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Federal Register / Vol. 86, No. 128 / Thursday, July 8, 2021 / Notices Requiring consumers to contact merchants about alleged unauthorized transactions before investigating;
Relying on incorrect dates to assess the timeliness of an EFT error notice;
Failing to provide an explanation or an accurate explanation of investigation results when determining no error or a different error occurred; and Failing to include in the error investigation report a statement regarding a consumers right to obtain the documentation that an institution relied on in its error investigation.
An effective compliance strategy for institutions includes evaluation of their practices, including through transaction testing, monitoring, and review of their policies and procedures. This will help ensure compliance with applicable Federal consumer financial laws and stop any practices that were previously identified as violations. Examples of other violations found by examiners are described below.

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2.4.2 Issues With Provisional Credits Under Regulation E, a financial institution generally must complete its investigation and determine whether an error occurred within 10 business days of receiving a notice of error.41 But an institution may take up to 45 days 42 to complete its investigation if it, among other things, provisionally credits the alleged error amount including interest where applicable to the consumers account within 10 business days of receiving the error notice.43 The institution need not issue a provisional credit if it requires, but does not receive, written confirmation of an oral notice of error within 10 business days.44 When institutions issue provisional credits, they must inform the consumer of the amount and date the credit was applied to the account within two business days after provisionally crediting the account.45 Within three business days of completing an error investigation, the financial institution must report the results to the consumer, including, if applicable, notice that a provisional credit has been made final.46
41 12 CFR 1005.11c1. Note that this 10-day period may be extended to 20 days for certain new accounts. 12 CFR 1005.11c3i.
42 This time period may be extended to 90 days for certain transactions, such as transactions outside the U.S., point of sale transactions, or transactions that occurred within 30 days of the first deposit to the account. 12 CFR 1005.11c3ii.
43 12 CFR 1005.11c2i.
44 12 CFR 1005.11c2iA. Note that even though a financial institution may request written confirmation within 10 days of receipt of an oral notice, it must begin its investigation promptly upon receipt of an oral notice.
12 CFR 1005, supp. I, comment 11b1.
45 12 CFR 1005.11c2ii.
46 12 CFR 1005.11c2iv.

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If an institution debits a provisional credit from a consumers account because it determines that no error occurred or that an error occurred in a manner or amount different from that described by the consumer, it must, among other things, notify consumers of the debiting.47 The notice must State the date and amount of the debit and that the financial institution will honor checks, drafts, or similar instruments payable to third parties and preauthorized EFTs from the consumers account for five business days after the notification.48 As an alternative to this notice, which is specified in the text of Regulation E, the associated Staff Commentary provides that a financial institution may notify the consumer that the consumers account will be debited five business days from the transmittal of the notification and specify the calendar date on which the debiting will occur.49
Examiners found that numerous institutions violated Regulation Es provisional credit requirements, including as follows:
Failing to provide provisional credits, despite not completing error investigations within 10 business days of notice of an error;
Failing to provide provisional credits to consumers who timely provided required written confirmation of oral error notices;
Posting the provisional credit to the wrong account, by failing to ensure that the ownership of the credited account matched the account that should have received the credit;
Excluding interest from the provisional credit;
Using notification templates that either had a timeframe to disclose when a provisional credit would be applied instead of a specific date or lacked any date information;
Failing to provide notice that a provisional credit had been made final due to process weakness, including: i An unsuccessful attempt to combine the letter informing consumers of a provisional credit with the letter notifying them the credit would be final, and ii a process deficiency in which both the financial institution and the merchant of the disputed charge issued a simultaneous credit; and Sending consumers notices that provisional credits would be reversed, but excluding either the exact date a credit was or would be debited or notice that it would honor checks, drafts, or 47 12

CFR 1005.11d2i.
CFR 1005.11d2ii.
49 12 CFR part 1005, supp. I, comment 11d2
48 12

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similar instruments payable to third parties and preauthorized transfers from the customers account for five business days after the notification, or excluding both.
The institutions took a variety of corrective actions to remedy these violations, including making improvements to compliance management systems and providing remediation to consumers.
2.4.3 Failure To Timely Investigate Errors If a financial institution is unable to complete its investigation within 10
business days, 12 CFR 1005.11c2
provides that an institution may take up to 45 days from receipt of the notice of error to investigate and determine whether an error occurred provided it, among other things, provisionally credits the consumers account as discussed above. If the alleged error involves an EFT that was not initiated within a state, resulted from a point-ofsale debit card transaction, or occurred within 30 days after the first deposit to the account was made, the institution may take up to 90 days to investigate and determine whether an error occurred, provided it otherwise complied with the requirements of 12
CFR 1005.11c2.50
Examiners found that financial institutions violated Regulation E by failing to complete investigations and make a determination within 45 days from receipt of the notice of error and within 90 days from receipt of the notice of error for point-of-sale debit transactions, respectively, after providing provisional credit within 10
business days of the error notice. In each instance, the financial institutions exceeded the applicable timelines.
In response to examiners findings, the financial institutions updated their training to ensure that employees were properly trained on the applicable Regulation E timelines and modified certain policies and procedures.51
2.4.4 Failure To Conduct Reasonable Investigations All error investigations must be reasonable. 52 When it applies, Regulation E, 12 CFR 1005.11c4, requires that a financial institution in 50 See
also 12 CFR 1005.2l defining state.
certain payment network rules may impose alternative timing requirements or limitations, network rules do not excuse institutions from complying with the applicable Regulation E timelines to complete the error investigation and make a determination. 12 CFR
1005.11c2 and 3.
52 71 FR 1638, 1654 Jan. 10, 2006. See also USAA Federal Savings Bank Consent Order, File No. 2019BCFP0001.
51 While
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