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#1739888 - 09/11/12 05:57 PM Reg E: Negligence
TruthNTime Offline
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TruthNTime
Joined: Dec 2011
Posts: 84
Texas
My member came in last week stating she had unauthorized FaceBook charges on her account, occuring in that same week. After reviewing her account, I found facebook charges going back to April 23 2012. Some of these charges were through PayPal for facebook credits, and others were directly through FaceBook. The last payment through PayPal was April 25 2012. She saw the charges and closed the PayPal Account on April 25 2012 as well. She never notified us (Credit Union), and these charges have continued on and off (all non Paypal/direct facebbok charges) for the 5 months after April, the recent ones being the highest dollar amount. Now she want's to be reimbursed, but says she is not worried about the older charges. Being that she knew her paypal account was compromised along with all the card information it contained, and she never reported this to us, is there any way to avoid payment. This is gross negligence if I have ever seen it, but that applies only to Visa zero liability. She did not lose or have the card stolen (technically), so the 50/500 dollar limits do not apply (I think). She did not spot these on her statement, so I can't start with the first unauhtorized transaction in April and pay 60 days out (or can I?) I feel like when she knew the card was being used and did not report it back then, she prevented us from reissueing, and preventing this loss for her and us. Any advice. Robert R.
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Robert R.
Fraud Specialist
Beaumont, TX

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eBanking / Technology
#1739900 - 09/11/12 06:17 PM Re: Reg E: Negligence [Re: TruthNTime]
John Burnett Offline
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John Burnett
Joined: Oct 2000
Posts: 38,783
Cape Cod
Negligence is not a factor under Regulation E rules for determining a consumer's liability for unauthorized transactions. You're correct about the fact that her card was not stolen eliminates the liability assignments under 1005.6(b)(1) and 1005.6(b)(2). That leave you with 1005.6(b)(3), which is the statement date plus 60 calendar days rule. Whether or not your customer noticed the transactions on her statements is irrelevant. The fact that an unauthorized transaction appeared on a statement triggers the 60-day notice period. You should determine the date on which the first unauthorized transaction took place. That's not necessarily the earliest of the transactions she is filing a claim for, so you'll have to play a little "20 Questions" to find out from her when the unauthorized transactions actually started. Then figure out the date of the statement showing the first unauthorized transaction. That becomes the starting date for the 60-day count.

If you agree that the transactions were unauthorized, your bank will absorb the loss for the transactions occurring through the end of the 60-day period. Your customer gets tagged for the rest, under Regulation E.

Check the Visa Zero Liability rules to determine whether you will have to follow the zero liability rule and refund the money regardless of the Reg E result.
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John S. Burnett
BankersOnline.com
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#1739902 - 09/11/12 06:20 PM Re: Reg E: Negligence [Re: TruthNTime]
BrianC Offline
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BrianC
Joined: Nov 2004
Posts: 5,685
Illinois
Quote:
She did not spot these on her statement, so I can't start with the first unauhtorized transaction in April and pay 60 days out (or can I?)


You can start counting from April!

Reg E 1005.6(b)(3)

(3) Periodic statement; timely notice not given. A consumer must report an unauthorized electronic fund transfer that appears on a periodic statement within 60 days of the financial institution's transmittal of the statement to avoid liability for subsequent transfers. If the consumer fails to do so, the consumer's liability shall not exceed the amount of the unauthorized transfers that occur after the close of the 60 days and before notice to the institution, and that the institution establishes would not have occurred had the consumer notified the institution within the 60-day period. When an access device is involved in the unauthorized transfer, the consumer may be liable for other amounts set forth in paragraphs (b)(1) or (b)(2) of this section, as applicable.

She has unlimited liability for any charge occurring more than 60 days after the statement date on which the first unauthorized charge appeared.

VISA/MasterCard allow you to file chargebacks up to 120 days after the transaction date so if the dollar amounts are large enough, you can file chargebacks on transactions going back as far as mid May to further limit your losses. I agree with your assessment that Zero Liability would not apply as the institution is permitted to limit coverage based on gross negligence.

This is exactly the type of question I will be tackling at my webinar on September 20th.

Skimmers & Hackers & Phishers...Oh My! Debit Card Fraud Loss Prevention.
Last edited by BrianC; 09/11/12 06:53 PM. Reason: Add Zero Liability
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#1739932 - 09/11/12 07:34 PM Re: Reg E: Negligence [Re: TruthNTime]
TruthNTime Offline
Member
TruthNTime
Joined: Dec 2011
Posts: 84
Texas
That is good news, thanks for the helping hand my fellow banking brothers! I will likely be buying the CD from your training Brian, I will be out of town for the live session date. Thanks again to both of you.
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Robert R.
Fraud Specialist
Beaumont, TX

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