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Issuing Provisional Credit-Customer Closed Deposit

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According to Regulation E, Financial Institutions have 10 business days from their date of notification to issue provisional credit for a dispute. In cases where the customer closes their deposit account before their provisional credit is issued, what is the proper procedure for issuing this credit? Should the account be reopened and explain to the customer that we have rights to withdraw that credit for up to 45 days?

In such a situation, the bank would have to prevent the account from closing, and post the provisional credit there (most bank systems require a zero balance for a period of several days before the status changes to closed), or open another account for the customer to receive the credit.

I always advocate explaining the provisional nature of the credit. It won't be final until the bank completes the investigation, which will be done promptly, but it could take longer if third parties are involved, etc. Until the provisional credit is declared final, the customer has the full use of it but with the understanding that some or all of the provisional credit may be reversed, and the customer will be responsible for any negative balance that might result.

By the way, that 45 day period could be as long as 90 days if the transaction was initiated in a foreign country, was a point of sale purchase transaction, or was completed within 30 days of the first deposit to the account.

First published on 10/10/11

First published on 10/10/2011

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