Do I Have to Pay Back Provisional Credit?

When an unauthorized transaction or error occurs on a bank account, customers often report it to their financial institution. In response, banks sometimes issue a “provisional credit,” which is a temporary credit to the customer’s account. This action allows the customer to access the disputed funds while the bank conducts an investigation into the reported claim. It serves as a temporary financial relief, ensuring that the account holder is not unduly burdened during the investigation period. This temporary credit is not a final resolution and remains subject to the outcome of the bank’s thorough review process.

What Provisional Credit Means

Provisional credit represents a temporary refund applied to a customer’s account by their financial institution while it investigates a reported unauthorized transaction or billing error, like fraudulent activity on a debit card, an incorrect ATM withdrawal, or an erroneous electronic fund transfer. Its purpose is to ensure the customer has access to the disputed funds during the investigation. The issuance of provisional credit is often governed by federal regulations, specifically Regulation E for electronic fund transfers, which mandates how financial institutions must handle such disputes. Under Regulation E, if a bank cannot complete its investigation within a certain timeframe, it is generally required to issue this temporary credit. This temporary credit is clearly distinct from a permanent resolution, as it can be reversed if the bank’s investigation concludes differently.

How Banks Investigate Claims

After a customer reports an error or unauthorized transaction and a provisional credit is issued, banks initiate an investigation, reviewing transaction history, account activity, and contacting involved merchants or other parties to gather evidence. The aim is to determine if the reported issue genuinely occurred. Federal regulations, such as Regulation E, establish specific timelines for these investigations. Generally, financial institutions must complete an investigation within 10 business days of receiving notice of an error. If the investigation requires more time, banks can extend the period up to 45 calendar days, or even 90 calendar days for new accounts or foreign-initiated transactions, provided they have issued the provisional credit within the initial 10 business days.

When Provisional Credit is Reversed

Provisional credit can be reversed if the bank’s investigation concludes that the reported error or unauthorized transaction did not occur as claimed. This often happens if the bank determines the transaction was, in fact, authorized by the account holder. Another scenario for reversal is when the investigation finds that the reported error, such as a duplicate charge, was not an actual error. In some situations, if a customer was found to be negligent in protecting their account information, such as voluntarily sharing a Personal Identification Number (PIN), this could contribute to the bank’s decision to reverse the credit, although full liability for such negligence is less common. The bank must provide a written explanation of their findings to the customer when a provisional credit is reversed.

What to Do if Repayment is Required

If a bank determines that provisional credit must be repaid, it will provide a written explanation of its findings. It is important for the customer to carefully review this explanation and any supporting evidence the bank provides. Should a customer disagree with the bank’s conclusion, they have the option to dispute the decision, often by providing additional evidence or clarification to the bank. If the issue remains unresolved after communicating with the bank, customers can escalate their complaint to regulatory bodies, such as the Consumer Financial Protection Bureau (CFPB). Maintaining meticulous records of all communications and transactions is advisable throughout this process.