Page 1 of 2 1 2
Thread Options
#2189093 - 08/14/18 07:33 PM P2P Pmts
Andy_Z Offline
10K Club
Andy_Z
Joined: Oct 2000
Posts: 27,485
On the Net
So Good Morning America (ABC) had a segment this morning on P2P payments focusing on Apple Pay, Venmo and Zelle (I think it was). The conclusion was that if a payment is sent to the wrong person, sorry about that. Consumers feel like something has to be done but the police say it isn't a crime. (I see a civil case for undue enrichment, but would they generally bother?) In one example a Chicago man sent $1700 to the wrong person, who then wasn't answering his phone. Big surprise. Chase said they'd try to help recover funds on a case by case basis. In his case Chase gave him $800 back. I think Chase went above and beyond (and may have set a dangerous precedent.)

Consumers - when the bank follows your directions, why should the bank pay for your mistake? <----- My recommended addition to Reg E disclosures.
_________________________
AndyZ CRCM
My opinions are not necessarily my employers.
R+R-R=R+R
Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell

Return to Top
eBanking / Technology
#2242653 - 09/17/20 09:34 PM Re: P2P Pmts Andy_Z
Compliance NABW Offline
Diamond Poster
Joined: Oct 2015
Posts: 1,597
Do you see these as an "unauthorized EFT?"

Return to Top
#2242656 - 09/17/20 09:38 PM Re: P2P Pmts Andy_Z
Compliance NABW Offline
Diamond Poster
Joined: Oct 2015
Posts: 1,597
I don't, but it seems like these could fall within the realm of a Reg. E error. Could it be claimed this meets the definition of "(ii) An incorrect electronic fund transfer to or from the consumer's account;" In this instance, instead of the normal situation where the incorrect eft is because the amount is wrong, could it be considered incorrect because the recipient is wrong?

Return to Top
#2242657 - 09/17/20 09:41 PM Re: P2P Pmts Andy_Z
BrianC Offline
Power Poster
BrianC
Joined: Nov 2004
Posts: 6,282
Illinois
The P2P service simply followed the customer's instructions and sent the correct dollar amount in accordance with those instructions There's nothing unauthorized here.

The only way Reg E will cover a P2P transfer is if:

1. The customer says send the money to Account 555-555-1234 and someone at the bank manually changes the destination to 555-555-2345. (That's an error because the customer's instructions weren't followed.)

2. My account number and routing number / debit card number are compromised and the bad guys originate payments without my knowledge or consent.

If I get tricked by the bad guys into sending a P2P payment and it turns out the beautiful woman I met online is not a woman at all, that's too bad for me. The P2P service followed my instructions and sent the correct amount to the destination I provided. Reg E doesn't cover that.
_________________________
Sola Gratia, Sola Fides, Sola Scriptura, Solus Christus, Soli Deo Gloria!
www.tcaregs.com

Return to Top
#2242680 - 09/18/20 12:57 PM Re: P2P Pmts Andy_Z
Skittles Offline
10K Club
Skittles
Joined: Sep 2002
Posts: 13,963
TN
Unfortunately we recently had Brian's 2nd instance (bad guys got access to phone through fraud) and determined this was a Reg E claim. The dispute where the customer was purchasing a puppy, which didn't exist, was determined not to be a dispute because the transactions weren't unauthorized.

We do limit our P2P transfers to $300 per transfer; however in the second instance above the customer sent multiple transactions. Additionally we encourage our customers to only use Zelle to people they know and trust.

Reminds me - I need to thoroughly read our disclosure again.
_________________________
My Opinions Only

Return to Top
#2242711 - 09/18/20 03:36 PM Re: P2P Pmts Andy_Z
Compliance NABW Offline
Diamond Poster
Joined: Oct 2015
Posts: 1,597
Yes, I'm not arguing the unauthorized piece, but, arther the "incorrect eft" angle; however, I have concluded the same.

Return to Top
#2252222 - 04/12/21 05:40 PM Re: P2P Pmts Andy_Z
MassCompliance4 Offline
New Poster
MassCompliance4
Joined: Sep 2009
Posts: 24
MA
Follow on question regarding whether a Zelle transaction is covered under Reg E 1005.11 "(ii) An incorrect electronic fund transfer to or from the consumer's account" - Scenario: Customer initiates an authorized Zelle transaction and bank follows customer's instructions and correct dollar is debited and posted to customer's account; however, recipient never received the money. Two questions:
1. If the recipient is also our customer, and therefore we can confirm that the corresponding Zelle transfer was never credited/posted to the account, is this a Reg E covered error under section 1005.11 and would require all of the applicable error resolution steps?

