How Long Do You Have to Report Unauthorized Transactions?

Unauthorized transactions can be a disorienting experience, but swift action and accurate reporting are crucial for consumers to protect themselves financially. Federal laws provide important safeguards, which are often time-sensitive, making prompt reporting essential. This article guides readers through understanding unauthorized transactions, reporting deadlines, the process, and what to expect afterward.

Understanding Unauthorized Transactions

An unauthorized transaction is any financial activity initiated without the account holder’s permission or knowledge, from which the consumer receives no benefit. This differs from a billing error or a dispute over goods or services that were initially authorized.

For credit cards, unauthorized transactions typically involve charges made when a card is stolen or account information is compromised. The Fair Credit Billing Act (FCBA) protects credit card users against such fraudulent charges, ensuring they can dispute incorrect amounts or charges made without their consent.

Debit cards and electronic funds transfers (EFTs) are protected by Regulation E, part of the Electronic Fund Transfer Act (EFTA). This regulation covers a broad range of electronic transactions, including unauthorized withdrawals from bank accounts, ATM transactions, point-of-sale purchases, and online transfers. If someone uses your debit card or account information without your permission, Regulation E outlines your rights and the financial institution’s responsibilities. Beyond traditional bank accounts, unauthorized activity on online payment platforms or peer-to-peer payment apps may also occur, often falling under the purview of Regulation E if linked to a bank account or debit card.

Key Reporting Deadlines

Understanding specific reporting deadlines is important, as these timelines directly impact a consumer’s potential liability for unauthorized transactions. Different types of accounts and transactions have varying federal requirements, making prompt notification to your financial institution crucial to minimize financial exposure.

For credit cards, the Fair Credit Billing Act (FCBA) provides a clear framework for disputing unauthorized charges. Consumers typically have 60 days from the statement date on which the unauthorized charge first appeared to notify their creditor. If reported within this 60-day window, a cardholder’s maximum liability for unauthorized charges is limited to $50. In many cases, if the card is reported lost or stolen before any unauthorized use, liability may be $0.

Debit cards and other electronic funds transfers (EFTs) are governed by Regulation E, which establishes reporting requirements and varying liability tiers. If a consumer reports the loss or theft of their debit card or access device within two business days of learning about it, their liability is limited to $50. This prompt notification is important because waiting longer can significantly increase potential losses.

If the unauthorized transaction is reported after two business days but within 60 calendar days of the bank statement being sent, the consumer’s liability can increase up to $500. This $500 limit applies if the financial institution can prove that earlier notification would have prevented additional unauthorized transfers. However, if unauthorized transactions appear on a periodic statement and are not reported within 60 calendar days of the statement’s transmittal, the consumer could face unlimited liability for transactions that occur after that 60-day period and before reporting. Regularly reviewing bank statements is important to identify and report suspicious activity without delay.

How to Report an Unauthorized Transaction

Reporting an unauthorized transaction involves practical steps to formally notify your financial institution and preserve your rights. The goal is to initiate an investigation and prevent further unauthorized activity. While methods vary by institution, core requirements remain consistent.

Contact your financial institution immediately upon discovering the unauthorized transaction. Most banks and credit card companies provide a toll-free customer service number on your card, statement, or online portal. Be prepared to provide essential details: your account number, the date and amount of the suspicious transaction(s), and a clear description. If your card was lost or stolen, report when and where you believe it occurred.

Following an initial phone call, it is advisable to follow up with a written notice. For credit card disputes under the Fair Credit Billing Act, a written letter or official dispute form is often required to protect your rights. This written communication creates a formal record of your report and helps initiate the financial institution’s investigation. Send the written notice to the address specified by your institution for billing inquiries or disputes.

Maintaining detailed records throughout this process is important. Keep a log of all communications, including dates, times, the names of representatives you spoke with, and any reference or confirmation numbers provided. It is also wise to keep copies of all submitted documents, such as your written dispute letter and any supporting evidence.

What Happens After Reporting

Once an unauthorized transaction has been reported, the financial institution begins its investigation and resolution process. Actions taken are largely dictated by federal regulations, which aim to protect consumers while allowing for a thorough review of the reported activity.

The financial institution will typically conduct an investigation into the reported transaction to determine its legitimacy. For debit card and electronic funds transfer disputes covered by Regulation E, banks are often required to provide provisional credit to the consumer’s account within 10 business days while the investigation is ongoing. This provisional credit allows the consumer access to the disputed funds, though it can be reversed if the investigation concludes the transaction was authorized.

Financial institutions generally have 45 to 90 days to complete their investigation, depending on the transaction type and whether provisional credit was issued. During this time, they gather information and make a determination. Once complete, the institution provides a final decision, either confirming the transaction was unauthorized and making provisional credit permanent, or deeming it authorized.

Should a consumer disagree with the financial institution’s final decision, there are avenues for further recourse. Consumers may challenge the institution’s findings and escalate the matter to regulatory bodies. The Consumer Financial Protection Bureau (CFPB) serves as a resource for consumers to submit complaints about financial products and services, including unauthorized transactions. Even after a resolution, continued monitoring of financial accounts is advisable to detect any further suspicious activity.