Feb 13, 2018 – In the Fall edition of the CFPB’s 2014 Supervisory Highlights publication, violations of the error resolution requirements prescribed by Regulation E were expressly addressed. These same violations were reiterated in the 2017 Summer edition of this same publication. In general, financial institutions were cited for placing more stringent requirements on consumers than what is permitted by the regulation, which resulted in missed timeframes, wrongfully denying claims, and in some cases, both. Here are a few examples these “more stringent” requirements:

  • Waiting to begin the investigation:
    • until the customer provides written confirmation,
    • a police report, or
    • any other documentation.
  • Informing customers that they must contact the merchant before a claim can be submitted.

Institutions were also cited for imposing greater liability on a consumer customer than is permitted under Reg E. Claims of alleged errors were denied for reasons such as being negligent (e.g., writing a PIN on the back of a debit card) and, on more than one occasion, the fact that the customer was in possession of the card and could not explain how it was compromised.

Violations such as these often stem from rules that pertain to the chargeback process, which are set forth by NACHA (for ACH) and the various card networks. Unfortunately, whether an institution can recover funds from the originating depository financial institution (ODFI) has no impact on a consumer’s liability. The basic premise of Reg E and thus, the timeframes consumers are obligated to meet, is to prevent future transactions from occurring. Ironically the transactions that an institution is often able to recover from the ODFI are those for which the consumer can be held liable.

In 2018 fraudulent activity is predicted to increase again. So now is a good time to take stock of your error resolution procedures and consider a Dispute Tracking System to gain efficiency in getting the information you need from your customer to process the chargeback. Consider FINBOA, a cloud based regulatory compliance software making it the most cost effective solution on the market. In addition, with a Certified Risk and Compliance Manager on staff FINBOA can answer your compliance questions and ensure your processes are correct.

2014 – CFPB Supervisory Highlights – Fall 2014 (refer to Section 2.3 Deposits – pgs. 9 – 11)
2017 – CFPB Supervisory Highlights – Summer 2017 (refer to Section 2.4 Deposits pgs 13 – 14)

About Lori Moore
Lori Moore is currently the Chief Compliance and Risk Officer at FINBOA, Inc., and has 30 years of experience in the financial services industry. During her career, she has gained an in-depth knowledge and practical experience within all areas of community banking and served in key positions including vice president of operations, BSA officer, compliance officer, internal audit and vice president of risk management. Lori Moore was also designated as the Outstanding Graduate of Texas Bankers Association Operations School.

FINBOA™ is headquartered out of Houston Texas. FINBOA™ helps community banks automate their compliance and regulatory needs. FINBOA™ delivers cloud based solutions that is accessible to both office and mobile users. By building a solution that conforms to both the desktop and mobile devices, FINBOA™ creates significant value for banks through the single platform solution. FINBOA™ is backed by Financial Software Solutions and FSSI, an angel investment company.

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