IBA Compliance Connection

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The answer to a prior question on GoToIBA.com related to Regulation E resolution claims states that a bank “may not require the customer to sign an affidavit or provide a proof of purchase, receipt, email, or cancellation number.” Could there ever be a situation where a customer has one of these items for an unauthorized transaction? Wouldn’t the fact that the transaction is unauthorized mean that the customer does not have access to such items? Also, can we inform a customer that we may press charges if we discover that their family member is the source of an unauthorized transaction, or must we research their claim before raising this possibility? We want to inform the customer of this possibility, but we don’t want to discourage error resolution claims.

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We believe there may be circumstances where a customer has a proof of purchase, receipt, email, or cancellation number relating to an unauthorized transaction. For example, a customer may be able to obtain these items by requesting them from the merchant with whom the unauthorized transaction was made. Or, in the case of a forced initiation at an ATM, the customer may be able to obtain a receipt or periodic statement showing the forced withdrawal from their account.

However, a bank cannot require a customer to obtain such documentation when making an error resolution claim. As noted in our prior Q&A, if a consumer provides a timely notice of error, Regulation E’s investigation and resolution requirements are triggered after the consumer provides: (1) sufficient information to identify the consumer’s name and account number, (2) an indication of why the consumer believes an error exists, and (3) to the extent possible, the type, date and amount of the error. You may request that the consumer provide other documentation, but you may not require the consumer to do so.

Regarding your second question, we recommend reviewing your bank’s policies and procedures related to error resolution claims. If you typically press charges when you learn the identity of the person who made the unauthorized transaction, we believe it would be appropriate to inform your customer of this policy. However, we would not recommend referring to a specific person, such as “your family member” when notifying your customer of the policy.

For resources related to our guidance, please see:

  • Regulation E, 12 CFR 1005.2(m) (“‘Unauthorized electronic fund transfer’ means an electronic fund transfer from a consumer’s account initiated by a person other than the consumer without actual authority to initiate the transfer and from which the consumer receives no benefit. . . .”)
  • Regulation E, Official Interpretations, Section 2(m), Comment 4 (“Forced initiation. An EFT at an ATM is an unauthorized transfer if the consumer has been induced by force to initiate the transfer.”)
  • Regulation E, 12 CFR 1005.11(b)(1) (“A financial institution shall comply with the requirements of this section with respect to any oral or written notice of error from the consumer that: (i) Is received by the institution no later than 60 days after the institution sends the periodic statement or provides the passbook documentation, required by § 1005.9, on which the alleged error is first reflected; (ii) Enables the institution to identify the consumer’s name and account number; and (iii) indicates why the consumer believes an error exists and includes to the extent possible the type, date, and amount of the error, except for requests described in paragraph (a)(1)(vii) of this section.”)
  • FDIC, Chicago Region Regulatory Conference Call (July 29, 2014), slides 26–28 (“Concerns: Some financial institutions are imposing greater requirements on consumers for reporting unauthorized electronic fund transfers than allowed by Regulation E. Examples: . . . ‘Requiring consumer to physically come in to bank to complete paperwork . . . Requiring consumer to attempt to resolve error with merchant first . . . .”)
  • OCC, EFTA Consumer Compliance Handbook, page 27 (“An institution may request a customer’s reasonable cooperation in any such investigation. It may not, however, deny a claim of error based solely on the cardholder’s failure to comply with such a request.”)