Q&A COMPLIANCE The following questions and answers (Q&A) are drawn from questions asked by bankers calling Young & Associates’ Compliance Hot Line. Please note that Young & Associates Inc. is not engaged in the practice of law. The answers given here apply to individual situations that may differ from one institution to another. The advice of legal counsel should be sought on specific situations. EFTA. Q: We issued a provisional credit to a customer for an online card-not-present transaction while we investigated the error they alleged. The dispute for the transaction was filed through our EFT system provider. The merchant denied the dispute based on the methods used to verify the customer at the time of initiating the transaction. The merchant provided us with a copy of the bank customer’s driver’s license as well as a “selfie” photo which the merchant requires when initiating a transaction. We recognize the selfie as being a picture of our customer. In your opinion, is the evidence of a driver’s license and selfie photo sufficient evidence to revoke the provisional credit? A: We cannot make the final decision regarding the legitimacy or not of the “error” for the bank. It does sound like the merchant’s evidence is compelling, but only the bank can determine if it is “enough” since that can depend on the bank’s risk appetite. One step you could take (if not done already) is to contact the customer with this information and see what they say. It may very well be that this will jog their memory, and they may ask to end the dispute process. If this happens (or if the bank otherwise determines that the evidence proves the correctness of the EFT transaction), debiting the provisional credit from their account would seem appropriate while complying with Regulation E requirements for notifying the customer and honoring items and preauthorized transactions initiated based on the provisional credit for five business days after notifying the customer. TILA. Q: Currently, we disclose the fee for the automobile title on an auto loan, even if we do not do the titling ourselves. Do we have to disclose the fee, or can we stop doing that? A: Regulation Z generally requires disclosing only amounts that are paid from/with a loan transaction. One exception to that is “security interest charges” (translation: filing fees). Generally, anything paid by the customer to perfect the lender’s security interest is a finance charge unless particular steps are taken. This applies whether the lender collects the fee(s) and pays them to the relevant government agency itself, a dealer collects the fee and pays it to the relevant government agency, or the customer goes directly to the government agency and pays them to file the lender’s lien. If there are security interest charges (filing fees) involved in a transaction that are required to perfect the bank’s security interest, they are a finance charge unless the fee(s) is (are) “itemized and disclosed” by the lender on/with the disclosure statement given BY BILL SHOWALTER SENIOR CONSULTANT, YOUNG & ASSOCIATES INC. 18 In Touch
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