If a DFI receives an error report after two business days, what happens to the consumer's liability for unauthorized transactions?

When a Depository Financial Institution (DFI) receives an error report from a consumer after two business days, the consumer's liability for unauthorized transactions can potentially increase depending on the circumstances. Under the Electronic Fund Transfer Act (EFTA) and Regulation E, a consumer is protected from liability for unauthorized transactions if they report such transactions within a specific timeframe.

If the consumer notifies the DFI within two business days of learning about the unauthorized transaction, their liability is limited to a maximum of $50. However, if the consumer fails to report the unauthorized transaction within this time frame, the liability can escalate to higher amounts. Specifically, after the two-day period, the consumer's liability can increase to up to $500 if the unauthorized transaction is reported within 60 days of receiving the bank statement. If the report is made after this period, the consumer could potentially be held liable for the entire amount of the unauthorized transactions.

Thus, the correct answer reflects the notion that the timing of error reporting is critical in determining the consumer's liability, making it subject to increase based on the delay in reporting. This encourages prompt reporting to protect the consumer’s financial interests.