P2P Pmts

Posted By: Andy_Z

P2P Pmts - 08/14/18 07:33 PM

So Good Morning America (ABC) had a segment this morning on P2P payments focusing on Apple Pay, Venmo and Zelle (I think it was). The conclusion was that if a payment is sent to the wrong person, sorry about that. Consumers feel like something has to be done but the police say it isn't a crime. (I see a civil case for undue enrichment, but would they generally bother?) In one example a Chicago man sent $1700 to the wrong person, who then wasn't answering his phone. Big surprise. Chase said they'd try to help recover funds on a case by case basis. In his case Chase gave him $800 back. I think Chase went above and beyond (and may have set a dangerous precedent.)

Consumers - when the bank follows your directions, why should the bank pay for your mistake? <----- My recommended addition to Reg E disclosures.
Posted By: Compliance NABW

Re: P2P Pmts - 09/17/20 09:34 PM

Do you see these as an "unauthorized EFT?"
Posted By: Compliance NABW

Re: P2P Pmts - 09/17/20 09:38 PM

I don't, but it seems like these could fall within the realm of a Reg. E error. Could it be claimed this meets the definition of "(ii) An incorrect electronic fund transfer to or from the consumer's account;" In this instance, instead of the normal situation where the incorrect eft is because the amount is wrong, could it be considered incorrect because the recipient is wrong?
Posted By: BrianC

Re: P2P Pmts - 09/17/20 09:41 PM

The P2P service simply followed the customer's instructions and sent the correct dollar amount in accordance with those instructions There's nothing unauthorized here.

The only way Reg E will cover a P2P transfer is if:

1. The customer says send the money to Account 555-555-1234 and someone at the bank manually changes the destination to 555-555-2345. (That's an error because the customer's instructions weren't followed.)

2. My account number and routing number / debit card number are compromised and the bad guys originate payments without my knowledge or consent.

If I get tricked by the bad guys into sending a P2P payment and it turns out the beautiful woman I met online is not a woman at all, that's too bad for me. The P2P service followed my instructions and sent the correct amount to the destination I provided. Reg E doesn't cover that.
Posted By: Skittles

Re: P2P Pmts - 09/18/20 12:57 PM

Unfortunately we recently had Brian's 2nd instance (bad guys got access to phone through fraud) and determined this was a Reg E claim. The dispute where the customer was purchasing a puppy, which didn't exist, was determined not to be a dispute because the transactions weren't unauthorized.

We do limit our P2P transfers to $300 per transfer; however in the second instance above the customer sent multiple transactions. Additionally we encourage our customers to only use Zelle to people they know and trust.

Reminds me - I need to thoroughly read our disclosure again.
Posted By: Compliance NABW

Re: P2P Pmts - 09/18/20 03:36 PM

Yes, I'm not arguing the unauthorized piece, but, arther the "incorrect eft" angle; however, I have concluded the same.
Posted By: MassCompliance4

Re: P2P Pmts - 04/12/21 05:40 PM

Follow on question regarding whether a Zelle transaction is covered under Reg E 1005.11 "(ii) An incorrect electronic fund transfer to or from the consumer's account" - Scenario: Customer initiates an authorized Zelle transaction and bank follows customer's instructions and correct dollar is debited and posted to customer's account; however, recipient never received the money. Two questions:
1. If the recipient is also our customer, and therefore we can confirm that the corresponding Zelle transfer was never credited/posted to the account, is this a Reg E covered error under section 1005.11 and would require all of the applicable error resolution steps?

2. If the recipient is NOT our customer, and therefore we can only "see" the transaction instruction leaving our bank/customer's account, is this same scenario a Reg E covered error under section 1005.11 and would require all of the applicable error resolution steps? Could we treat it like an ACH where our "investigation" would stop at our payment instruction that went out the door?

I have been told that because the correct dollar amount was posted to the customer's account and the Zelle instruction went correctly to the intended recipient, even though we have clear evidence that the recipient did not actually receive the money, that it is NOT a Reg E covered error and that the customer's "claim" was corrected treated as a "Non Reg E Proof of Payment" claim and did not need to follow the Error Resolution under 1105.11. Thoughts?
Posted By: John Burnett

Re: P2P Pmts - 04/12/21 06:05 PM

Do you know where the intended recipient or the account for the intended recipient is located?
Posted By: MassCompliance4

Re: P2P Pmts - 04/12/21 06:21 PM

John - In my scenario, the intended recipient is in the US and the sender is in the US.

Both are our customers. So the main question is whether the Zelle transaction that was correctly and timely debited from our customer's account but was not correctly and timely credited to our other customer's account is a covered Reg E "error" and subject to all of the error resolution steps as outlined in 1005.11.

The dollar amount was correctly debited and the Zelle transaction was processed to the correct recipient, i.e. the customer's payment instructions contained no error. However, for undetermined reasons, the Zelle transaction did not go through to the recipient's account. I am being told that this scenario is NOT Reg E covered because the correct dollar amount was debited and posted to the sender's account - so there was no "error".

