Reversing a Premature Reg E Claim

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Question:

We had approved and closed a Reg E claim prematurely and the merchant later represented with a copy of a receipt that bears our cardholder's signature. Can we now reverse our decision and debit the client's DDA? If so, do we have to send a new resolution letter?

Answer:

Yes. Refer to Section 205.11(d):
"In addition to [the investigation time limits] the financial institution shall follow the procedures set forth [below] if it determines that no error occurred or that an error occurred in a manner or amount different from that described by the consumer:
a. Written explanation. The institution’s report of the results of its investigation shall include a written explanation of the institution’s findings and shall note the consumer’s right to request the documents that the institution relied on in making its determination. Upon request, the institution shall promptly provide copies of the documents.
b. Debiting provisional credit. Upon debiting a provisionally credited amount, the financial institution shall notify the consumer:
1) Of the date and amount of the debiting; and
2) Notify the consumer that the institution will honor checks, drafts, or similar instruments payable to third parties and preauthorized transfers from the consumer’s account (without charge to the consumer as a result of an overdraft) for five business days after the notification. The institution shall honor items as specified in the notice, but need honor only items that it would have paid if the provisionally credited funds had not been debited.

Editor's Note: Banks should wait for the duration of the allowed investigatory period when a merchant has the option to contest a charge. Once the period ends, the investigation must be finalized. We would not encourage a bank to reverse any EFT claim after that against the consumer.

First published on BankersOnline.com 11/03/08