Dispute Investigation 101

mark teta finance

In any industry where financial transactions take place, there is a chance that a consumer will want to dispute a charge. When dealing with financial institutions (lenders), there are specific protocols that need to be followed and compliance deliverables that need to be met. The type of follow up that is required will depend on the type of financial dispute that is taking place. If there is a dispute in the realm of open-end credit accounts, it will fall under Regulation Z (which has its own required steps for resolution). Other disputes are handled a bit differently.

With any dispute there are few universal steps that financial institutions have to take to remain compliant.

  • The nature of the dispute needs to be assessed
  • Once the nature of the dispute is assessed, the financial institution must decide whether investigation is required (if it falls under Regulation Z, an investigation is mandatory)
  • If it is determined that an investigation is required, then the institution must then make sure that all procedures are followed (timing, notices, etc.)

When a dispute DOES fall under Regulation Z…

Transactions (and subsequently their related disputes) that revolve around home equity lines of credit, overdrafts related to credit, credit cards, and other transactions of that nature carry specific rules about their investigations and resolutions.

According to Regulation Z, a billing error is,

“a reflection on or with a periodic statement for an extension of credit that exhibits some type of error, ”

which can come in many forms.  An error can be anything from an unauthorized transaction to an improperly credited payment. If a consumer files a complaint about an error within the allotted 60 day time frame, there are three steps that will take places.

  1. Written acknowledgement of the receipt of the billing error dispute must be sent back the consumer within 30 days. The creditor must then follow all Regulation Z procedures.
  2. The consumer is not required to pay the disputed amount while the investigation takes place. The creditor is not allowed to make any negative actions against the consumer, and no delinquency is allowed to be reported.
  3. At the conclusion of the investigation, if there was no billing error, then the creditor must inform the consumer, in writing, that the disputed issue was in fact compliant. If it is determined that an error did occur, then the creditor in question must correct the error and send written notice of the correction to the consumer.

If the dispute DOES NOT fall under Regulation Z…

There are several potential billing disputes that do not involve open-credit accounts. In those situations, the creditor/lender is still responsible to carry out the “consumer complaint process” as part of the Compliance Management System.

All complaints must be documented, investigated, and resolved in accordance to the Compliance Management System (CMS).