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If an ATM does not dispense the correct amount of cash, do the investigation time frames and consumer liability caps from Regulation E apply? – IBA Compliance Connection

IBA Compliance Connection

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If an ATM does not dispense the correct amount of cash, do the investigation time frames and consumer liability caps from Regulation E apply?

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Regulation E’s error resolution time frames do apply to incorrect ATM withdrawals. The 10-day and 45-day time limits on investigations apply to all “errors,” including a “consumer’s receipt of an incorrect amount of money” from an ATM.

However, Regulation E’s consumer liability caps do not apply to incorrect ATM withdrawals. The consumer liability caps apply only to an “unauthorized electronic fund transfer,” defined as “an electronic fund transfer from a consumer’s account initiated by a person other than the consumer . . . .” Presumably the customer initiated the ATM transaction, in which case it should not be treated as “unauthorized” and is not subject to Regulation E’s consumer liability caps.

For resources related to our guidance, please see:

  • Regulation E, 12 CFR 1005.11(c)(1) and (2) (“(1) A financial institution shall investigate promptly and, except as otherwise provided in this paragraph (c), shall determine whether an error occurred within 10 business days of receiving a notice of error. . . . (2) If the financial institution is unable to complete its investigation within 10 business days, the institution may take up to 45 days from receipt of a notice of error to investigate and determine whether an error occurred . . . .”)
  • Regulation E, 12 CFR 1005.11(a)(1)(v) (“The term ‘error’ means: The consumer’s receipt of an incorrect amount of money from an electronic terminal . . .”)
  • Regulation E, 12 CFR 1005.6(a) (“A consumer may be held liable, within the limitations described in paragraph (b) of this section, for an unauthorized electronic fund transfer involving the consumer’s account . . . .”)
  • 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. . . .”)