Reg E Dispute Question

Posted By: TeamComply

Reg E Dispute Question - 11/14/16 10:00 PM

We issue MC branded debit cards at the bank. The majority of the disputes we receive are due to a lost card or lost card number. Generally, the losses incurred by the customer are absorbed by the bank. In what instances does the $50 liability under MC kick in? And is there any other way we can handle these or is this what banks have to do...incur the losses on these types of disputes?
Posted By: TeamComply

Re: Reg E Dispute Question - 11/14/16 10:03 PM

I should have said stolen card number (not lost card number).
Posted By: BrianC

Re: Reg E Dispute Question - 11/14/16 10:17 PM

For transactions involving a lost, stolen or compromised card, MasterCard Zero Liability will apply unless, a) the cardholder does not promptly notify the issuer of the loss or theft of the access device or b) the cardholder does not exercise reasonable care in safeguarding the card.

https://www.mastercard.us/en-us/about-ma...conditions.html

The MasterCard cap of $50 in consumer liability went away in October 2014. If Zero Liability does not apply, you may use the $50/$500/unlimited tiers of Reg E 1005.6 based on how long after learning of the loss or theft of the access device or the transmittal of the periodic statement the cardholder notified you. If you have not updated your cardholder agreement to reflect the 2014 changes to MasterCard Zero Liability, you may want to consider doing so.

MasterCard does not provide any chargeback rights for card present fraud with the exception of pay-at-the-pump gas purchases using a lost/stolen card or the chip liability shift if you are issuing EMV cards and the merchant processes a counterfeit transaction using a mag-stripe terminal. You do have chargeback rights and can recover for most card not present fraud (internet based) unless the transaction was performed at a MasterCard SecureCode enabled merchant.

If the cardholder did not perform the transactions, you have little recourse except for the options identified above. If the charges are local and you think the customer did perform the transactions, you may file a retrieval request to obtain a copy of the signed sales receipt or contact the merchant directly to see if you are able to obtain video surveillance.
Posted By: TeamComply

Re: Reg E Dispute Question - 11/14/16 10:37 PM

Thank you for the wealth of knowledge Brian C!

One additional question, if we have a dispute in which an incorrect amount was charged to the customer and bank was notified timely (within 2 business days of learning of the incorrectly posted amount), customer's liability is limited to $50, is that correct?
Posted By: BrianC

Re: Reg E Dispute Question - 11/14/16 10:51 PM

An incorrect amount does not involve the loss or theft of an access device so 1005.b(1) & (2) would not apply. The customer's liability would be $0 if you determined that an error did occur.
Posted By: TeamComply

Re: Reg E Dispute Question - 11/15/16 03:12 PM

This customer also never received the merchandise. Purchased boots online for a specified amount, larger amount posted to his account and he never received the boots. Still $0 liability for this consumer?
Posted By: TeamComply

Re: Reg E Dispute Question - 11/15/16 03:21 PM

I believe we provided provisional credit to this customer under 1005.11(c)(2)(I) and withheld a maximum of $50 from the amount credited. Would this not be an acceptable practice in this particular situation (error with amount - incorrect amount and non-receipt of merchandise)? Thanks.
Posted By: BrianC

Re: Reg E Dispute Question - 11/15/16 06:40 PM

This would not be an acceptable practice. 1005.11(c)(2)(i) speaks to your right to withhold $50.00. "Provisionally credits the consumer's account in the amount of the alleged error (including interest where applicable) within 10 business days of receiving the error notice. If the financial institution has a reasonable basis for believing that an unauthorized electronic fund transfer has occurred and the institution has satisfied the requirements of ยง 1005.6(a), the institution may withhold a maximum of $50 from the amount credited."

