Just completed an audit of the bank's procedures for Reg E compliance.

Here's what I found that I believe to be "problems" and I was looking for some confirmation or other opinions.

We charge a fee to investigate/resolve all Reg E related error/disputes and we disclose this fee. I believe we can only charge a fee when we determine that an error has not occurred - not on valid claims due to "having a chilling effect".

If a customer disputes a transaction that occurred more than 60 days after we sent them a statement, we tell the customer that it's beyond the timeframe that they can dispute. We don't do any investigation or refunds. I believe we are obligated to investigate and refund (pursuant to the liability under 205.6 if applicable) if we can't prove that the customer authorized the EFT - no matter how long ago it happened.

We have no way of tracking all Reg E claims. For example, if a customer comes in and disputes an EFT, they are told to try and resolve with the merchant first. If we never hear from them again, we have no way of ensuring that they have been reimbursed for an unauthorized EFT. Occasionally a customer may come back due to not getting satisfaction with the merchant, and it's beyond 10 days, so we aren't in compliance with the timeframes in 205.11.

Read Comment 11(c)-3 in the Regulation E Supplement I. You are correct that you cannot charge a fee for error resolution when an error is found to have occurred. The Comment goes on to say you should be careful that any fee for filing claims that result in a "no error" determination does not have a chilling effect on claims.



You can refuse claims other than those that a transaction was unauthorized. Sections 205.6 and 205.11 operate independently of one another. See Comment 11(b)(1)-7 in Supplement I.



Although you can encourage a customer to work with the merchant (often such an approach gets faster results for the customer), pushing off the error claim is incorrect. You are obliged to accept and investigate even an oral claim if it sufficiently identifies the customer, the transaction in question and why the customer believes it to be an error.

(1) I read this to mean we shouldn't be charging $500 when a claim is denied, but we could charge a small fee, say $20.

(2) We can deny a claim, but we need to at least investigate to determine whether the EFT was unauthorized - correct? We can't just deny a claim due to time elapsed since the EFT without even trying to determine if the EFT was indeed unauthorized.

(3) I agree.

(1) What's chilling will depend, I suspect, on the relationship of the fee to other fees charged by the bank and by other banks in general and on your consumer demographics.

2) Correct. The requirements of 205.11 (timing, provision credit, notification, etc.) don't apply, but you'll need to use some of the same investigative techniques you use under 205.11 to determine if the transaction was authorized or not.

Great...thanks for the "words of wisdom" John!

I think I'm going to recommend a standardized "Notification of EFT Error" form that the tellers will have the customer complete (including all relevant information, such as date they realized card was lost, etc.) and then these forms would be routed to a centralized person who will keep a log of the claims and will be responsible for researching/tracking Reg E claims. Even if the customer decides they are going to try and work with the merchant, we'll still have the form completed so we know when the 10 day clock starts. The way we do it now, we don't even have record of the customer's notification.

Just to be clear, when you are notified your 10 day clock starts if they say they are making a claim. There is a fine line between, "I'll take it up with the merchant and get back to you" and denying the consumers ability to file a claim unless they first try to resolve it elsewhere.

We haev a client who has said he did purchase something, some kind of software. He didnt' realize what hte charge would be. He got charged .99 two times and then $80. He had 7 days to review the product and then send back. Well he didn't send back and now wants to disput the charge. If he admitted to this, does Reg E still apply?

It sounds like he authorized payment - even though he didn't know what it would cost. If that's the case, he's outta luck for making a valid Reg E claim.

Yes, he did authorize it. He just didn't read the fine print. I didn't think he could make a reg e claim since it was authorized.

My customer service reps often ask the question, "Is this disputable?" Reg E gives the customer the right to dispute and electronic funds transfer. Your customer can make a Reg E claim for the $80.00. You can then make a Reg E denial based on the customer's description of the events. To avoid the very issues that AuditorK has discovered, I will still log a dispute under these circumstances and issue a written denial...just in case one of these folks decides to bring the issue to a BBB or regulator.

Good point crowman3 - he can make a claim, its just that you can deny it based on those facts.

would you give provisional credit and then we it was determined no error occurred, send a letter explaining why and that the account will be debited?

Since my denial of the claim would be based on the information obtained during the completing of the dispute letter, and I can make a determination within 10 business days, (in this case within 10 business minutes) there is no need for provisional credit. I would simply send out the denial letter. If I can find it, I also include a printed version of the terms and conditions containing highlighted fineprint showing what they agreed to when they gave out the debit card number for the "trial period."

If I am reading it right I like Crowmans process. I say you always take the claim. You may immediately deny it, but you took the info, evaluated it and made a decision. Reg E requires that you make a decision based on your info and when you can do that before the expiration of your 1-, 45, or 90 day periods, you should.

Also, when you deny the claim, there is no need to reopen it. Say I gave my card to someone who abused the authority I gave them. That is on me. But if you prequalify my claim, I go back to another branch as an example, and change my story. Now I have the info I need to get a valid claim put in.