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Special thanks to @Emily Nelson, AAP, AFPP, APRP, NCP, Senior Manager, Payments Education for helping me write this blog!

What should an RDFI do when a consumer account holder disputes an ACH transaction but is unable to, or refuses to, sign a Written Statement of Unauthorized Debit (WSUD)? To answer this, an RDFI must first understand how the ACH Rules and Regulation E work together in handling consumer disputes.  

The ACH Rules address an RDFI’s responsibilities associated with processing returns. For consumer debits that are pending or posted and disputed as unauthorized, authorization revoked or improperly processed, an RDFI must obtain a WSUD before they can return the entry. Additionally, they must be within 60 calendar days from the Settlement Date of the disputed entry to be considered a timely extended return entry.  

A WSUD may be a paper or electronic document and must be signed and dated by the consumer. With a paper WSUD, the consumer’s signature may be handwritten in ink or similarly authenticated. A similarly authenticated signature simply allows a written authorization to be obtained electronically. However, the signature requirements must comply with the Electronic Signatures in Global and National Commerce Act (U.S.C. 7001 et seq.), commonly known as the E-Sign Act. A recent blog by EPCOR’s Raven Smith can tell you more.

An RDFI must also comply with Regulation E in these situations, which provides consumer protection and addresses the responsibilities of a financial institution. More specifically, §1005.11 of Regulation E outlines the process a financial institution must follow to resolve errors brought to its attention by its consumer account holder. In these cases, a financial institution must investigate a consumer’s claim promptly, and within 45 days of the consumer’s notification to determine if the identified transfer(s) were authorized or not. Nowhere within this process does it require a financial institution to obtain the consumer’s signature, nor does it allow a financial institution to delay its investigation to obtain written confirmation of the error or a signature.  

So, how do the ACH Rules and Regulation E work together? Regulation E requires an RDFI to begin its investigation promptly, and if applicable, provisionally credit the consumer, complete the investigation in a timely manner, make a final determination and notify the consumer of the outcome of the investigation. The ACH Rules, however, allow an RDFI to obtain a completed (i.e., signed and dated) WSUD from a consumer, process a timely extended return entry based on the WSUD and “promptly” recredit the consumer without conducting any investigation (i.e., may take the consumer’s claim as being valid). “Promptly” is not defined within the ACH Rules. Regulation E defines it as “correcting an error within one business day of determining the error occurred,” according to §1005.11(c)(2)(iv). If a consumer makes a claim on an ACH debit that occurred within 60 days of the Settlement Date of the entry, then an RDFI may simply obtain a completed WSUD and recredit the consumer within one business day. Additionally, the RDFI should process the extended return entry timely and send notice to the consumer regarding the final credit as required by Regulation E.  

While the ACH Rules allow for an easy resolution for both the consumer and its RDFI, the consumer is required to sign and date a WSUD. And it is this issue that takes us back to our original question: What should an RDFI do when it is unable to obtain a wet signature or a similarly authenticated signature? Since Regulation E requires the investigation, not the signature, an RDFI must process the consumer’s dispute in accordance with Regulation E. In this case, the RDFI would not be able to process the extended return entry based on a WSUD. They would need to work directly with the ODFI to obtain a copy of the consumer’s authorization for the entry, which would be used in their investigation of the claim.  

RDFIs may want to consider joining the digital age, where maintaining compliance with the ACH Rules and Regulation E may be less difficult or perhaps more efficient. To hear more about how Regulation E and the ACH Rules work together, join our ACH vs Reg E: Before the 60 Days webinar happening August 12^th or check out our EFT Dispute Resource Package. 

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