2. If the recipient is NOT our customer, and therefore we can only "see" the transaction instruction leaving our bank/customer's account, is this same scenario a Reg E covered error under section 1005.11 and would require all of the applicable error resolution steps? Could we treat it like an ACH where our "investigation" would stop at our payment instruction that went out the door?

I have been told that because the correct dollar amount was posted to the customer's account and the Zelle instruction went correctly to the intended recipient, even though we have clear evidence that the recipient did not actually receive the money, that it is NOT a Reg E covered error and that the customer's "claim" was corrected treated as a "Non Reg E Proof of Payment" claim and did not need to follow the Error Resolution under 1105.11. Thoughts?

Return to Top
#2252228 - 04/12/21 06:05 PM Re: P2P Pmts Andy_Z
John Burnett Offline
10K Club
John Burnett
Joined: Oct 2000
Posts: 39,641
Cape Cod
Do you know where the intended recipient or the account for the intended recipient is located?
_________________________
John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
Bankers' Threads User #8

Return to Top
#2252233 - 04/12/21 06:21 PM Re: P2P Pmts Andy_Z
MassCompliance4 Offline
New Poster
MassCompliance4
Joined: Sep 2009
Posts: 24
MA
John - In my scenario, the intended recipient is in the US and the sender is in the US.

Both are our customers. So the main question is whether the Zelle transaction that was correctly and timely debited from our customer's account but was not correctly and timely credited to our other customer's account is a covered Reg E "error" and subject to all of the error resolution steps as outlined in 1005.11.

The dollar amount was correctly debited and the Zelle transaction was processed to the correct recipient, i.e. the customer's payment instructions contained no error. However, for undetermined reasons, the Zelle transaction did not go through to the recipient's account. I am being told that this scenario is NOT Reg E covered because the correct dollar amount was debited and posted to the sender's account - so there was no "error".

But that does not make sense to me as clearly there was an "error" - say $200 dollars were requested to be sent but the recipient received $0 - That seems like a clear "error" under the 1005.11(a)(ii) an incorrect electronic fund transfer to or from the consumer's account".

Return to Top
#2252237 - 04/12/21 06:29 PM Re: P2P Pmts Andy_Z
Andy_Z Offline
10K Club
Andy_Z
Joined: Oct 2000
Posts: 27,485
On the Net
The recipient has a Reg E claim in the incorrect EFT to their account.
_________________________
AndyZ CRCM
My opinions are not necessarily my employers.
R+R-R=R+R
Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell

Return to Top
#2252244 - 04/12/21 07:42 PM Re: P2P Pmts Andy_Z
MassCompliance4 Offline
New Poster
MassCompliance4
Joined: Sep 2009
Posts: 24
MA
Thank you, Andy and John. With my scenario, the sender and the receiver of the Zelle transfer just happened to be our customers, each with different deposit accounts. The sender called to notify us of the "error" in that the intended receiver did not receive the funds. If I am understanding you correctly, we did NOT need to treat the sender's alleged error as Reg E covered; however, if the intended receiver had called us instead to say that he had not received the funds from the sender, then we WOULD have to treat his alleged error as Reg E covered.

And we would have given the intended receiver the $200 that the sender had instructed through Zelle to be sent to him.

However, that's "easy" to see because both parties to the single Zelle transaction have their accounts with us. But had the intended receiver NOT been our customer, what then? We just deny the sender's claim that the Zelle transaction didn't go through and that it isn't Reg E covered error cause the instruction went out as intended and the correct amount of $200 was debited from his account?

And then the intended receiver would have to make a Reg E claim with his bank that he did not receive the $200 Zelle transfer that our sender had tried to send to him? I am not sure I understand how a bank is supposed to conduct the investigation when its customer says, "Hey my brother sent me $200 through Zelle but I didn't receive it." How would the receiving bank have any way of knowing that a Zelle transaction was initiated to be sent TO its customer FROM a non-customer in order to say, "Yes, I can see that the Zelle transaction never came through so here's $200 final credit for your Reg E error claim."???

