Reg E Starter Kit

Cardholder disputes are governed by Regulation E (“Reg E”) which implements the Electronic Funds Transfer Act (EFTA). EFTA allows consumers to challenge electronic transaction errors involving unauthorized or incomplete cardholder transactions as outlined in the issuing bank’s cardholder agreement.

While some cardholder disputes are considered errors under Reg E, other cardholder disputes are not afforded the same protection. Regardless of whether it falls under the purview of Reg E, all cardholder disputes should be submitted to the card processor who ultimately submits it onto the respective card network.

This resource will provide guidance on the steps involved in a cardholder dispute, delineate roles and responsibilities among various parties involved, and provide template cardholder notifications for your review. As an initial matter, you should always remember that Reg E only applies to individual cardholders and not commercial customers. However, you may have obligations to submit a cardholder dispute to Treasury Prime, and by extension the card processor, even if it is not Reg E eligible.

You should always discuss specific roles and responsibilities as well as the cost of submitting a cardholder dispute with your bank partner, who is ultimately responsible as the issuing bank of your card program. We encourage you to reference the FAQs at the end of this document for specific tactical questions.

Submitting a Cardholder Dispute

When you receive a dispute from your customer, it is important that you are aware of the overall process so you can timely adhere to necessary actions needed on your end. This section provides an overview of the process.

Steps to Submit a Dispute

• Enterprise establishes parameters of its card program with its bank partner including dispute adjudication during implementation.
• Enterprise is notified by customer of a potential dispute.
• Upon reviewing the dispute, Enterprise notifies Treasury Prime via Treasury Prime’s Dispute Submission Page. Enterprise is responsible for ensuring all of the requisite data has been obtained from the cardholder and for choosing an appropriate reason code.
• Upon receiving dispute from the enterprise, Treasury Prime reviews the dispute for complete information and submits dispute details to card processor.
• Card processor validates that the transaction exists in network and verifies transaction.
• Card processor submits dispute with the network and notifies Treasury Prime via webhook.
• If applicable, Treasury Prime moves provisional credit funds into cardholder’s account.
• If applicable, enterprise submits notice of provisional credit to cardholder.

Once the dispute has been investigated and resolved, if the dispute was decided in the cardholder’s favor, the enterprise will have to notify the cardholder that the provisional credit is final.

To the extent that the dispute was decided against the cardholder, the enterprise will send an appropriate notification to the cardholder and reverse provisional credit by deducting funds from the cardholder’s account. If an enterprise decides to cover the disputed amount, it will replace funds in loss reserve and send a notification to the cardholder that provisional credit is final as a professional courtesy from the enterprise.

All notifications should be retained and sent through a medium like e-mail or a letter. Your bank partner will often ask for a copy of the provisional credit notice.

De-Minimis Disputes and Reg E

You as the enterprise or fintech will assume a cost to submit a cardholder dispute to the processor. In most cases, the cost will be $35. As such, if a particular dispute is under this de minimis amount of $35, the card networks will not allow it to be submitted. However, to the extent that the cardholder alleges that the transaction is unauthorized, you may still have an obligation under Reg E to either investigate the dispute or cover the disputed amount. You should discuss these processes as part of the global process with your issuing bank, who is always available to provide guidance.

Frequently Asked Questions

Please see the Cardholder Disputes FAQ for coverage of more specific tactical issues related to the disputes process.