Nearly every time I get the call asking for help or clarification on a consumer dispute question, I feel like the bearer of bad news. Consumers want their money back; financial institutions don’t want to take a loss and merchants have the authorization. We know consumers may dispute transactions for a variety of reasons. Maybe they want their money back, they do not remember doing the transaction, they did not read the terms and conditions before authorizing the transaction or they honestly did not do the transaction. As financial institutions it is our job to figure out the facts and determine the outcome. One of the biggest struggles with consumer disputes is figuring out how to take a regulation created years ago and apply it to today’s environment with its many challenges.
As technology has advanced, we have figured out how to apply the consumer disputes, but the tricks by fraudsters to access account information and money leaves us scratching our heads and wondering if the transaction truly authorized or did the fraudster do the transaction. The definition and the official interpretation of an unauthorized transaction in Section 1005.2 (m) of Regulation E is helpful, but leaves room for interpretation.
On June 4th the Consumer Financial Protection Bureau (CFPB) published an “Electronic Funds Transfers FAQs” document that should help answer some of the questions surrounding the liability for consumer’s dispute. Though the answers may not be what we had hoped for, they will at least give the financial institution the guidance needed to determine if the consumer should be held responsible.
One of the things at the top of my wish list is a magic want for Reg E disputes. I think what I really want from the magic wand is not how to answer disputes, but an answer for how we stop the fraudsters from taking advantage of organizations and consumers. Fraud can happen to anyone at any time. Many of us think the fraudsters could never outsmart us, but they can. Keep an open mind when it comes to disputes and look at the disputes from both perspectives, the consumer and the financial institution.