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A bank customer has a CashApp account linked to her debit card. She filed a dispute claiming that she did not authorize several CashApp transactions. Should the bank or CashApp investigate the dispute?

My bank has a customer who has a CashApp account, which allows her to make P2P transactions that are processed through the debit card for her account held at my bank. She has filed a dispute claiming that she did not authorize several CashApp transactions. Under Regulation E, should the bank investigate the dispute or should the customer go to CashApp for resolution?

It appears that, for Regulation E purposes, the customer should file a claim with CashApp.

Under §1005.14(a) of Regulation E (Electronic Fund Transfer Act):

A person that provides an electronic fund transfer service to a consumer but that does not hold the consumer’s account is subject to all requirements of this part [Regulation E] if the person:

  1. Issues a debit card (or other access device) that the consumer can use to access the consumer’s account held by a financial institution; and
  2. Has no agreement with the account-holding institution regarding such access.

First, it appears that CashApp has issued an access device. Under Regulation E Section 1005.2(a)(1), an access device is a “card, code, or other means of access to a consumer’s account…that may be used by the consumer to initiate electronic fund transfers.” (emphasis added) It appears that CashApp, whatever the channel, has in some fashion provided a “means of access” to the consumer’s bank account. Second, CashApp does not have any agreement with the bank about this access.

As noted, under §1005.14(a), service providers are subject to “the requirements generally applicable under” Regulation E, including liability for unauthorized transactions that exceed the consumer’s liability (See Comment 1 to §1005.14(b)) and the dispute resolution provisions (See Comment 1 to §1005.14(b)(2)). In addition, service providers must extend “by a reasonable time the period in which notice of an error must be received…if a delay resulted from an initial attempt by the consumer to notify the account-holding institution.” (See §1005.14(b)(2)(i))

However, while Regulation E assigns responsibility for resolving the dispute to the service provider, you should check payment network rules (e.g., Visa or MasterCard) to determine the bank’s responsibilities under those rules. (February 2021)

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