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FOS Blog

06 Mar
2016

Regulation E Disputes and Written Notification Requirements

Regulation E Disputes and Written Notification Requirements – When the “Or” Means More

What is your institution’s policy regarding the investigation of Regulation E disputes and granting of provisional credit when the customer doesn’t or won’t provide the dispute in writing?  Let a careful review of Regulation E be your guide to ensuring your institution is compliant and aware that written notification, investigations, and provisional credit do not always go hand-in-hand.

The first step in any Regulation E dispute is the Bank’s receipt of a customer’s notification of an error or unauthorized transaction.  Within 60 days of identifying an error, or unauthorized transaction, the customer must provide the institution with just enough information for an investigation to begin – name, account number, and as much information as possible about the disputed transaction.  Once notification is received, the institution’s investigation must begin within 10 business days.  Many institutions require customers to complete a written dispute form during the initial stage of the dispute process, but it is important to understand the “why” behind this requirement.  Most card processors require written dispute documentation from the customer to accompany chargebacks submitted by institutions for the purpose of receiving credit for disputed transactions.  Failure to submit something in writing from the customer may result in the processor’s refusal to credit the institution, although the institution will still be required under Regulation E to ultimately credit the customer if the dispute is found to be valid.

The understandable question arises – if the institution faces the risk of financial loss if the customer refuses or forgets to submit their dispute in writing, can’t we require written notification before proceeding with disputes, or deny disputes in these instances?  The answer is no.  It is crucial for your institution to understand that the investigation must begin once the customer notifies you in-person, by telephone, or in writing – not and in writing.  Now, keep in mind, Regulation E does not turn its back on institutions entirely here – although your institution is restricted from requiring written notification in order to begin and complete the investigation, your institution can refrain from providing provisional credit if the customer fails to submit written notification within 10 days of the initial verbal notification as long as the institution’s Regulation E policy includes this requirement and the customer has been made aware of this requirement.

Require written notification in order to investigate a dispute?  No.  Require written notification within 10 days of verbal notification in order to grant provisional credit?  Yes, but only if this is your institution’s policy and the customer has been informed of the requirement.  Regulation E is the regulation where the “or’s” may mean more than your institution expected.  With debit card fraud and customer disputes on the rise, take a close look at your Regulation E policy, and frontline training, to make sure your institution knows the “and’s” and “or’s” of Regulation E compliance.

For additional information contact the author Julie J. Mixtacki at jmixtacki@fosaudit.com.

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