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Government watch
Reg. E Error Resolution:
EvEryonE’s BusinEss
speed
timing
availability of the funds within two business days of the credit. And, there can’t be any restrictions on access to the credited funds.
If the financial institution later deter- mines the error didn’t occur or there was a different error, it may debit the provisionally credited amount from the consumer’s account, but it must provide specific notification to the consumer and honor debits to the account for five business days after notification. (Some issuers minimize potential issues by provid- ing notice five days in advance of reversing the provisional credit.) But, if the consumer has spent the money or closed the account, the financial institution may be left holding the bag. The problem of closed or emptied accounts appears to be more significant with prepaid cards because the relationship between the cardholder and finan- cial institution is often thinner or less sticky than, say, a DDA relation- ship. And, most of the time, there aren’t any other accounts to offset the missing funds in the closed or emptied prepaid account.
The best solution to the challenge of provisional credit is resolving as many alleged errors as possible within the required time frame,
accuracy
rules
By Marilyn Bochicchio, CEO
If you’re a third- party service provider to prepaid issuers, don’t overlook your Regulation E error resolution responsibilities. Here are five topics to think about.
This article is intended for general information purposes only and should not be construed as legal advice. Readers are urged not to act upon the information without first consulting an attorney.
Regulation E, implementing the 1978 Electronic Fund Transfer Act, was created largely to protect consumers
who used what were then new- fangled ATMs or recurring ACH payments. Nearly 40 years later, the CFPB is using Reg. E to ad- dress new forms of electronic payment, while sending clear signals that it’s intent on enforce- ment—and error resolution compli- ance is squarely in the enforcement crosshairs. In prepaid’s complex value chain, Reg. E error resolution compliance often is a shared responsibility, with third-party service providers (TPSPs) playing
a critical role.1, 2
Provisional Credit
We all know the critical issue with Reg. E error resolution: It’s the provisional credit. In general, the regulation requires financial institu- tions to investigate and resolve, within 10 business days,3 a con- sumer (not business) allegation of an error that decreases the value of the consumer’s “consumer asset” account.4 If the error isn’t resolved within the required time, which is often challenging or even impos- sible, the disputed amount must be credited to the consumer’s account,5 and he must be notified of the
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