Withholding Provisional Credit
by Andy Zavoina and John Burnett, BOL Gurus Guru BIOS
Question: If you have a customer who says they had fraud transactions at an ATM yet they still have their card, can you withhold provisional credit? Who would be liable to pay the customer back?
Answer by Andy Zavoina: The bank would have to pay them back if the customer didn't do the transaction, authorize it or benefit from it. The fact that they didn't lose their card is not sufficient to deny a claim. It may be a contributing layer, however. Look too at the pattern of the customer and the withdrawal(s) they claim were not authorized. Did anyone else have access to their card, where was the customer when the withdrawal(s) took place (even in the same state for instance), film, etc? Review OCC AL 2001-9 for excellent guidance on this topic, no matter who your primary regulator is.
Provisional credit can be withheld only if you requested a written statement of the claim and didn't receive it within 10 business days.
Answer by John Burnett: We need to remember that even if we only issue one card with the cardholder's number and PIN, there are schemes that are able to record the card number and PIN through technology and/or observation, allowing a crook to create bogus duplicates of the card to be used elsewhere.
The pattern of transactions that is alleged to be fraudulent, when compared with the customer's known pattern prior to those transactions, is probably the most telling evidence. As Andy suggests, the mere presence of the card in the cardholder's continuing possession is only one piece of this complicated puzzle.
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