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Refunding NSFs after Long Reg E Claim

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Question: 
If NSF fees occur outside of the “statement + 60-day time period” that would not have occurred without the unauthorized EFTs, is the bank required to refund those as well or only NSF fees that were applied within the statement + 60 day period?
Answer: 

I’ve never had this question before, so lets break down what Reg E says. Under 1005.6(b)(3) when the consumer fails to notify the bank within the “statement + 60 day” period the bank has liability for the transfers and costs related to those which occurred within the claim period, meaning before that statement + 60 days. If the consumer fails to provide notice before the "statement + 60 days" period ends, 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. Fees are not mentioned in 1005.6 but there are references to the “unauthorized transfers.”

In 1005.11, and the OSC at .11(c)-6, fees are mentioned. The OSC says, “If the financial institution determines an error occurred, within either the 10-day or 45-day period, it must correct the error… including, where applicable, the crediting of interest and the refunding of any fees imposed by the institution.”

As I read this, the bank is required to reimburse the claimed amounts it had liability for during the 10- or 45-day claim period plus all fees that resulted from them. There is no time limit on when the fee was incurred, if it can be traced back to the claimed amount and would not have otherwise been charged. I would opine that NSF fees resulting from the valid claimed amount would be refundable regardless of when that fee accrued.

Here is a simplified example of how this might occur (assume the recurring charges were small and would have paid had the initial deposit been there):

1) Jan. 1 Joe has $1,000 in his account, loses his card with the PIN on it and the money is taken by a thief.

2) Jan10, a recurring charge is attempted to the account and the bank charges an NSF fee of $20

3) Jan 15 a statement is sent reflecting the EFT.

4) Feb 10, recurring charge $20 fee

5) Feb 15 a statement is cut

6) March 10, recurring charge, $20 fee

7) April 10, recurring charge, $20 fee

8) May 10, recurring charge, $20 fee

9) May 15, statement is cut

10) May 16 is statement + 60

11) June 10, recurring charge, $20 fee.

The months could go on, but each fee is due to a small recurring charge that would have otherwise paid out of that $1,000 which was deposited by Joe to cover that recurring charge. Each fee is directly relatable to the initial theft and each would be reimbursable because it can be traced to the valid claimed amount.

First published on 09/26/2021

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