What Is Error Resolution?
Error resolution is a procedure that allows consumers to dispute bookkeeping errors or unauthorized transactions related to their bank accounts. The error resolution process is codified under Regulation E, the Federal Reserve's implementation of the Electronic Fund Transfer Act (EFTA) of 1978.
- Error resolution is the formal process followed by banks in response to errors reported by customers.
- Banks are required to investigate the error within a limited period of time, and they may also need to reimburse the customer for any affected funds while the investigation takes place.
- Customers, meanwhile, are required to notify the bank promptly when an error has occurred, while also providing supporting information to help the bank investigate the error.
Understanding Error Resolution
Regulation E requires that financial institutions investigate all complaints and re-credit all funds debited in error. The financial institution usually has between 10 and 45 days to investigate complaints. Federal regulations limit consumers' account liability to $50 if the bank is notified of the error, but it can go as high as $500 otherwise.
There are many types of errors that can trigger the requirements of Regulation E. These include incorrect electronic funds transfers (EFTs) to or from a customer's account; unauthorized withdrawals, whether electronically or through an automated teller machine (ATM); inaccurate withdrawals from an ATM, such as when the ATM dispenses less funds than were requested by the customer; inaccurate or incomplete account statements; and mistakes in the bank's bookkeeping or calculations.
When customers wish to initiate the error resolution process, they must issue a notice of error to the bank, which includes their name and account number as well as any additional information about the error they can provide. The customer should identify the nature of the error, the date at which it occurred, and the amount of money affected. Customers have 60 days in order to make such claims, counting from the first day in which the error appeared on the customer's bank statements.
Real World Example of Error Resolution
Generally, banks have 10 days in which to complete their investigation of the error once appropriate notice has been given by the customer. Although some banks may require customers to give additional written notice even if they have already given notice of the error verbally, the 10-day time limit nonetheless begins once the verbal notice is given.
Under certain circumstances, banks can extend their investigation deadline to 45 days. However, this is only permitted under situations in which the bank has already provisionally approved a reimbursement to the customer which resolves the effects of the error. Moreover, in order to benefit from an extension, the bank would need to have notified the customer that such a reimbursement has been given, and the reimbursed funds would need to be available to the customer during the period in which the investigation takes place.
If, however, the error in question was related to an out-of-state EFT, a debit card transaction at a point of sale (POS) terminal, or an account which was opened within 30 days of the reported error, then the bank can take up to 90 days to complete its investigation. Nevertheless, the bank would need to abide by all of the above conditions in order to benefit from this extended timeframe.