I guess ultimately what is not making sense to me is that I do not see how the receiver's bank can investigate and correct the Zelle transaction error on their end so they cannot end up making the receiver whole. But if the sender does not have any "error" rights to get his $200 back to make himself whole....then what happens to the funds that never make it to the intended recipient?

Has anyone had this type of error with Zelle transactions? The sender has all of the correct information in the payment instruction. The sender's bank queue's it up as intended. But the recipient never receives the money. Is this not a similar concept as a Bill Payment transaction? Our customer provides correct Bill Payment instructions. Bank sends the correct ACH payment instructions, but the intended payee never receives the funds. Doesn't our customer have a valid Reg E Claim that the payee never received the payment? I understand that our investigation may be limited to just proof to the customer the Bank correctly sent an ACH payment instruction for the correct amount to the correct recipient and that we do not know why their bank did not post the ACH credit, but our customer still would have a Reg E Claim, correct?

My bank is telling me that a Zelle transaction that does not go through is not a Reg E claim as long as the correct amount of money is debited/posted to our customer's account and that does not make logical sense to me.

And it does not make logical sense to me that the recipient could just say to his bank, "Hey, my pal, Steve, said he sent me 200 bucks and I never got it so I want to make Reg E claim." I do not understand how we could even process such a claim?

Return to Top
#2252246 - 04/12/21 07:46 PM Re: P2P Pmts Andy_Z
Skittles Offline
10K Club
Skittles
Joined: Sep 2002
Posts: 13,963
TN
I am curious to know if the recipient doesn't receive the funds - when the transfer 'expires' (according to Zelle this is 14 days) will the sender receive the funds back?
_________________________
My Opinions Only

Return to Top
#2252249 - 04/12/21 07:53 PM Re: P2P Pmts Andy_Z
Andy_Z Offline
10K Club
Andy_Z
Joined: Oct 2000
Posts: 27,485
On the Net
The receiver goes to his bank and files Reg E. That may be where the error occurred. Your consumer requested a transfer of $200 and it happened as instructed. The receiving bank needs to find the money and it may enlist your bank and Zelle to do that, but it isn't your problem.

The receiving bank needs to ensure the funds went to the correct account. If not, why. The sending info was all correct? I don't know how it gets traced, but there has to be a way to see where the funds went and why they didn't get to where they were instructed.
_________________________
AndyZ CRCM
My opinions are not necessarily my employers.
R+R-R=R+R
Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell

Return to Top
#2252251 - 04/12/21 08:22 PM Re: P2P Pmts Andy_Z
MassCompliance4 Offline
New Poster
MassCompliance4
Joined: Sep 2009
Posts: 24
MA
Okay everyone....thank you all so much for your input. I am glad to hear that this is covered by Reg E - it's just that it is the receiver who did not receive the funds that needs to raise the Reg E claim.

And this was actually a Zelle transaction between two of our customers and we were never able to determine how the funds were debited from our sender's account but were never credited to our receiver's account. We ultimately gave the sender back the money, but my concern is that I was told that this entire scenario was not even covered by Reg E because there was "no error". Well, obviously there was SOME error because the transaction was not completed as intended!!

But I take all of your points and thank you all again for the dialogue - if anyone who reads this thread has any other anecdotal stories about Zelle "errors" - not fraud, that part is relatively easy - I'd appreciate your reaching out.

Return to Top
#2252277 - 04/13/21 02:04 PM Re: P2P Pmts Andy_Z
John Burnett Offline
10K Club
John Burnett
Joined: Oct 2000
Posts: 39,641
Cape Cod
Just to extend this discussion a bit -- If your bank has an agreement with Zelle that allows the bank to initiate Zelle transfers for your customers, there ought to be something in the agreement or the Zelle operations manuals that explains what's supposed to happen and who needs to do what when something (apparently) goes sideways.

Zelle can't have just set up its network without ways to trace such messes.
_________________________
John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
Bankers' Threads User #8

Return to Top
#2252278 - 04/13/21 02:19 PM Re: P2P Pmts Andy_Z
Andy_Z Offline
10K Club
Andy_Z
Joined: Oct 2000
Posts: 27,485
On the Net
Agreed, John. That $200 went somewhere and auditors from Zelle or wherever should want to know. That could be a huge control issue. Did the funds revert to the sender after 14 days or some period, can the bank debit those or intercept them in this case to cover the would be loss, was the transfer refused somehow by the recipient or somewhere along the chain and could that have been BSA related? For the sake of future issues, there should be some answers available or Zelle could prosper at banks expense.
_________________________
AndyZ CRCM
My opinions are not necessarily my employers.
R+R-R=R+R
Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell

Return to Top
#2252479 - 04/16/21 04:05 PM Re: P2P Pmts Andy_Z
MassCompliance4 Offline
New Poster
MassCompliance4
Joined: Sep 2009
Posts: 24
MA
Thank you, John and Andy, for the additional considerations and great questions for me to follow up with the BL.

