Yes, you may begin investigating the error when a customer notifies you of an unauthorized transaction that is still pending. However, in our view, Regulation E’s 10-day deadline for completing the investigation (or 45-day deadline if you have provided provisional credit) does not start until the transaction actually posts.

Regulation E’s error resolution requirements are triggered when a consumer gives notice of an “error,” which includes inquiries about incorrect “electronic fund transfers.” Strictly speaking, a pending transaction does not meet the definition of an “electronic fund transfer” because no funds have been transferred. Before the funds have been transferred, there can be no error for the customer to report.

That said, it is in the best interest of all parties for you to commence your investigation as soon as you receive notice of the purported error — even if the transaction is still pending. In most cases, the pending transaction will disappear (if there has been no charge) or post (if there has been a charge) within a few days, before the ten-day deadline. In addition, though we are not aware of any regulatory guidance or court cases on this point, it may be considered “unfair” in violation of the Consumer Financial Protection Act to require the customer to wait and notify you when the transaction actually posts before you begin any sort of investigation. Therefore, we recommend initiating your investigation into the pending error as soon as the customer provides notice.

However, we reiterate that the error resolution deadlines imposed by Regulation E likely are not triggered until the error occurs — that is, until the transaction posts. Consequently, you should communicate clearly with your customer regarding your investigation process in order to manage their expectations of your deadlines and their rights under Regulation E.

For resources related to our guidance, please see:

• Regulation E, 12 CFR 1005.11(c)(1) (“A financial institution shall investigate promptly and . . . shall determine whether an error occurred within 10 business days of receiving a notice of error.”) 

• Regulation E, 12 CFR 1005.11(a)(1) (The term “error” means “an unauthorized electronic fund transfer; an incorrect electronic fund transfer to or from the consumer’s account; the omission of an electronic fund transfer from a periodic statement . . .”)

• 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, 12 CFR 1005.3(b) (“The term “electronic fund transfer” means any transfer of funds that is initiated through an electronic terminal, telephone, computer, or magnetic tape for the purpose of ordering, instructing, or authorizing a financial institution to debit or credit a consumer's account.”)

• Consumer Financial Protection Act, 12 USC 5531 (Prohibits unfair, deceptive, or abusive acts or practices.)