We are not claiming that the transaction was unauthorized, we are claiming that the amount was wrong. The $50.00 liability provision simply does not apply. As a side note, had we not had the incorrect amount claim, this dispute would not have meet the definition of an EFT error at all. Non-Receipt of merchandise is not one of the types of EFT errors in 1005.11(a). We may be able to assist a cardholder in that situation using the VISA/MasterCard chargeback process, but we would not be subject to Reg E provisional credit and error resolution timeframes.
Posted By: TeamComply

Re: Reg E Dispute Question - 11/15/16 08:17 PM

Obviously I'm struggling to get a good handle on this, as I don't handle this stuff often. So do MasterCard rules always supersede Reg. E rules? So in what cases would a consumer be liable for $50?

Is there a Reg. E matrix or reference sheet showing how to determine which set of rules to follow, how much the consumer is liable for, etc.?
Posted By: BrianC

Re: Reg E Dispute Question - 11/15/16 08:40 PM

In order to comply with both sets of rules, you must follow whichever is friendliest to the consumer. The $50/$500 liability tiers of Reg E 1005.6 apply when there is a lost or stolen access device and the cardholder failed to notify you promptly of the loss or theft and did not safeguard the card. (See my answer above).

I provide a summary of Reg E coverage vs. MasterCard requirements as part of my annual webinars on the topic. The last was recorded in September.

MasterCard and Reg E Error Resolution
Posted By: TeamComply

Re: Reg E Dispute Question - 11/17/16 08:23 PM

Brian C - you state in post #2107278 that "the customer's liability would be $0 if you determined that an error did occur."

We sent the dispute/error in, the claim was denied....so should bank take the loss or hold customer liable for incorrect amount?
Posted By: rlcarey

Re: Reg E Dispute Question - 11/17/16 08:27 PM

Not Brian, but whether or not the bank can recover funds never impacts a consumer's liability.
Posted By: TeamComply

Re: Reg E Dispute Question - 11/17/16 08:36 PM

Ok, so where is the specific rule that says customer has $0 liability for incorrect amount?

So, let me make sure I understand this correctly....customer authorizes transaction for $118, account is debited for $135, no merchandise is received and bank is expected to incur loss of $135 and customer liability is $0?
Posted By: Gioia

Re: Reg E Dispute Question - 11/17/16 09:41 PM

Incorrect amount is an error that a consumer has $0 liability for. Are you saying that the merchant came back with proof that the amount was not incorrect? Then you may be able to prove that it was not an error. You have to look at the evidence that is coming back to you, not just say that since the bank didn't get the money back, to deny the dispute. A guru might chime in, but I think the merchandise not received portion is sort of erroneous.
Posted By: burkemi

Re: Reg E Dispute Question - 11/17/16 09:56 PM

Sounds to me like there are 2 components to this dispute... 1) merchandise not received and 2) incorrect amount.

If your customer admits to authorizing $118, but did not receive the merchandise, you may be able to file a dispute for that amount for the merchandise not received. For this amount, there would be no liability to the bank.

The additional $17 is the incorrect amount. For this amount the customer does not have liability since he/she only authorized 118 rather than 135. If you have proof the total amount is correct, you can deny the claim. If you don't have the proof but feel the customer isn't trying to pull the wool over your eyes, your best bet may be to absorb the $17. But the $118 "authorized" amount should not be in question, other than trying to recoup through a Merchandise Not Received dispute.
Posted By: BrianC

Re: Reg E Dispute Question - 11/18/16 02:37 AM

Burkemi has already broken down what is and is not covered by Reg E from a dollar amount perspective so there is no need for me to repeat that answer.

To answer the question, "Where does is say that incorrect amount has $0 liability..."

Look carefully at 1005.6(b)(1) and (2). You will note that the $50 and $500 liability tiers are both tied to the consumer notifying the institution of the loss or theft of an access device. For claims that do not involve the loss or theft of an access device (anything ACH, incorrect amount being two examples) you must look exclusively at 1005.6(b)(3) which does not impose any liability on the consumer unless they do not notify you timely of the error.