But that does not make sense to me as clearly there was an "error" - say $200 dollars were requested to be sent but the recipient received $0 - That seems like a clear "error" under the 1005.11(a)(ii) an incorrect electronic fund transfer to or from the consumer's account".
Posted By: Andy_Z

Re: P2P Pmts - 04/12/21 06:29 PM

The recipient has a Reg E claim in the incorrect EFT to their account.
Posted By: MassCompliance4

Re: P2P Pmts - 04/12/21 07:42 PM

Thank you, Andy and John. With my scenario, the sender and the receiver of the Zelle transfer just happened to be our customers, each with different deposit accounts. The sender called to notify us of the "error" in that the intended receiver did not receive the funds. If I am understanding you correctly, we did NOT need to treat the sender's alleged error as Reg E covered; however, if the intended receiver had called us instead to say that he had not received the funds from the sender, then we WOULD have to treat his alleged error as Reg E covered.

And we would have given the intended receiver the $200 that the sender had instructed through Zelle to be sent to him.

However, that's "easy" to see because both parties to the single Zelle transaction have their accounts with us. But had the intended receiver NOT been our customer, what then? We just deny the sender's claim that the Zelle transaction didn't go through and that it isn't Reg E covered error cause the instruction went out as intended and the correct amount of $200 was debited from his account?

And then the intended receiver would have to make a Reg E claim with his bank that he did not receive the $200 Zelle transfer that our sender had tried to send to him? I am not sure I understand how a bank is supposed to conduct the investigation when its customer says, "Hey my brother sent me $200 through Zelle but I didn't receive it." How would the receiving bank have any way of knowing that a Zelle transaction was initiated to be sent TO its customer FROM a non-customer in order to say, "Yes, I can see that the Zelle transaction never came through so here's $200 final credit for your Reg E error claim."???

I guess ultimately what is not making sense to me is that I do not see how the receiver's bank can investigate and correct the Zelle transaction error on their end so they cannot end up making the receiver whole. But if the sender does not have any "error" rights to get his $200 back to make himself whole....then what happens to the funds that never make it to the intended recipient?

Has anyone had this type of error with Zelle transactions? The sender has all of the correct information in the payment instruction. The sender's bank queue's it up as intended. But the recipient never receives the money. Is this not a similar concept as a Bill Payment transaction? Our customer provides correct Bill Payment instructions. Bank sends the correct ACH payment instructions, but the intended payee never receives the funds. Doesn't our customer have a valid Reg E Claim that the payee never received the payment? I understand that our investigation may be limited to just proof to the customer the Bank correctly sent an ACH payment instruction for the correct amount to the correct recipient and that we do not know why their bank did not post the ACH credit, but our customer still would have a Reg E Claim, correct?

My bank is telling me that a Zelle transaction that does not go through is not a Reg E claim as long as the correct amount of money is debited/posted to our customer's account and that does not make logical sense to me.

And it does not make logical sense to me that the recipient could just say to his bank, "Hey, my pal, Steve, said he sent me 200 bucks and I never got it so I want to make Reg E claim." I do not understand how we could even process such a claim?
Posted By: Skittles

Re: P2P Pmts - 04/12/21 07:46 PM

I am curious to know if the recipient doesn't receive the funds - when the transfer 'expires' (according to Zelle this is 14 days) will the sender receive the funds back?
Posted By: Andy_Z

Re: P2P Pmts - 04/12/21 07:53 PM

The receiver goes to his bank and files Reg E. That may be where the error occurred. Your consumer requested a transfer of $200 and it happened as instructed. The receiving bank needs to find the money and it may enlist your bank and Zelle to do that, but it isn't your problem.

The receiving bank needs to ensure the funds went to the correct account. If not, why. The sending info was all correct? I don't know how it gets traced, but there has to be a way to see where the funds went and why they didn't get to where they were instructed.
Posted By: MassCompliance4

Re: P2P Pmts - 04/12/21 08:22 PM

Okay everyone....thank you all so much for your input. I am glad to hear that this is covered by Reg E - it's just that it is the receiver who did not receive the funds that needs to raise the Reg E claim.

And this was actually a Zelle transaction between two of our customers and we were never able to determine how the funds were debited from our sender's account but were never credited to our receiver's account. We ultimately gave the sender back the money, but my concern is that I was told that this entire scenario was not even covered by Reg E because there was "no error". Well, obviously there was SOME error because the transaction was not completed as intended!!

But I take all of your points and thank you all again for the dialogue - if anyone who reads this thread has any other anecdotal stories about Zelle "errors" - not fraud, that part is relatively easy - I'd appreciate your reaching out.
Posted By: John Burnett

Re: P2P Pmts - 04/13/21 02:04 PM

Just to extend this discussion a bit -- If your bank has an agreement with Zelle that allows the bank to initiate Zelle transfers for your customers, there ought to be something in the agreement or the Zelle operations manuals that explains what's supposed to happen and who needs to do what when something (apparently) goes sideways.

Zelle can't have just set up its network without ways to trace such messes.
Posted By: Andy_Z

Re: P2P Pmts - 04/13/21 02:19 PM

Agreed, John. That $200 went somewhere and auditors from Zelle or wherever should want to know. That could be a huge control issue. Did the funds revert to the sender after 14 days or some period, can the bank debit those or intercept them in this case to cover the would be loss, was the transfer refused somehow by the recipient or somewhere along the chain and could that have been BSA related? For the sake of future issues, there should be some answers available or Zelle could prosper at banks expense.
Posted By: MassCompliance4

Re: P2P Pmts - 04/16/21 04:05 PM

Thank you, John and Andy, for the additional considerations and great questions for me to follow up with the BL.