A client sets up a one time payment that was to come out on the 30th, but came out on the 15th instead. For ACH the payment could be returned, for debit card under Reg E, the client authorized the transaction and would ultimately benefit from the payment. So would we treat it as a merchant dispute for coming out on a different day then was authorized?

Although VISA and MasterCard would treat this as a "merchant dispute" since the cardholder admits to providing their debit card number, this transaction would still meet the Reg E definition 205.11(a)(1)(ii) of an "incorrect electronic transfer to of from a consumer's account."

On the one hand, VISA/MasterCard will have requirements that the cardholder first try to resolve their dispute before you can initiate a chargeback, but Reg E requires that the bank investigate and provide provisional credit. Reg E says that the customer has met their obligation of notifying you of the error.

When faced with this conflict between VISA/MC and Reg E, there are a few options that I recommend.

1. You can ask (not require) that the cardholder go back to the merchant to see if they will refund the card. In the very near future VISA/MasterCard will no longer be permit chargebacks on bill payment transactions since the cardholder has received benefit for the transaction so if the merchant refuses to help you won't even have a chargeback as an option. Consequently, there may be little incentive for a bill collector to work with a cardholder.

2. Since the cardholder has received benefit from the transaction, their' primary reason for filing the dispute probably revolves around the fact that they will become overdrawn and have/will incur fees. Since Reg E will require that you rebate any fees as a result of the incorrect charge anyway, offer to provisionally credit the cardholder's account until the date the charge was supposed to have been charged, and then reverse the credit on that day. Rebate any fees incurred prior to the provisional credit.

3. Ask the cardholder if it is sufficient to rebate any fees that they have incurred, and allow the charge to stand since they did receive benefit for the transaction. (This way there is no risk of finding that the cardholder doesn't have the money on the authorized date as is a possibility in option 2.)

Just because a cardholder has provided their card number to a merchant does not give the merchant carte blanche to charge the customer's account whenever they please or for whatever amount they please. Reg E protects the cardholder from this type of activity. It does not protect the bank.

Brian, do you know the bulletin number for the VISA/MC bill payment chargeback changes you mention in your reply?

There wasn't a specific bulletin. What I see coming down the pipe is more domestic online merchants and bill collectors beginning to make use "Pinless" bill payments, and routing these transaction through the PIN networks instead of through V/MC (cheaper interechange rates.) Generally you cannot chargeback these transaction because the networks will treat them the same as PIN transactions.

For fraud related bill payments, US merchants and bill collectors will soon begin making more use of MasterCard SecureCode and Verified by VISA which will provide them chargeback protection from fraud related chargebacks.