To reverse or not to reverse: Handling duplicate credits for the same error

The error resolution procedures in Regulation E and Regulation Z are a constant thorn in the side of any compliance officer. While no credit union wants to hold its member liable for transactions they didn’t make, the time and effort it takes to investigate an unauthorized transaction claim can be extremely costly to a credit union’s bottom line. The proliferation of online shopping and a fraudster’s ability to charge transactions to a member’s account without getting their physical card make it even more challenging to investigate these claims.

The regulations also do not prohibit members from making a claim through both the credit union and the merchant that processed the transaction. When both the credit union and the merchant determine the transaction was unauthorized, the member may end up getting two credits for the same unauthorized transaction. So, this means the credit union can simply reverse its credit, right? Well, not so fast . . .

We blogged in the past that Regulation E does not provide an avenue for reversing a credit once the credit union has completed its investigation and finalized such credit. Credit unions may have to go down other avenues to get its credit back, such asking the member to return the money or making an unjust enrichment claim. Thankfully, Regulation Z does provide an avenue for reversing a credit under its error resolution procedures for credit card transactions.

 

continue reading »