Reg E and ACH R

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Question:

One of our consumer customers overdrew her account and we returned the check unpaid. The payee converted it to a re-presented check (RCK) ACH entry that we paid. Our customer claims the ACH entry wasn’t authorized. Should we handle her claim as a Regulation E error claim?

Answer:

No. An RCK conversion entry is one of the ACH entries that are not included in Regulation E’s definition of “electronic fund transfer.” Therefore, it won’t be subject to the consumer protections of the regulation. There are, however, minimal authorization requirements for the RCK ACH entry. Before the Originator accepts the check from the Receiver (the check issuer), the Originator must provide a conspicuous notice to the Receiver (the check issuer) that it may collect the amount of the check electronically, and the check must be eligible for conversion to an RCK entry. Get a WSUD from your customer (you can require it because Reg E is not involved) and return the RCK entry using R11 within the extended return period.