the customer to re-open would be my preference. Technically Reg E allows the bank to credit the PC to the consumer's account. It does not offer alternatives. A cashier's check is in the spirit and intent as the consumer may get faster use of the funds than by reopening and having to get access to the account. If they've moved that could be really problematic.