Late EFT Errors
By David Dickinson
I believe one of the most misunderstood regulatory issues is bankers telling consumers they cannot make a claim on an unauthorized electronic funds transfer because it is "too old". A claim is never "too old" to be dismissed. The customer can tell you 10 years after the error and you must still investigate promptly and resolve the issue. Many bankers misunderstand because they believe the information on their statements indicating "If no reply is received within sixty days the account will be considered correct." This is a generalization and a prompting to your customers but you cannot hold them to it.
Section 205.6 of Reg E always applies, no matter when the consumer informs the institution. Section 205.11 only applies if they inform the bank within 60 days following the first statement showing the first error. What's the difference between these two? Section 205.11 requires provisional credit and the time limits (45/90 days) in which the institution must resolve the issue. Therefore, if they tell you "late" you don't have to provide provisional credit and you don't have to resolve it within 45/90 days, but you must still resolve the issue promptly.
There is some relief to bankers. Reg E caps the liability to the institution in reoccurring transactions (monthly ACH's, for instance) to just those that occur within 60 calendar days following the first statement showing the first error. Basically, there's a 90 window in which the customer is ALWAYS protected, but the institution does not have to pay for unauthorized errors following this period.
Let me illustrate. Let's say $100 is being taken out of my account by ACH every month, beginning on January 5th. I don't open my statements until the end of the year. I don't provide timely notice, so the institution is not liable for any unauthorized debits following 60 days after the January statement. Therefore, the bank is liable for the January, February and March debits ($300), but not for any other unauthorized debits in the series.
If you're not familiar with this requirement, we covered this in more detail in our August 2004 e-newsletter. Check it out. You may also find the OCC's Handbook "Depository's Services" helpful. On page 40 there is a table explaining section 205.6 and on page 44 there is a flowchart of section 205.11. Be sure to read them carefully.