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#631147 - 10/30/06 03:33 PM Reg E - Dispute question
#12 Offline
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We have a customer that filed a dispute at one of our branches stating that she contacted the merchant giving them notice of cancellation prior to the date of the transaction. She did not fill in the date of that cancellation. She also will not return any of the banker's calls to give us that date of cancellation. The banker wants to deny the claim because she won't furnish required information. Our Reg E dispute person doesn't think we can deny it due to that. Who is correct?
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#631148 - 10/30/06 05:48 PM Re: Reg E - Dispute question
Compliancer Offline
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Truthfully, you need to provide more information in order to get a full response (at least from me). For non-recurring transactions a cancellation is not, in and of itself, grounds for a Billing Error assertion. However, that does not mean there is not a potential Billing Error here.

Please provide the following details:
1) Is this a debit card transaction? Visa or MasterCard?
2) Is this a one-time or recurring transaction?
3) Was this a face-to-face or MOTO transaction? Was the cancellation done face-to-face or MOTO?
4) Was this for merchandise? Was it to be picked up or delivered? If not, then I'm guessing it is for services.
5) Did the consumer state the merchant actually accepted the cancellation? Did the consumer state the merchant agreed to issue a credit?

Please note one thing - it is not possible to cancel a transaction prior to it occurring. Once the consumer the provides the debit card information the transaction is complete (at least as far as Reg. E is concerned).
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#631149 - 10/30/06 08:27 PM Re: Reg E - Dispute question
#12 Offline
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Quote:

Truthfully, you need to provide more information in order to get a full response (at least from me). For non-recurring transactions a cancellation is not, in and of itself, grounds for a Billing Error assertion. However, that does not mean there is not a potential Billing Error here.

Please provide the following details:
1) Is this a debit card transaction? Visa or MasterCard?
2) Is this a one-time or recurring transaction?
3) Was this a face-to-face or MOTO transaction? Was the cancellation done face-to-face or MOTO?
4) Was this for merchandise? Was it to be picked up or delivered? If not, then I'm guessing it is for services.
5) Did the consumer state the merchant actually accepted the cancellation? Did the consumer state the merchant agreed to issue a credit?

Please note one thing - it is not possible to cancel a transaction prior to it occurring. Once the consumer the provides the debit card information the transaction is complete (at least as far as Reg. E is concerned).




1. Visa Debit Card Transaction
2. Recurring transaction
3. I'm not sure what MOTO stands for, but it wasn't done face to face, and I don't know if the cancellation was done face to face or not, they did not fill out that section of the form we use.
4. This was for an insurance premium
5. Basically, the consumer checked a box stating they gave the merchant notice of cancellation. They did not fill out any other information requested.

Good questions....thank you for helping!


<<<<Edited to correct my answer to number 1!>>>>>
Last edited by #12; 10/30/06 09:44 PM.
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#631150 - 10/30/06 07:59 PM Re: Reg E - Dispute question
John Burnett Offline
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Your customer has given you the bare minimum amount of information you need to process the claim. You can infer from the claim that the cancellation was given before the most recent debit was initiated, and decide whether your customer is giving you the straight scoop. It's always a good idea to walk through these forms (they can be real off putting for a customer) with the customer, either in person or over the phone.

Did the customer at least sign the form and was it signed under penalty of perjury so that you can use it to substantiate your R07 return of the item? If you return the debit, the insurance company might cancel coverage. If the form wasn't signed, you could have some real problems if the customer comes back at you on this.

[Note: corrected the return code to R07]
Last edited by John Burnett; 10/31/06 07:00 PM.
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#631151 - 10/30/06 09:23 PM Re: Reg E - Dispute question
#12 Offline
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Thanks John and David. I don't know the answers to a lot of this stuff, I'm not directly involved in the transaction, but you both have given me some answers/questions to take back to the staff. Thank you!
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#631152 - 10/30/06 09:26 PM Re: Reg E - Dispute question
#12 Offline
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Ok, I lied to the answer to #1. Not on purpose, but anyway....

This was a debit card transaction (Visa).

Does that change anything?
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#631153 - 10/30/06 08:32 PM Re: Reg E - Dispute question
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Ok, those details help.

Under section 12 CFR 205.10 (Reg E, Preauthorized transfers)
"Subsection C) Consumer's right to stop paymentó(1) Notice. A consumer may stop payment of a preauthorized electronic fund transfer from the consumer's account by notifying the financial institution orally or in writing at least three business days before the scheduled date of the transfer."

Notice it does not say anything about canceling with the merchant. The consumer has provided you the information required under Reg. E and your bank is obligated to act.

Note - Cancelling a preauthorized transaction is not a Billing Error.

Under Visa Chargeback rules for Canceled Recurring, if you cannot notify get the consumer the notify the merchant, you can do it on her behalf (you are allowed to do this under association rules for this type of dispute). Any transactions that appear prior to that date, and do not conform to the subsection above, do not require adjustment.

The alternative is if your center subscribes to the Visa Stop Payment Service. Then you can just list the account and the transactions will be blocked (assuming the MOTO Indicator is 4).

MOTO = Mail Order/Telephone Order (also includes Internet). It is an association acronym that applies to any transaction environment where the card is not present.
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#631154 - 10/30/06 09:48 PM Re: Reg E - Dispute question
#12 Offline
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So if she notified us after the payment went through the account are we obligated to give her that money back? I'm sorry if these questions seem elementary, but I'm having a hard time wrapping my head around Reg E (and ACH rules too!). Basically the customer filled out a dispute form after the charge had gone through her account saying she had cancelled with the merchant. Are we obligated to return the money to her, or does she need to go back to the merchant?
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#631155 - 10/30/06 08:44 PM Re: Reg E - Dispute question
Compliancer Offline
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Not a problem. The consumer must notify you at least 3 days prior to the date the transaction is received by you (not sent by the merchant). Any transaction that occurs within 2 days or has already posted to the account do not qualify.

Since you do not know the exact date of cancellation, you cannot Chargeback such transactions either. The consumer gets no credit.
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#631156 - 10/30/06 09:57 PM Re: Reg E - Dispute question
#12 Offline
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Thank you very much. You explained that very well.
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#631157 - 10/30/06 09:04 PM Re: Reg E - Dispute question
Compliancer Offline
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You're welcome. John's comments warrant attention also. Hopefully your form is easy to fill out.
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#631158 - 10/30/06 10:29 PM Re: Reg E - Dispute question
John Burnett Offline
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I'll just jump on David's coattails for a minute. If the consumer is claiming the authorization was yanked before the transaction in question, you need to know the date of cancellation or you won't be able to complete your investigation. I think you'd be justified in refusing the adjustment if the customer doesn't come across with the information you need to decide in his/her favor.
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#631159 - 10/30/06 10:33 PM Re: Reg E - Dispute question
#12 Offline
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Thank you both, again!
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#631160 - 10/31/06 05:42 PM Re: Reg E - Dispute question
Chiquita Banana Offline
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Can I just throw my two cents in?

If this was an ACH transaction...why not just return it as R07 and let the customer deal with the merchant?

But if it was a debit card, then yes, I see your point.
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