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Right to Deny Dispute if Lack of Details

Question: 
If a customer mentioned that a transaction was unauthorized, but they did not provide additional details such as their card or any information for investigation after we tried to contact them several times, do we have right to deny the dispute?
Answer: 

by Randy Carey

If the following was not met, then there is no dispute to deny.

1005.11(b) Notice of error from consumer. (1) Timing; contents. A financial institution shall comply with the requirements of this section with respect to any oral or written notice of error from the consumer that:

(i) Is received by the institution no later than 60 days after the institution sends the periodic statement or provides the passbook documentation, required by ยง 1005.9, on which the alleged error is first reflected;

(ii) Enables the institution to identify the consumer's name and account number; and

(iii) Indicates why the consumer believes an error exists and includes to the extent possible the type, date, and amount of the error, except for requests described in paragraph (a)(1)(vii) of this section.

Answer: 

by Andy Zavoina:

Randy provided the citation and it indicates that if you had enough information to identify the account and the reported unauthorized transfer you essentially have enough to initiate an investigation. That's what is required. The rest is up to the bank. A consumer who wants their money back is inclined to assist, but there is no requirement that they do so.

Staff should be trained to get as much information as possible during the initial report. If they do not, the bank can follow-up and even request the claim in writing. If a timely request for a written claim is made and not completed, the bank can forego paying provisional credit and extend the investigation period per Reg E.

Now, the real unpleasantness, 1005.11 deals with investigation responsibilities. 1005.6 deals with liability. The consumer still wants their money back. If the bank says it isn't going to investigate, it may still have liability under 1005.6. "Notice to a financial institution is given when a consumer takes steps reasonably necessary to provide the institution with the pertinent information, whether or not a particular employee or agent of the institution actually receives the information." How will the bank know which party has how much liability - it has to do some investigation. It's a chicken and the egg scenario.

Do not deny the claim because the consumer failed to assist in the investigation, deny the claim if the bank cannot determine the facts that there was an unauthorized transfer and because the consumer has not responded to repeated requests (phone, mail, etc.) to provide more information. If the bank can make a determination, all the better. React according to the findings.

The EFTA clearly places the burden of proof on the bank.

First published on 11/07/2021

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