2.3 EFT Error Investigation and Provisional Credit

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Definition of Error (12 CFR § 1005.11(a))

To trigger the formal investigatory protections of Regulation E, a consumer dispute or inquiry must fall within the regulatory definition of an "error." Under 12 CFR § 1005.11(a)(1), an error includes:

• Unauthorized Electronic Fund Transfers: Any electronic fund transfer initiated without actual authority and from which the consumer received no financial benefit.
• Incorrect Transfer Amounts: Any incorrect EFT to or from the consumer's account (e.g., an automated teller machine dispensing $40 in currency but debiting the account for $100, or a duplicate point-of-sale debit card charge).
• Omitted Transfers: The omission of an electronic fund transfer from the consumer's periodic account statement.
• Computational or Bookkeeping Errors: Any calculation, arithmetic, posting, or mathematical error committed by the financial institution in processing an EFT.
• Terminal Cash Dispensing Errors: The consumer's receipt of an incorrect amount of currency from an automated teller machine or cash-dispensing electronic terminal.
• Improperly Identified EFTs: An electronic fund transfer not identified in accordance with the transaction identification standards of § 1005.9 or § 1005.10(a).
• Clarification or Documentation Requests: A consumer's formal request for additional information, documentation, or clarification concerning an electronic fund transfer appearing on a periodic statement.

Non-Error Inquiries

Under 12 CFR § 1005.11(a)(2), the following inquiries do not constitute errors under Regulation E:

• Routine inquiries regarding account balance availability.
• Requests for duplicate periodic statements, checks, or documentation for personal recordkeeping, tax filing, or civil litigation purposes.
• Merchant disputes involving the quality, merchantability, defective nature, or non-delivery of goods or services (which are handled under commercial contract law or card payment network chargeback rules rather than Regulation E statutory error procedures).

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Consumer Notice of Error (12 CFR § 1005.11(b))

A financial institution's investigatory duties are triggered when it receives notice of an alleged error from the consumer.

Receipt and Timing Thresholds

• Form of Notice: The notice may be delivered orally or in writing. The bank cannot refuse to initiate an investigation simply because a customer reports an error via telephone or at a branch teller counter rather than in writing.
• 60-Day Notice Window: The notice must be received by the institution no later than 60 calendar days after the bank transmitted the periodic statement on which the alleged error first appeared.
• Substantive Content: The notice must enable the institution to identify the consumer's name and account number, and must assert the consumer's belief that an error occurred, including the suspected transfer type, date, and dollar amount to the extent possible.

Written Confirmation Requirement

Under 12 CFR § 1005.11(b)(2), a financial institution may require the consumer to provide written confirmation of an oral notice of error within 10 business days. However, this requirement is strictly conditioned:

1. The institution must inform the consumer of the written confirmation requirement at the time the consumer provides the oral notice; and
2. The institution must disclose the specific postal address to which the written confirmation must be sent.

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Investigation Timelines & Provisional Credit (12 CFR § 1005.11(c))

Regulation E establishes strict statutory timelines for conducting error investigations, balancing prompt resolution with operational flexibility.

The Standard 10-Business-Day Investigation

Under the baseline rule of 12 CFR § 1005.11(c)(1), the financial institution must investigate and resolve the alleged error within 10 business days of receiving the consumer's notice. If the bank determines that an error occurred, it must correct the error within one business day after making that determination and report the findings to the consumer within three business days.

Extended Investigation up to 45 Calendar Days

If the institution cannot complete its investigation within 10 business days, it may extend the investigation period up to 45 calendar days, provided it satisfies four mandatory conditions:

1. Grant Full Provisional Credit: The institution must provisionally credit the consumer's account in the amount of the alleged error (plus interest, if the account earns interest) within 10 business days of receiving the notice of error.
2. Deliver Notice of Credit: The institution must notify the consumer of the provisional credit within 2 business days of crediting the account.
3. Ensure Full Access to Funds: The institution must provide the consumer with full, unrestricted access to the provisionally credited funds during the remainder of the investigation.
4. Permissible $50 Withholding: The bank may withhold up to $50 from the provisional credit amount if it has a reasonable basis to believe an unauthorized EFT occurred and satisfies § 1005.6(a).