Return to Top
#2263740 - 12/16/21 09:47 PM Re: P2P Pmts Andy_Z
happyauditor Offline
Platinum Poster
happyauditor
Joined: Nov 2004
Posts: 809
NY
The most recent CFPB Supervisory Insights issue addresses this issue...

2.3.1 Regulation E error resolution for misdirected payments
Supervision conducted examinations of institutions in connection with the provision of personto-
person digital payment network services. Regulation E defines the term “error” to include,
among other things, “[a]n incorrect electronic fund transfer to or from the consumer’s
account.”12
Regulation E requires institutions to investigate promptly and determine whether
an error occurred.13
Examiners found that, in certain cases, due to inaccurate or outdated
information in the digital payment network directory, consumers’ electronic fund transfers
(EFTs) were misdirected to unintended recipients, even though the consumer provided the
correct identifying token information for the recipient, i.e., the recipient’s current and accurate
phone number or email address. These misdirected transfers are referred to as “token errors.”
Token errors are incorrect EFTs because the funds are not transferred to the correct account.14
Examiners found that institutions violated Regulation E by failing to determine that token
errors constituted “incorrect” EFTs under Regulation E.
Additionally, institutions violated Regulation E by failing to conduct reasonable error
investigations when the institutions received error notices from consumers that alleged that the
consumers had sent funds via a person-to-person payment network, but that the intended
recipients had not received the funds.15
The institutions reviewed only whether they processed
the transactions in accordance with the sender’s payment instructions and not whether the
transfer went to an unintended recipient due to a token error. The institutions did not consider
relevant information in their own records, or information that they reasonably could obtain
during their investigation, to consider whether the consumer’s error notice constituted an error
under Regulation E.
These violations caused monetary harm to consumers. As a result of these findings, the
institutions are revising their policies and procedures, are conducting lookbacks, and will
provide remediation to injured consumers.
_________________________
* My opinion is not necessarily that of my employer.

Return to Top
#2263742 - 12/16/21 10:08 PM Re: P2P Pmts Andy_Z
Andy_Z Offline
10K Club
Andy_Z
Joined: Oct 2000
Posts: 27,485
On the Net
Someone define for me "inaccurate or outdated information in the digital payment network directory." Is that the banks system because it recycled an account number, or is it the consumer input something incorrectly even though they had the correct phone number or email for the person? In the case of the former, I'm in agreement, but in the case of the latter, I disagree that the bank should be responsible. If the bank misdirected the funds that's on the bank. But if the bank put the funds in the correctly identified account that the sender typed incorrectly, how can that be an error?
_________________________
AndyZ CRCM
My opinions are not necessarily my employers.
R+R-R=R+R
Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell

Return to Top
#2263749 - 12/17/21 02:22 AM Re: P2P Pmts Andy_Z
rainman Offline
Power Poster
rainman
Joined: Nov 2004
Posts: 3,076
The CFPB dropped a new set of Reg. E FAQ along the same lines earlier this week. These FAQ and the Supervisory Highlights are hideous in many respects, starting with the idea that CFPB should not be engaged in rulemaking through FAQ. These issues should be addressed in Official Staff Comments that are subject to notice and comment rulemaking. That would give the CFPB the opportunity to receive feedback from people that actually know what they are talking about, including how P2P payments work.

The FAQ are riddled with generalities and assumptions that cannot be universally applied. They assume that a phone number or email address is a "token" for the recipient's account number, which may or may not be the case. They also ignore the role of the P2P intermediary in the transaction, and how the funds "travel" between the consumer's bank account and the recipient's bank account. That includes consideration of what "rails" the transfer(s) ride on, and what intermediate stops are made on the way.

Analysis of these issues under Reg. E (which has essentially the same provisions that existed before the internet) is incredibly complex and deserves far better than what CFPB has done. If a transaction is initiated through a P2P provider and the P2P provider uses the consumer's debit card number to pull money from the consumer's account, when does the "EFT" start, and when does it end?

