Reg E: Ready. Set. Investigate!

Amy Donaghue

By: Karen Nearing, AAP, APRP, CAMS, CRCM, NCP, Director, Compliance Education

An account holder contacts your financial institution via phone to inquire about an error or unauthorized electronic transaction that posted to their account. Your institution requires something in writing to be able to EASILY handle the dispute. Does that mean that the investigation does not begin until the written confirmation of the error is received by the institution? While it would be easier to have the written confirmation from the account holder, the answer is no.

The error resolution process, aka investigation, should begin as soon as a consumer account holder gives notice of an error according to Regulation E 1005.11 (b) – even if they don’t provide their account number! The staff interpretation of Regulation E 1005.11 (b) (i) specifically says, “The notice of error is effective even if it does not contain the consumer’s account number, so long as the financial institution is able to identify the account in question.”

Institutions can request written confirmation of the error but completing the error resolution investigation cannot be dependent on receiving written confirmation. If the institution requests written confirmation of the error but does not receive it, the institution must still complete the investigation. The official staff interpretation of Regulation E 1005.11 (b) (ii) states, “While a financial institution may request a written, signed statement from the consumer relating to a notice of error, it may not delay initiating or completing an investigation pending receipt of the statement.” Regulation E allows for a financial institution to require written notice within 10 days of oral notice from the consumer; however, lack of written notice by the consumer only enables the institution to withhold provisional credit according to the staff interpretation in section 1005.11 (b)(2). An error dispute cannot be denied based on the fact that no written confirmation of the error was received.

During the investigation, the institution may ask additional questions about the dispute including who had access to the account information, including the debit card and online banking credentials. The answers may aid in the investigation but do not give the institution the right to deny a claim. The institution needs to determine if the consumer was a party to the transaction and if they benefited from the transaction. If the institution can determine the consumer provided the information to another party and agreed to the transaction, the claim can be denied. If the consumer did not provide the information and did not benefit from the transaction, the consumer should be made whole.

Every dispute claim is different and should be treated as a new investigation each time. The investigation process should be thorough, and the consumer notified of the outcome.

The most recent CFPB version of the Regulation E can be found here.

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