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Bill Pay Electronic Withdrawal and Reg E

Answered by: 
John Burnett

Question: 
If a consumer enrolls in bill pay and has their account electronically debited for the payments, and then the bill pay company converts the electronic withdrawal from the customer's account into a paper check to be sent to the vendor identified, (1) do these transactions (the electronic withdrawal from the consumer's account) fall under Reg E coverage, and (2) if the check payment is sent to the wrong person/company by bill pay because the customer did not update information in the bill pay system, is the customer responsible to work through the company that received the payment in error or is the bank responsible under Reg E? The transaction was authorized with the customer inputting the information.
Answer: 

Bill pay transactions are EFTs subject to Regulation E unless they are completed in the form of checks drawn on the consumer's account and the account-holding bank discloses that all such payments will be by check on the consumer's account or discloses which payments will be by check on the consumer's account.

So, now you have a check payment that's subject to the regulation that's misdirected because of the consumer's error. The bank handled the transaction correctly, as directed by the consumer. Therefore no error occurred, and you must provide the consumer a written explanation of your findings [Section 1005.11(d)(1)]. Of course, if you gave the consumer provisional credit, you'll need to follow the requirements for debiting that provisional credit under either Section 1005.11(d)(2) or the Comments to that section.

First published on BankersOnline.com 5/28/12.

First published on 05/28/2012

Filed under: 
Technology
Filed under technology as: 
Checks

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