A consumer customer who has her cell phone bill automatically deducted from her checking account via ACH claims her cell phone was stolen and the thief ran up the bill which is the amount that showed up on her recent statement.

Is this a legitimate Reg E claim? It seems to me an access device was not used but appears to meet the definition of a preauthorized transfer.

Cancellation of recurring payments is interesting in Reg E because the consumer is required to contact YOU not the MERCHANT to cancel. When she advised you of the cancellation of the pre-authorized transactions, the rules for this type of claim kicked in and apply to all future transactions.

As for the transactions already on her account, she's SOL. Her issue is with her phone company. The only way she can dispute this transaction through you is if she contacted the phone company before the transaction was submitted and withdrew permission to charge her account. That scenario falls under unauthorized in the Billing Error section.

This sort of thing is the reason for the 10-day advance notice of varying amounts requirement in section 205.10. The cell phone company has to bill the customer at least 10 days before issuing the debit. Of course, we all know that bills like this take a few days to arrive, even if they are presented online. So that 10 day period make effectively be shorter.

If the customer notified the cellular carrier not to make the debit before the EFT was entered, notice is effective under both Reg. E and NACHA rules. The company should not enter the debit. If it does, your customer has the right to recovery from you for paying an unauthorized transaction. You have the right to recover from the phone company via the ACH if your customer provides a timely WSUPP.

If the customer notifies you of the revocation of the authorization before the debit posts, you have to put something up on your system to stop it and send it back.