institution is not required to provisionally
credit a consumer’s account if it requires
but does not receive written confirmation within 10 business days of initial
notification of an error, but it may still
take advantage of the 45-day extension.
Note that an FI cannot refuse to
investigate a claim simply because the
customer was negligent or failed to put
the claim in writing. Not only would that
be a Reg E violation, but regulators have also
deemed such actions as being a UDAAP issue
as well. It also cannot instruct the customer to
resolve the dispute with the merchant or third party
on his or her own, or require the customer to first file
a report with the police before accepting the complaint.
And, FIs cannot decline to investigate
because a customer did not comply
with Visa or MasterCard’s chargeback
requirements for their debit cards.
The notice and timing rules that apply going forward vary depending on
the investigation findings. If an error is
confirmed, the FI must correct it within
one business day of confirmation and
inform the customer (orally or in writing) within three business days
of the correction that the provisional credit has been finalized. It is
recommended that results are communicated in writing. If an FI opts
to communicate orally, this communication and its timing must be
documented to support that it is within regulatory limits.
When an error has not occurred, the FIs must explain the
findings in writing within three business days of concluding the
investigation. Upon debiting the provisional credit, it is required
to notify the customer of the date and amount.
Regulation E Returns to Regulators’ Radar
Largely driven by consumer complaints to the State regulators,
Federal Deposit Insurance Corporation (FDIC) and Consumer
Financial Protection Bureau (Bureau) regulators have been expanding the scope of their examinations for Regulation E coverage,
leading to lookback initiatives in some cases. Lookback requirements, which have always been common for other regulations such
as anti-money laundering and fair lending, are now expanding
to include Regulation E, due to the customer impact.
Although the regulatory requirements under Regulation E have
not changed in several years, the massive volume of electronic fund
transfer (EFT) transactions increases the risk of noncompliance.
As a result, FIs face the possibility of costly and time-consuming
look backs for matters requiring attention, consent orders, and
reimbursement payments to customers, including interest and fees.
The number of Regulation E violations has been on the
rise. (CFPB Supervisory Highlights, files.consumerfinance.
gov/f/201410_cfpb_supervisory-highlights_fall-2014.pdf)
Examiners have uncovered several
common errors by FIs, including:
■ ■ ■ Failing to investigate based on the
lack of written notice;
■ ■ ■ Failing to investigate because the
customer reported the error more
than 60 days after the date of transaction (but within the 60 days after
statement receipt);
■ ■ ■ Failing to provide the provisional credit;
■■ ■ Failing to notify the customer of the
amount and the date of the provisional credit;
■ ■ ■ Failing to notify the customer within three
business days of an error correction and finalized
provisional credit;
■ ■ ■ Failing to notify the customer in writing upon debiting the provisional credit because the
investigation found no error;
■ ■ ■ Requiring the customer to research
the claim with the merchant;
■ ■ ■ Resolving the dispute after the applicable time limit; and
■ ■ ■ Not waiving NSF fees if provisional
credit is reversed.
Missteps That Lead to Violations
Many Regulation E violations can be traced back easily to missteps. For example, FIs might send form letter notifications to
customers and omit some of the required language, such as language that describes the customer’s ability to request additional
information if a claim is denied, or explains that a provisional
credit will be made permanent if the investigation determines
an error did indeed occur.
Form letter templates that allow manual overrides can lead
to some customers receiving letters without all of the required
information, or with inaccurate information. Well-intentioned
employees who are merely trying to make things easier for customers by, removing language that seems irrelevant, for instance, can
expose the FI to violations. Banks can overcome concerns with
Reg E notices and standardized forms by ensuring that forms are
reviewed and approved by the compliance function.
The resolution process also can be the source of violations.
Disputes might be handled inconsistently. For example, ACH-related claims could be processed one way and ATM claims could
be processed another. Fraud claims might go through different
processes than non fraud-related claims. A branch could apply
a process not used by the branch in the next town, particularly if
the company has gone through a merger or acquisition.
FIs need to take a holistic view of their processes, taking into
account, for example, that Reg E claims can come in online or
through the call center, branch, or mail. The many potential
channels of a dispute mean that claims might not be logged
accurately, in a timely manner, or even logged-in at all if the
Many Regulation E
violations can be traced
back easily to missteps.
