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A customer calls the bank stating they cancelled services on an item a few weeks ago, yet the merchant continues to charge consumer's account. The consumer claims to have called a merchant directly twice with no resolution. Would this fall under the Regulation E dispute resolution requirements?

Can the American Bankers Association provide some guidance related to merchant disputes and Regulation E? My bank's operations area views disputes involving the cancellation of previously authorized services as merchant disputes that are not subject to Regulation E. Here is an example: Customer calls the bank stating he or she cancelled services on an item a few weeks ago, yet the merchant continues to charge the consumer's account. The consumer claims to have called the merchant directly twice with no resolution. Would this fall under the Regulation E dispute resolution requirements?

Your bank’s operations area appears to be confusing “merchant disputes” with unauthorized transactions. In effect, these recurring transactions are unauthorized and subject to Section 1005.6’s consumer liability limitations. In addition, the official staff commentary of Section 1005.10(c)(2) makes clear the bank’s responsibility to block such transactions:

Revocation of authorization. Once a financial institution has been notified that the consumer's authorization is no longer valid, it must block all future payments for the particular debit transmitted by the designated payee-originator. But see comment 10(c)-3. The institution may not wait for the payee-originator to terminate the automatic debits. The institution may confirm that the consumer has informed the payee-originator of the revocation (for example, by requiring a copy of the consumer's revocation as written confirmation to be provided within 14 days of an oral notification). If the institution does not receive the required written confirmation within the 14-day period, it may honor subsequent debits to the account.

Claims of unauthorized transactions are specifically listed as “errors” subject to the dispute resolution provisions. (See Section 1005. 11(a)(i)).

This is different from a “merchant dispute” envisioned in Regulation Z’s Section 1026.12(c). Under that provision, consumers dissatisfied with the product or services of the merchant may assert claims against the credit card issuer even if they authorized the transaction if they have met certain conditions, including having attempted to resolve the dispute with the merchant. Regulation E does not have a similar provision, so the bank may reject such debit card claims, though card network rules may permit them to be processed through the network. (June 2019)

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