Cash Advance Fraud
Answer by Andy Zavoina, BOL Guru Guru Bios
Question: Question on Reg Z: In instances of fraud, can Reg Z apply? A cash advance was made from a credit card to a checking account. The funds are held in an internal GL. The department holding the funds claims that applying the money to the credit card fraud loss would be a "blatant violation" of the Reg. They feel that sending a check to the fraudster is more appropriate! Please help.
Answer: While Reg. Z prohibits setoff I would be hard pressed to send the fraudster a check. My first call would be to counsel with the knowledge that fraud occurred and you're ready to accelerate the loan as a result. Hopefully this is a reason to accelerate and may allow you to recoup these funds. It may be a criminal matter and the customer may be willing to provide the funds to you. I would also look at the fraud and the possibility that the transaction should be "un-done" with a reversal making you whole.
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