Question & Answer

Question: Our ATM customer called and said someone had used her card and taken $1800 out of her account.

We knew that her "boyfriend" had used the card in the past, but she said he was no longer around and it wasn't him. She had no idea who did it.

We gave her provisional credit for the $1800, went to our provider and asked for the pictures of the transactions for our investigation. When we got the pictures-it was the boyfriend. Our customer had never notified us that he was unable to use the card until after the transactions, so our stand is that the withdrawals were authorized. We tried to reverse the provisional credit, only to find out she had cleaned the account out-it has a "$0" balance. Can we overdraw her account for the $1800 and send her an overdraft notice and try to collect? After our report to the police, the police have filed charges against the boyfriend.

Answer: Yes, you can. First of all, if you remember the article by Kathleen Patrick of FINSECOR, Inc. in Volume VI, No. 9 ("To Pay Or Not To Pay"), she explained that Reg E does not treat the transaction as being unauthorized if the customer gave his or her card and PIN to the person making the transaction, unless the customer notified the financial institution that this person is no longer authorized to conduct transactions. The law states specifically that if the authorization is withdrawn, the institution must be notified in writing. If that happened, you would then change the card and possibly the PIN on the account to protect yourself and your customer.

In your case, you were not notified, so you are correct, the withdrawals were authorized.Therefore, it is as if your customer withdrew the $1800 herself. And you have every right to collect from her however you can.

Good luck!

Copyright © 1997 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 7, No. 11, 9/97