Saturday, December 16, 2017

Regulation E and Business Account Errors

Posted by Sharon November 6, 2017 2:59pm

Photo Credit: olegdudko

I was asked this week, how and when does Regulation E apply to business customers if they report a claim? My answer: it doesn’t, but it could.

Regulation E is otherwise known as 12 CFR 1005, Electronic Funds Transfers. The Electronic Funds Transfer Act was passed in 1978 by President Jimmy Carter, to establish the rights and liabilities of consumers as well as the responsibilities of all participants with respect to electronic funds transfer activities. This consumer regulation is designed to protect the integrity of the systems used for transferring funds electronically and to provide a mechanism for reporting errors, unauthorized transactions, and fraud. Specifically, section 1005.11 pertains to procedures for resolving errors. An error, as defined by Regulation E, is generally an unauthorized electronic funds transfer.

Consumers are obligated to report unauthorized activity as quickly as possible to their bank for investigation. The longer consumers wait, the more liability they will have for unauthorized activities such as withdrawals from their bank accounts.

Regulation E is a consumer regulation. It does not specifically apply to business customers. However, the bank is still under contractual agreement with the business customers. So, based on the language that is included in the business account disclosures, the various terms and conditions, as defined in Regulation E, might also apply.  Thus, the specific contractual agreement as opposed to a regulatory requirement may also subject the Bank to similar terms. One would need to review any account agreements and Truth in Savings (“TIS”) disclosures given out to business customers.

If the bank provides the same disclosures to its business customers as it does to its consumer customers, the bank will be contractually bound to treat business customer claims in the same manner as consumer claims under the Regulation E requirements. If this is not the bank’s intent, then the bank should create separate disclosures for its business customers as opposed to its consumer customers. It’s all in the disclosures!

Comments

Add a comment

  • Required fields are marked with *.

If you have trouble reading the code, click on the code itself to generate a new random code.



 Image

Sharon Geiger

Quality Control Specialist

Sharon Geiger, Quality Control Specialist Sharon has 27 years banking experience, 21 of which have been involved in internal audit. She has extensive knowledge of all aspects of the banking industry, with a particular emphasis on regulatory compliance and identifying risks and controls. As QCR Specialist, she performs Quality Control Reviews to ensure all workpapers and reports are completed in compliance with the firm's standards.



Sharon's Posts Subscribe to RSS Feed



Regulation E and Business Account Errors
Controls over Employee and Officer T&E Expenses
Is Regulation CC Put on the Back Burner?
Keep an Eye On Your Chip!
Top Compliance Topics Discussed at the NJ Bankers Compliance University
Some tips and tricks for dealing with Regulatory Examinations
Updated Regulation E Booklet from the OCC!
Is Flood Disaster Still on the Heat Map?
Have You Implemented Your Plan yet?
FDIC Consumer Newsletter
More Flood Insurance Changes...
Same Sex Married Couples - Ensuring Equal Treatment – Announcement from Consumer Financial Protection Bureau
Truth in Lending (Regulation Z) Annual Threshold Adjustments (CARD ACT, HOEPA and ATR/QM)
ABA Survey on Impact of Dodd Frank Compliance
ABA Mortgage Origination Deskbook
Who handles Your Dormant Accounts?
How do you charge Early Withdrawal Fees on Time Deposits?
Do you still offer NOW Accounts?
Policy Changes Required – Do you Wait until Annual Approval?
ACAMS to provide Free Webinar
ACBB Changes its Name
Who Do You Give Cash to?
ABA Briefing to Help Banks Address Cyber-security Threats
The OCC Issues Booklet: “A Common Sense Approach to Community Banking”
Safe Deposit Box Contents are not insured – But They COULD Be!
FDIC Can Review New Products
Let’s Talk About Overdrafts!
Regulation E and NACHA Rules: When you Want to Stop Payment on a Recurring Debit
CFPB Stands Up Against Poor Debt Collection Practices
Don’t Forget the Small Stuff
Double Endorsed Checks: What is the Risk?
Social Media – Will the Regulators Do Spot Checks?
Solutions to Reducing Dormant Accounts at Your Institution
Regulation E Foreign Remittance Rules
Expiration of Unlimited Deposit Insurance for NIBTAs
Regulation O – 5 Easy ways to avoid violations