If the claim is that the transactions weren't authorized, you may or may not be able to impose the timing deadline under §1005.11 for filing the claim under that section. However, you still have a claim under §1005.6 to consider -- were the withdrawals authorized or not? Since you have a clue in your investigation -- the sister had "custody" of the card and PIN -- see if you can tie her to one or more of the transactions. If the sister made the withdrawals, they would not be unauthorized (see §1005.2(m)) and you can deny the claim for those transactions. If there are transactions remaining after culling out those that were not unauthorized, apply the liability limitations under §1005.6 to determine how much your customer is liable for. Since she probably doesn't have a clue as to when the card was lost, you can pretty much forget about anything in paragraphs 1005.6(b)(1) and (2). Then you'll have to decide whether and how much leeway to give her on the 60-day rule's allowance for "extenuating circumstances." As you noted, if the account was already wiped out, it really doesn't matter because there would no customer liability at all (not even $500).
There really isn't any guidance on whether incarceration qualifies as an extenuating circumstance. I imagine that a court would look for information about whether the customer had access to mail (if she could have her statements forwarded and whether they would be subject to opening and review by prison officials, for example) while on her enforced vacation.
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John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
Bankers' Threads User #8