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Password reset for a customer doesn't work

1) Check the user can actually login, do they have the right role
2) Login as administrator, go to the customer account, click the auto login link, does it work?
3) Go to Settings > Advanced and change 'password_reset_debug' from 0 to 1 and try resetting the password again. Do you get any errors?

Send in a support ticket if you are still stuck and we can help.