Does unlimited liability apply even when the customer has possession of their card? A customer has just now noticed transactions done with her M/C debit card that happened over 1 year ago that she states were unauthorized. Her card has always been in her possession.

I understand the bank may still have liability for the transactions prior to the 60 day timeframe.

In order for MasterCard Zero Liability to cover your customer, they must meet the following criteria:

•Your account is in good standing.
•You have exercised reasonable care in safeguarding your card from any unauthorized use**. Unauthorized use means that you did not provide, directly, by implication or otherwise, the right to use your card and you received no benefit from the "unauthorized" purchase.
(** Failure to register certain cards will be considered as not safeguarding your card.)
•You have not reported two or more unauthorized events in the past 12 months.

MasterCard Zero Liability

Failure to review statements in a timely manner is not exercising reasonable care so Zero Liability would not apply.

However, you must also consider the Reg E provisions in 1005.6. The 60-day timeframe applies to the 60 days after the delivery of the statement on which the FIRST unauthorized charge appeared. Meaning, if the first charge occurred on March 7, 2011, and the statement was sent to the customer on March 15, 2011, the bank could have liability up to May 14, 2011, and the customer unlimited liability for any charges on or after May 15, 2011.

Since you were not provided timely notice, 1005.11 removes the requirement to provide provisional credit and to complete your investigation in 90 days.

For help when calculating liability, I encourage you to check out BOL Guru Andy Zavoina's Reg E Liability Calculator