Hi everyone,

First of all - I've been browsing these forums for a while and find it to be a very valuable source of information. Big thanks to everyone contributing!

We're mainly an European issuer with a number of cards issued in the States. After going through the regulation text and the very useful BOL course by Brian Crow, there are still several open questions:

1) Are the timeframes counted from authorization or clearing of the transaction?

We would expect that the 60 days to report an unauthorized charge will start running as soon as the item appears on the statement, which in our case is simultaneous to the authorization request being approved.

On the other hand, we also understand that we do not have an obligation to act on a dispute as long as the transaction is not completed, ie the funds are reserved but have not left on the account.

For example, a hotel reservation:
- We get a pre-authorization for 500 USD in on January 1st
- The customer sends in an unauthorized transaction form on January 3rd
- The transaction completes for 500 USD on January 30th

Are we expected to post provisional credit to the account by January 15th or February 12th?

2) If a disputed transaction is refunded by the merchant after having issued a provisional credit to the account, do we still need to give the customer 5 business days notice prior to withdrawing the credit?

We are worried that leaving the duplicate amount on the account for the extra week would cause unjust enrichment in case of high value transactions.

Looking forward to any advice, or references to additional information!

Rainer

Welcome to BankersOnline. I am glad that you found my webinar helpful. With respect to your questions:

1. The timeframes begin based on the date the transaction settles to the account. Although a preauthorization may temporarily hold funds in the account, the electronic funds transfer error does not actually occur when the funds are debited. In your example with a hotel, VISA/MC rules prohibit the charging of the account until after the guest checks out so there can be a significant delay between authorization and posting. Sometimes the merchant realizes that the transaction is fraudulent and never settles. The bank wouldn't want to provide provisional credit, have the authorization hold drop off, the customer spend the money, and never actually have an error to investigate.

The next portion of your first question references the 60-day timeframe to notify the bank of an electronic funds transfer error. Read 1005.11(b)(i) carefully. The 60 day clock starts ticking "after the institution sends the periodic statement...on which the alleged error is first reflected." If the hotel charge posts on January 30th, but my statements cut the 27th of each month, then the 60 days would not start ticking until February 27th.

With respect to provisional credit in your example, the provisional credit would be due February 12th.

2. The key to this situation is the semantics. If the merchant issues a refund and I determine that no error occurred and revoke provisional credit, 1005.11(d) will require that I honor overdrafts for five business days. However, since the merchant issued a refund, this leads me to conclude that an error did occur so I finalize the provisional credit and notify the customer that they received a "duplicate credit" which I am debiting.

Thank you Brian, very helpful!

Regarding the second point:

I understand that an advance notice is not required when debiting the merchant's refund - as soon as we are alerted about the refund, we can complete our investigation, send out the final credit email and reverse the duplicate refund?

Also, does it matter in these cases if we had previously posted a final credit or a provisional credit?

Rainer

Hello, I hope all is well.

Hopefully, someone can assist me pertaining to couple of questions.

1. When a REG-E violation does occur, for example, incorrect date was on the letter, etc. What would the potential fines be? I have been looking everywhere and unable to determine the actual answers.

2. If the provisional credit did not get reversed on the 5th business day, does it fall as a reg-e violation and if so are we able to resend a denial letter with a new reversal date of the provisional credit and save from a violation?