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Reg E Definition of Error for Remittance Transfers

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My question relates to the definition of error in the update to Regulation E (Requirements for Remittance Transfers). If, after a sender authorizes a remittance transfer, a transaction occurs on a sender's account that reduces the amount of available funds below the amount of the remittance transfer, can the bank NOT send the transfer without an error occurring?

A very interesting question, and one that isn't contemplated directly by the regulation, as far as I can see. Clearly, your question relates to a consumer's request for a remittance transfer in advance of the scheduled date for the transfer. In my opinion, if a bank obtains an authorization from the consumer to charge the consumer's account for a future remittance transfer, and if the bank is required to provide the receipt for the transaction at the time the consumer provides the authorization to charge the account, the bank should hold or withdraw the funds to pay for the transfer at that time (such a hold is not covered by Regulation CC).

If the receipt is not required to be provided at the time of the request (as would be the case for other than the first transfer in a series of preauthorized transfers), and if the transfer is not completed because of an insufficient balance in the funding account, the bank should promptly notify the sender that the transfer was not completed.

First published on 11/26/12.

First published on 11/26/2012

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