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Reg E Provisional Credit: 5 Day Reversal?

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REG E- If provisional credit was provided to a customer and the merchant later credits the customer, is there a 5 business day window before provisional can be reversed?

Reversal of a provisional credit under section 1005.11 requires either a notice of the reversal five business days in advance of making the reversing entry or a notice of the reversal followed by five days of account monitoring to ensure that any items presented won't be treated as overdrafts if the reversal entry not been posted. That's true whether or not a merchant credit entry is the reason for the reversal.

However, the adjustment doesn't need to be handled that way, since the unplanned merchant credit provides the consumer with the same protection against overdrawing the account. The alternative way to handle the situation without the five business day advance notice or monitoring is to inform the customer that the provisional credit is being made final, and that the bank is charging the account to reverse the credit from the merchant, which duplicated the account adjustment already provided by the bank.

First published on 06/09/2014

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