Question on Regulation E Timely Reporting

Posted By: Jack Shi

Question on Regulation E Timely Reporting - 10/19/20 02:17 PM

We had recently a customer come to claim funds that was deducted from her account 3 years ago via ACH. This is definitely considered timely notice not given. However, ยง 1005.6 b (3) limits customer liability "If the consumer fails to do so, the consumer's liability shall not exceed the amount of the unauthorized transfers that occur after the close of the 60 days and before notice to the institution, and that the institution establishes would not have occurred had the consumer notified the institution within the 60-day period".

Unfortunately, all of the transactions 3 year ago happened within that 60 days after we send the statement on which the first unauthorized transaction appeared. Is the bank liable for those transactions even customer reported 2 years later? I felt this is a loophole and customers can always come back to claim unauthorized ACH transactions. The bank has very little further course of actions since the transaction took place so many years ago.
Posted By: rlcarey

Re: Question on Regulation E Timely Reporting - 10/19/20 02:42 PM

Unfortunately, unless you can prove they are authorized, you are stuck. But this is a one and done occurrence for any specific customer - they just found themselves a new bank.
Posted By: John Burnett

Re: Question on Regulation E Timely Reporting - 10/20/20 03:38 PM

One tiny glimmer of hope - "prove" doesn't mean you have to meet the legal "beyond a shadow of doubt" standard. But you do have to determine to your satisfaction that the transactions were authorized to deny the claim. When you're investigating things that happened three years ago, it's a challenge to arrive at such a determination.

I do agree that a customer who is only now checking on account activity from three years ago is not a customer most banks would want to keep.
Posted By: Valley girl

Re: Question on Regulation E Timely Reporting - 10/21/20 07:18 PM

Thank you John! I have been working on the "preponderance of evidence" not "beyond a shadow of a doubt" standard while training some of my coworkers how to handle disputes.
Posted By: Andy_Z

Re: Question on Regulation E Timely Reporting - 10/23/20 08:25 PM

I have used a test, based on your evidence, what would a reasonable person conclude?"

The law buts the burden on the bank, but to your advantage the late reporting allows that you need not follow all the investigative rules like finishing within any given time frame or paying provisional credit. I'd never say the investigation could take as long as the claim, but I'd sure think it. :p
Posted By: banker-12

Re: Question on Regulation E Timely Reporting - 07/01/21 06:00 PM

Do we still need to follow the provisional credit 5 business day requirement under VISA when we receive late notice?

Thank You
Posted By: BrianC

Re: Question on Regulation E Timely Reporting - 07/01/21 06:25 PM

You should review your cardholder agreement. Visa's Zero Liability website has the following caveat:

If you experience unauthorized transactions, notify your financial institution immediately. Replacement funds are provided on a provisional basis and may be withheld, delayed, limited, or rescinded by your issuer based on gross negligence or fraud, a delay in reporting unauthorized use, an investigation and verification of a claim, and account standing and history.
Posted By: John Burnett

Re: Question on Regulation E Timely Reporting - 07/08/21 06:55 PM

Just keep that wording from Visa clearly separate in your mind from your Reg E process. Visa can (and has) modified the number of days to provisional credit from 10 to 5, but it cannot increase the Reg E limits on consumer liability for unauthorized EFTs, for example.