TIP: If you attended our recent Fall Compliance Roundtable in Wisconsin Dells, you know that one of our speakers was Tom Theune, Deputy Director of the Wisconsin Office of Credit Unions. Among his other responsibilities, Tom responds to consumer complaints about state credit union practices. Tom shared some of the common complaints he gets. Topping his list was this: Some credit unions tell members that they will not start investigating a claim of an unauthorized electronic funds transfer (EFT) – like purchases made with a member’s stolen debit card – until the member files a police report or signs a fraud affidavit. Tom warned credit unions against this practice, and he’s right.
When a member reports unauthorized debit card transactions, a credit union must follow Reg. E error resolution procedures. Exhibit B to The League’s ii Release No. 0120 has a flow chart illustrating the Reg. E requirements for resolving errors, including claims of unauthorize EFTs. The ii Release explains that Reg. E requires the credit union to start its investigation “promptly,” and it doesn’t give the credit union leeway to require a police report or other documentation as a prerequisite.
The Consumer Financial Protection Bureau (CFPB) confirmed this in a set of frequently asked questions about Reg. E. Here’s one of their Q&As:
Q. Can a financial institution require a consumer to file a police report or other documentation as a condition of initiating an error resolution investigation?
A. No. A financial institution must begin its investigation promptly upon receipt of an oral or written notice of error and may not delay initiating or completing an investigation pending receipt of information from the consumer. See Comments 11(b)(1)-2 and 11(c)-2. In the past, Bureau examiners found that one or more financial institutions failed to initiate and complete reasonable error resolution investigations pending the receipt of additional information required by the institution. These examples can be found in the Bureau’s Summer 2020 edition of Supervisory Highlights and Fall 2014 edition of Supervisory Highlights . The Bureau cited similar violations in 2019-BCFP-0001.
EFTA states that “no writing or other agreement between a consumer and any other person may contain any provision which constitutes a waiver of any right conferred or cause of action created by this subchapter.” … By requiring consumers to “cooperate” with Regulation E error investigations and provide information beyond that which is required in EFTA and Regulation E, the financial institutions’ agreements contained provisions that waived consumers’ rights in violation of EFTA.
A credit union may require a written confirmation of an oral notice of error within 10 business days if the consumer is so advised when the oral notice is given. If confirmation is not received, the credit union still must comply with the error-resolution procedures, but it need not comply with the requirement (discussed below) to credit the account provisionally if it takes longer than 10 business days to resolve the matter. … A credit union may use disclosures which set a 20-day time period when the notice of error involves an EFT to or from an account within 30 days after the first deposit to the account was made.
Also, the written confirmation only needs to include the same information the verbal notice of error is supposed to include. It must (a) enable the credit union to identify the member (account number, member number, social security number or other personal identifier); and (b) indicate why the member believes an error exists along with the type of error, date, and amount of the error.