Topic: Unauthorized Transactions
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Can we initiate Regulation E’s error dispute procedure when a customer notifies us of an unauthorized transaction that is still pending? What regulatory risk do we face if we wait until the transaction actually posts?
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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…
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How long do corporate customers have to report an unauthorized “PPD” ACH transaction? Our account agreements provide that customers must notify us of unauthorized transactions within 30 days of receiving a statement showing the unauthorized transaction, and a customer did notify us within that time frame.
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Generally, a business customer’s time frame for reporting an unauthorized ACH transaction for a commercial account will be governed by your account agreement, which in your case requires business customers to report unauthorized transactions within thirty days. However, your bank’s deadline for reporting a transaction for reimbursement from the originating depository financial institution (ODFI) is…
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A customer just notified us of unauthorized transactions on the customer’s personal account made through prearranged PPD ACH transactions. Some are from last month, and others are from over four months ago. Which, if any, do we have to reimburse him for?
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Regulation E requires you to reimburse the customer for the unauthorized ACH transactions that occurred within the first sixty days after your bank provided a periodic statement showing the unauthorized transactions. For unauthorized transactions on consumer accounts that do not involve a debit card or other access device, Regulation E requires banks to reimburse only…
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Do we need to obtain ink or wet signatures on stop payment orders? Do we need a written acknowledgment of stop payment orders?
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Disclaimer: The Electronic Commerce Security Act (ECSA) was repealed and replaced with the Uniform Electronic Transaction Act (UETA), effective June 25, 2021. Please note that this change may affect the continued accuracy of this guidance as it pertains to the ECSA. No, we believe that you may accept electronic signatures for stop payment orders. Both Illinois…
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One of our bank board members owns a business. The business mailed a check to a vendor. Forty days after the check was cashed, the vendor notified the business that the vendor did not receive the check. The business customer requested a copy of the check that was cashed and discovered it had been altered. Is the business customer liable for the fraudulent check? Should the payor bank give the business customer credit for the check? Can the business do anything to receive provisional credit or is that subject to bank procedure?
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Based on the facts provided, it is difficult for us to determine who is liable for the altered check, and we recommend that your board member review his account agreement with the payor bank and consult with an attorney to assess the various factors discussed below. In general, a payor bank that pays a fraudulently altered…
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Master Card requires written confirmation signed by the card holder when disputing an unauthorized transaction. If the customer refuses to provide written confirmation of an unauthorized debit (via fax, e-mail, standard mail, or coming into the bank), how do we proceed to file a claim with Master Card? I understand that we do not have to give provisional credit without proper forms signed, but after the 45-day investigation what would be the proper procedure?
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It is difficult to reconcile Regulation E with credit card company policies because they do not always align. In this case, regardless of Master Card’s policy, Regulation E requires that you investigate the disputed charge. Procedurally, after your 45-day investigation period, you must notify the customer of the results of your investigation and correct the…
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For a joint deposit account, should we be accepting a form reporting an unauthorized ACH debit from just one of the joint owners? For example, it doesn’t seem logical to return an ACH as unauthorized unless all owners are willing to attest that the charge was unauthorized.
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Yes, you may accept a “written statement of unauthorized debit” (WSUD) from a joint account holder without the other joint account holder’s signature. Under the NACHA rules, the “Receiver” must sign the WSUD. Because the term “Receiver” is defined to include “all Persons whose signatures are required to withdraw funds from an account,” and either…
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What is our potential liability when a customer deposits checks made out to a business name (“Smith & Associates”) that does not match the customer’s name (“123 LLC”)? The name “Smith & Associates” is not registered as a business entity or as a d/b/a name.
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Depositing these checks into your customer’s account without endorsements could raise a number of concerns. First, your examiners may criticize this practice due to the risk that your customer is using the unendorsed checks made out to a different payee to launder money or engage in other illegal activities. Second, your bank is risking liability…
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One of our commercial customers reported several checks as forgeries promptly after receiving its account statement. The customer’s employee had stolen the checks and forged them. Should we file a police report? If the customer receives restitution from its employee, would we be entitled to receive that restitution?
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Since a police report already has been filed regarding the forgeries, the question becomes whether the bank should file a suspicious activity report, which would be required if the total dollar amount of the forgeries exceeds $5,000. Also, under the Uniform Commercial Code (UCC), in most circumstances, you will need to reimburse the customer for…
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We received a Fedwire transfer request and paid the funds into our customer’s account. The next day, we learned from the originating bank that it very likely was a fraudulent transaction (related to an email scam), where someone impersonated the originator to initiate the transfer. The originating bank has requested that we return the funds, and we froze our customer’s account before he could withdraw the funds. We have confirmed the identity of the originator and originating bank and obtained a copy of the originator’s police report. Do we need any other documentation before returning the funds?
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No other documentation is required. The process of returning the wired funds is not governed by any laws or regulations related to Fedwire transfers. We recommend reviewing your account agreement with the customer to ensure that you are within your rights in freezing and removing funds from the customer’s account (which is likely in this…