Answer:
Let’s look at the case of Barnaby Benson, whose take of woe is related beginning on page 21 of the materials handout. You will recall that Barnaby bought a T-shirt from Thunder Telemarketing for $19.95 in mid-April 2022. While he ignored
his account balance (and bank statements) for several months, Thunder Telemarketing was draining his account by repeating the $19.95 charge each month. That finally got Barnaby’s attention in May 2023, when he got an overdraft
notice. After looking for the bank statements he had been ignoring, he contacted the bank in late June to get copies. He discovered 14 months of $19.95 debits that started on April 15, 2022. He had been scammed!
Barnaby related his tale of woe to the CSR at his local bank branch. The bank’s EFT investigations team decided that Barnaby had authorized the initial April 15 debit (had had acknowledged that fact) but agreed that following 13 charges had not been authorized. The first unauthorized entry (May 15, 2022) appeared on the statement sent on May 30, 2022. Under § 1005.6, the bank had to refund Barnaby’s account for the charges posted on May 15, June 15, and July 15, 2022, because they hit the account before July 29, the 60th calendar day counting from the May 30 statement date. They told Barnaby he was responsible for the remaining unauthorized charges posted after July 29, 2022, which by this time (July 7, 2023) had included an additional $19.95 debit on June 15.
Regulation E’s protections for Barnaby ended there. But Nacha rules allow the bank to make an extended period return of the debits that posted on May 15 and June 15, 2023, if Barnaby provides the bank a Written Statement of Unauthorized Debit
(WSUD). When Barnaby heard that, he quickly completed the WUSDs.
The bank returned those two items, and credited Barnaby an additional $39.90. The bank staff then set about pulling together a breach of authorization warranty claim against the ODFI for all of the debits from May 2022 through April 2023,
inclusive, for a total of $239.40. To the bank’s delight, the ODFI honored the claim in full. The total of the unauthorized EFTs that hit Barnaby’s account was $279.30. His bank had already reimbursed him for five of those charges (May, June and July of
2022, which it had charged off as a cost, and May and June 2023, which had been covered under the extended return provision) for $99.75, leaving Barnaby “out” $179.55, which the bank must now pay him from the breach of warranty claim
proceeds, leaving the bank the princely sum of $59.85, which it can take as a recovery of the bank’s cost in reimbursing Barnaby for the May–July 2022 unauthorized transactions.
The result? In this case, Barnaby and the bank were both made whole (with the exception of any interest and fees adjustments the bank may have had to make under Regulation E).
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