Requiring Reg E Disputes to be Submitted Only Online
In this Compliance Clip (video), Adam answers a question related to streamlining the EFT dispute process by requiring customers to submit all disputes online so that they can easily flow into a help-desk type software for tracking purposes. Adam provides two examples where other financial institutions have had similar requirements and how this process worked out for them.
Video Transcript
The following is a transcript of this video.
This Compliance Clip is going to answer the question, can we require Reg E disputes to be submitted only online? This is a question that I recently saw and relates to electronic fund transfer disputes under Regulation E. So the question we have here is, “Would we be allowed to require all Reg E disputes to be submitted online for a streamlined process?”
I understand there are help desk options out there. There are different software that would make things very slick, very smooth and very efficient if we could just have all disputes go online and go into the system automatically from the customer inputting this. In fact, I've seen some instances where financial institutions are trying to cut back the duties on their call center staff or even eliminate a call center altogether. So they're trying to find ways to streamline the Reg E disputes. One thing they might wanna do is put the dispute process online so the customers just enter the information themselves. Well, the question is, can they go to only doing that?
The answer, of course, to this is found in Regulation E. It's found in 1005.11(b)(1). In looking at 1005.11(b)(1) of Regulation E, it says that a financial institution shall comply with requirements of this section with respect to any oral or written notice of error from the consumer. So what they're talking about here is the requirements of this section are the dispute processes or the procedures for resolving errors under regulation E. When a customer has a potential error and they wanna dispute it, this rule under 1005.11(b)(1) says that you must follow these rules with respect to any oral or written notice. The bottom line is you cannot require all of your disputes to be submitted online. You have to permit the customer to contact you by phone, and then you must begin the investigation if they contacted you verbally. You cannot require something in writing in order for you to begin the investigation.
Just to clarify, you can require something in writing if you've disclosed it in relationship to provisional credit. So you can withhold provisional credit if they don't provide you something in writing and you've asked for it, but you cannot delay your investigation. There's a big difference there on giving provisional credit or investigating. So you absolutely have to investigate. If you find that they're correct, even if you didn't get provisional credit, then you still have to refund them their fees. That's how Regulation E works. But you absolutely have to investigate an error upon an oral request. You cannot require anything in writing to begin your investigation.
In fact, this has been a hot topic over the years, especially in relationship to UDAAP, which is the Unfair and Deceptive or Abusive Acts or Practices rule by the Federal Trade Commission. So this is something that's shown up quite a bit. In fact, there's a couple of recent examples on how this has been a problem when financial institutions have not allowed a consumer to dispute an error through an oral request.
The first example I have for you here is from the USAA Consent Order that took place in early 2019. This was a big consent order from the Consumer Financial Protection Bureau with USAA bank. One of the things that was found in this consent order, and there were a lot of things, but one of the things found was that USAA was requiring a specific written form. It was one of their internal documents had to be signed by customers before they would proceed with an investigation. And in that consent order, it talked about how the financial institution cannot require their own form, they have to permit consumers to submit an oral request, and that oral request must trigger that investigation.
Also, another example was the FDIC recently came out with guidance and their Consumer Compliance Supervisory Highlights, which was released in June of 2019. In this document, they mentioned several things that were problems with Regulation E, but one of the things they said was some financial institutions failed to investigate consumer error claims promptly upon receipt of oral notifications. In other words, when an oral notification came in, these financial institutions were not properly conducting their investigation and therefore were found to violate Regulation E.
The bottom line is you must promptly investigate an error upon receipt of either a written or oral notification from the customer. And the bottom line to our question is that we cannot require all disputes to go through our website because that would not be accepting oral notifications for EFT disputes.
That's all I have for you for this Compliance Clip.