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#149629 - 01/14/04 01:17 AM Reg E / Unauthorized Transactions
Anonymous
Unregistered

I have a question:

A customer of ours had his ATM stolen. The customer notified us within 2 days, filed a fraud claim, and got a police report. However, after investigating the claim, we learned that the customer had serveral unauthorized transfer using his ATM card and PIN. Therefore we denied the claim becuase his PIN had been used, indicating to us that it was someone who had known his PIN. After recieving our denial - the customer claims his PIN was with his ATM card.

Despite being dumb by keeping his ATM card and PIN together - would he only be liable for $50 since he notified us within 2 days of the theft? He didnt tell us about the theft of his PIN. Also, Since he didn't tell us withing those 2 days of the theft of his PIN, but could do so now, would his liablity only be $500?

Thoughts?

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Operations Compliance
#149630 - 01/14/04 01:19 AM Re: Reg E / Unauthorized Transactions
Terah2 Offline
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Terah2
Joined: Apr 2003
Posts: 107
50.00. Sorry
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#149631 - 01/14/04 04:25 PM Re: Reg E / Unauthorized Transactions
NotALawyer Offline
Gold Star
NotALawyer
Joined: Nov 2001
Posts: 455
However, you should be able to close the customer's account now.

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#149632 - 01/14/04 04:59 PM Re: Reg E / Unauthorized Transactions
David Dickinson Offline
10K Club
David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
Sorry, but I have to agree with the above 2 posts. Their ignorance doesn't increase their liability. Keeping the PIN with the card doesn't hurt them either. The only leverage you have is to take their card away, but you still own them for the losses (minus $50). Read the Commentary to ยง205.6(b)#2.
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#149633 - 01/15/04 08:21 PM Re: Reg E / Unauthorized Transactions
John Burnett Offline
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John Burnett
Joined: Oct 2000
Posts: 40,086
Cape Cod
One careful note: the 2-day period covered by the $50 liability limit starts with the discovery of the loss or theft of the card, not with the actual date of the loss or theft.

So, if Simple Simon leaves his card behind at the restaurant and only discovers it five days later, any liability Simon has will be limited to $50 if he notifies the bank within 2 business days of when he learned of the loss. That means $800 in unauthorized transfers occurring in the five days before he learned of the loss would not be Simple's liability.
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#149634 - 01/15/04 10:11 PM Re: Reg E / Unauthorized Transactions
BrendaC Offline
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BrendaC
Joined: Sep 2001
Posts: 6,029
Sweet Home AL
John's scenario so accurately represents why we must train our personnel to ask "When did you first notice your card was missing, Mrs. Smith?" (in the most caring and sincere tone we can muster) BEFORE we discuss liability. And in my opinion, there should be no discussion of liability in the front office. It is just too complicated. We should tell the customer that someone from Security will be contacting them later regarding their claim. (I think I am getting cynical in my old age...I've just seen banks taken to the cleaners too many times because of incorrect handling of these situations in the initial documentation stages.)
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#149635 - 01/16/04 02:07 PM Re: Reg E / Unauthorized Transactions
John Burnett Offline
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John Burnett
Joined: Oct 2000
Posts: 40,086
Cape Cod
Thank you, Brenda, from the frozen northland. We in Massachusetts have it a little easier, since our state rules cap liability at $50 regardless. But we still need to know when the customer noticed the loss/theft of the card, because the timing of that event and the unauthorized EFTs could force us to swallow ALL the liability.

(Got room in your shop for a frozen Yankee compliance officer yearning for a return of the warmth of his three years in Gadsden, AL?)
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#149636 - 01/16/04 04:37 PM Re: Reg E / Unauthorized Transactions
Anonymous
Unregistered

Thank you all for your input. After reading your thoughts and the Reg E commentary - I understand it better, and will adjust our procedures accordingly.

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#149637 - 01/20/04 05:05 PM Re: Reg E / Unauthorized Transactions
Anonymous
Unregistered

It was 17 degrees in Gadsden, AL this morning. Not as cold as it is up north, but still cold for us.

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#149638 - 01/21/04 10:25 PM Re: Reg E / Unauthorized Transactions
Happy Offline
Gold Star
Happy
Joined: Jan 2002
Posts: 282
Quote:

(Got room in your shop for a frozen Yankee compliance officer yearning for a return of the warmth of his three years in Gadsden, AL?)


John, what happened to beautiful Cape Cod??

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#149639 - 01/22/04 12:32 PM Re: Reg E / Unauthorized Transactions
John Burnett Offline
10K Club
John Burnett
Joined: Oct 2000
Posts: 40,086
Cape Cod
Quote:

John, what happened to beautiful Cape Cod??




There appears to be a strong desire on the part of our frozen neighbors to the north in Canada to share their climate with us this year.

I believe in snow staying in the mountains where it can earn a ski operation money, and cold air staying in Canada. President Bush, where have our secure borders gone?
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John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
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