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Government watch
Reg. E Error Resolution: Everyone’s Business
so provisional credit doesn’t kick in. Easier said than done, of course. But, the key for all parties— particularly TPSPs—is to under- stand the rules of the Reg. E error resolution road, fulfill their respon- sibilities to a T, and work quickly and accurately. There’s no room for sloppiness.
Here are five discussion topics
that may be useful as you review or conceive your comprehensive Reg. E compliance program in support of your financial institution prepaid issuer:
2 What’s a Reg. e eRRoR and
What’s not
Not every interaction with a con- sumer triggers Reg. E error resolu- tion procedures. For example, if a consumer makes a routine balance inquiry request, asks for information for tax or recordkeeping purposes, or requests duplicate copies of documentation, a Reg. E error isn’t triggered. But, make sure you understand what the consumer is saying or asking, and never, ever try to “talk a consumer down” from alleging a Reg. E error (“If you think your son made that transaction, you’d better talk to him before you talk to us.”) or put up barriers to alleging an error (“We can’t start our investigation until we get a police report.”).6 If the consumer alleges an error, you are required to accept that allegation at face value in terms of starting an investigation. Period.
But, recognize that not every prepaid card is actually covered by Reg. E. Currently, Reg. E error resolution requirements apply to a subset of prepaid cards: payroll cards, cards that are eligible to receive federal benefits,7 federal tax refunds, government wages or wages from a company with govern- ment ownership.8 (Note: Some state-administered prepaid cards follow federal requirements.)
The problem, of course, is differenti- ating between prepaid cards to determine if they’re subject to Reg. E error resolution procedures. It’s often hard for TPSPs to make this
determination, although the issuing financial institution is better posi- tioned because it can access BIN tables. But, even the issuing finan- cial institution is challenged to identify all federal payments. This difficulty has led some prepaid issuers to treat all error resolution allegations as falling under Reg. E, even if technically they don’t.9 As
a TPSP you must understand your prepaid issuer’s policies on how it handles errors that technically aren’t covered by Reg. E.
There are other unusual and sticky situations you may run across, such as how to handle a bill pay transac- tion initiated electronically but paid via paper check. How to handle every oddity that arises is beyond the scope of this article, but the example highlights that employees handling consumer complaints or error allegations involving prepaid (and other forms of electronic transactions) must be great listeners and understand the nuances of what consumers are telling them.
If employees are suspicious that
a situation may be triggering a Reg. E error, they must escalate the inquiry to someone qualified to make a determination.
By the way, in the above example, a bill pay transaction initiated electronically but paid via paper check generally isn’t covered by Reg. E.
But, what happens if an error alle- gation doesn’t fall under Reg. E? The financial institution still has an obligation to resolve the problem
1
Reg. e Is a Con- sumeR PRoteCtIon RegulatIon
The purpose of Reg. E is to pro- tect consumers—not financial institutions or other businesses
in the prepaid value chain. It doesn’t matter if consumer negli- gence (like writing a PIN on the back of a card) contributed to the unauthorized use: All Reg. E error resolution requirements apply. Even if the cardholder mentions that a friend or family member made the unauthorized transaction, it’s still a Reg. E error (provided the consumer doesn’t benefit from the “unauthorized” transaction).
If you understand the under- lying intent of Reg. E, a lot of
the error resolution requirements become more understandable, although not necessarily easier to comply with.