Here's an analogy: if the consumer goes to Western Union to initiate a Western Union transfer and pays for the transfer with a debit card, is the transfer from Western Union to the recipient part of the EFT on the consumer's bank account? If Western Union sends the money to the wrong place, is that an EFT error to the consumer's account? The consumer authorized the debit card transaction payable to Western Union in the amount and on the date that the transfer occurred. The fact that Western Union sent the money to the wrong place is not an EFT error on the bank account. It's a quality/delivery of goods/services issue under the Visa/MC rules but not an EFT error for the FI holding the account. Some (arguably many) P2P transactions may be analogous to this. But the CFPB can't be bothered to engage in this analysis and certainly can't be put to the trouble of doing rulemaking to actually provide reliable legal rules adopted with due process.
_________________________
Nobody's perfect, not even a perfect stranger.

Return to Top
#2263781 - 12/20/21 03:05 PM Re: P2P Pmts rainman
InFairness, CRCM Offline
Platinum Poster
InFairness, CRCM
Joined: Nov 2010
Posts: 651
USA
This is the interpretation that grabbed me:

"However, an ACH agreement combined with another agreement to process payment transfers – such as an ACH agreement under which members specifically agree to honor each other's debit cards – is an “agreement,” and thus section 1005.14 does not apply."

Does this mean if you have an ACH agreement and are part of the same card association that the exemptions in 1005.14 don't apply? Won't that remove the bulk of exemptions?
_________________________
Opinions are strictly my own, and have nothing to do with my employer.

Return to Top
#2263787 - 12/20/21 03:32 PM Re: P2P Pmts Andy_Z
John Burnett Offline
10K Club
John Burnett
Joined: Oct 2000
Posts: 39,641
Cape Cod
No, it means the CFPB doesn't understand how these transfers are often completed without any agreement between the P2P service provider and and the bank holding the customer's funds.
_________________________
John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
Bankers' Threads User #8

Return to Top
#2263795 - 12/20/21 04:30 PM Re: P2P Pmts Andy_Z
BrianC Offline
Power Poster
BrianC
Joined: Nov 2004
Posts: 6,282
Illinois
There was a discussion in the private forums a few months ago where a CFPB lawyer was discussing 1005.14 and the CFPB lawyer made the comment that if a bank has a contract to issue Mastercard or Visa cards and a P2P provider has a contract to accept Mastercard or Visa cards, then the Bank has a contract with the P2P with the P2P provider for the purposes of 1005.14. I completely disagree with that interpretation, but thta FAQ essentially puts us on notice that if there is a debit card transaction from a third party provider, we're on the hook for investigating it even if it was the third party provider's access device that was compromised.

The "narrow" exception the CFPB references would be if I authorized a debit from my account to the P2P provider and then held the funds in a moble wallet and the unauthorize charge impacted the funds in the mobile wallet.
_________________________
Sola Gratia, Sola Fides, Sola Scriptura, Solus Christus, Soli Deo Gloria!
www.tcaregs.com

Return to Top
#2263796 - 12/20/21 04:38 PM Re: P2P Pmts Andy_Z
John Burnett Offline
10K Club
John Burnett
Joined: Oct 2000
Posts: 39,641
Cape Cod
Of course, the most recent regulatory agenda from the Bureau puts any progress on an overhaul of Reg E to bring it close to current reality on the "no action" list. It will be interesting to see if Chopra gives the review any life.
Last edited by John Burnett; 12/20/21 04:40 PM.
_________________________
John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
Bankers' Threads User #8

Return to Top
#2263799 - 12/20/21 05:05 PM Re: P2P Pmts Andy_Z
rainman Offline
Power Poster
rainman
Joined: Nov 2004
Posts: 3,076
I am more concerned about the CFPB's view of what constitutes an "error" or an "unauthorized transaction" than I am about the investigation obligation. As John notes, the CFPB's view is based on a stunning lack of understanding about the way these payments happen. It's also worth noting that the Visa and MC rules expressly provide that they do not create a contractual relationship between issuer and merchant. Maybe that's not dispositive, but the CFPB should at least acknowledge it and say why they think there's a contract between issuer and merchant in spite of what the only contract documents (between issuer and Visa/MC and between merchant and Visa/MC) actually say.
_________________________
Nobody's perfect, not even a perfect stranger.

Return to Top
Page 1 of 2 1 2

Moderator:  Andy_Z