New Time Frames for Reg E Error Correction

The Federal Reserve Board has issued a final rule on timing requirements for the error corrections provisions of Regulation E. On the whole, the news is pretty good.

In its proposal, the FRB asked for comment on eliminating the extended time periods for crediting accounts and resolving complaints for transactions at point-of-sale and foreign locations. In the final rule, the FRB adopted the tighter provisional credit time frame but retained the 90-day period for resolving errors. Provisional crediting for POS and foreign-initiated transactions is now a uniform 10 days.

In addition, the new rule clarifies some questions about new accounts and also provides banks with greater protection against new account fraud. Regulation E now uses a new account definition similar to that of Regulation CC. Accounts are new for 30 days. Here, the provisional crediting schedule is extended to 20 days.

These changes may simplify compliance. Failure to give provisional crediting on time is one of the most common compliance failures. Now, except for new accounts that are flagged for other reasons as well, all provisional rules follow the same schedule. However, the extended time to resolve the complaints for POS and foreign-initiated transactions is realistic.

The Board also revised the model error resolution notice to clarify that the bank has three days to notify the customer of the resolution, including when the finding is that there was an error.Compliance is optional immediately, and mandatory by April 1, 1999.

On this proposal, the Board received 55 comments - a better showing than for Regulation C, but still very low. Fortunately, among the 55 commenters were institutions that provided clear factual support for the delays and problems that they encountered in investigating and resolving POS and foreign-initiated transactions.

Copyright © 1998 Compliance Action. Originally appeared in Compliance Action, Vol. 3, No. 13 & 14, 10/98