Can we place a hold a pre-auth?

Posted By: twana

Can we place a hold a pre-auth? - 08/19/10 03:47 PM

Is it possible to place a hold on pre-authorized debit card transactions?
Question stems from the following: customer uses debit card for a $50 charge against a $60 balance; debit card transaction is approved. Before the debit transaction settles a check for $55 clears. The next day debit card transaction for $50 settles against a balance of $5, we have to pay and overdraw the account.
How are other banks handling this? What are best practices?
Thanks.
Posted By: madukes

Re: Can we place a hold a pre-auth? - 08/19/10 05:24 PM

Doesn't the preauthorization place a hold on the funds for the debit?

our accounts would show on our nsf list for "held funds" when the check came through. it would be up to the branch to decide to pay or return the check if there is no privilege on the account.
Posted By: John Burnett

Re: Can we place a hold a pre-auth? - 08/19/10 05:55 PM

Many banks are able to hold funds for an authorization, and some even recognize those infamous $1 gas pump authorizations and create an assumed hold of, I am told, as much as $100 (I'm thinking $50 is enough for most fill-up transactions). The hold drops of the system after X days (system parameter, sometimes not customizable), or when the matching transaction shows up to post.

Check with your systems people or vendor to find out what options you have.
Posted By: John Burnett

Re: Can we place a hold a pre-auth? - 08/19/10 05:56 PM

For the record, such holds are not regulated by Regulation CC.
Posted By: Andy_Z

Re: Can we place a hold a pre-auth? - 08/19/10 07:53 PM

+1 on John's comments two above. That was our process.
Posted By: BetsyS

Re: Can we place a hold a pre-auth? - 08/19/10 10:51 PM

Quote:
For the record, such holds are not regulated by Regulation CC.


It is however governed by the card associations. From the Visa Operating rules on Visa Checkcard transactions, pre-auth holds must be released:
"When a matching Clearing record is received, but no later than 3 business days from the Authorization request". There are additional rules in effect for real-time auths.

My guess twana is a PBF bank like us. We do not receive the hold records on pre-auths in our settlement files from our processor, so they're not placed against the account balance on our operating platform. However, at least they reside on the card balances. Another argument for real-time!
Posted By: RVFlyboy

Re: Can we place a hold a pre-auth? - 12/04/12 09:21 PM

To follow up, if we do place a hold based on the pre-authorization, can the customer dispute the hold and is that dispute obligated to be handled under Reg E error resolution procedures?
Posted By: John Burnett

Re: Can we place a hold a pre-auth? - 12/04/12 09:33 PM

Regulation E error claims apply to actual transactions that have posted to an account, not to authorization entries that are pending, or to any hold triggered by an authorization. That said, you certainly should respond to a customer's complaint about a hold (note I said "respond," not "cave"). You just don't have to treat it as a bona fide error claim under 1005.11.
Posted By: Andy_Z

Re: Can we place a hold a pre-auth? - 12/06/12 07:02 PM

While I haven't seen a regulatory opinion on that, I'm in agreement that a hold is a different issue.
Posted By: rlcarey

Re: Can we place a hold a pre-auth? - 12/07/12 12:28 PM

If the OP is suggesting whether it is possible to return the $55 check due to the preauthorization, I have a feeling that banks that are doing this (as the preauthorized transaction has not yet actually posted to the account) are risky lawsuits for unlawful dishonor and most likely UDAAP citations from the regulators. This is gaining in popularity and I see it as one of the next regulatory actions taken in this area as banks are again starting to shoot themselves in the foot.