Learn More - Click Here!

Page 1 of 2 1 2
Thread Options
#1741262 - 09/15/12 06:43 PM Customer Liability and Reg-E 60 day timeframe
DingoJ Offline
Member
Joined: Sep 2012
Posts: 72
I have been trying to get a better grasp on customer liability, and after pouring over Reg-E and Staff Interpretations of Reg-E, I think I have it, but would like some confirmation: (sorry I do best with visuals)

FEB
|
MAR --------------bank liability starts here
| $-unauth EFT
APR
| $-unauth EFT
MAY
| $-unauth EFT
JUN --------------bank liability ends, customer liability starts
| $-unauth EFT
JUL
| $-unauth EFT
AUG
| $-unauth EFT
SEP --------------customer liability ends (date EFTs discovered and reported)
|
OCT

The “$”s represents unauthorized EFTs. The customer realizes the unauthorized EFTs on his August statement and reports them that day. Since the first unauthorized EFT occurred and appeared on the customer’s May statement, the bank is liable for the EFT that occurred in March, plus the ones in April and May (60 days).

The customer would be liable for the amount of the EFTs (less fees charged by the bank as a result of the unauthorized EFTs) for June, July, and August.

That would hold true regardless of whether the unauthorized EFTs had been initiated with an access device or not.
HOWEVER, if an access device was used, the customer could be liable for an additional $50.00 or even $500.00 depending on when he discovered his card was missing or stolen, and when he reported it as such.


Three examples:

Unauthorized EFTs were initiated as ACH debits:
* Bank is liable for March, April, May.
* Customer is liable for June, July, August.

Unauthorized EFTs were initiated with a debit card. Customer realized it was stolen when he checked his August statement and reported this to the bank that same day:
* Bank is liable for March, April, May, less $50.00 allowable due to EFTs being conducted with an access device.
* Customer is liable for June, July, August, plus the $50.00 allowable.

Unauthorized EFTs were initiated with a debit card. Customer sees the unauthorized EFTs on his August statement and calls the bank that same day. During the conversation he says he hasn’t been able to find his card since the end of January:
* Bank is liable for March, April, May, less $500.00 allowable due to customer’s failure to give timely notice of the lost card.
* Customer is liable for June, July, August, plus the $500.00 allowable.

Is this an accurate understanding of customer liability?

Does it matter if the access device is literally (i.e. physically) stolen, or does it include fraudulent use and counterfeit cards?

Return to Top
Operations Compliance
#1741268 - 09/16/12 12:10 PM Re: Customer Liability and Reg-E 60 day timeframe DingoJ
rlcarey Online
10K Club
rlcarey
Joined: Jul 2001
Posts: 78,971
Galveston, TX
Why don't you test your theories on Andy Z's Reg. E liability calendar?

http://home.roadrunner.com/~zavoina/Reg_E.htm
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#1741272 - 09/16/12 11:17 PM Re: Customer Liability and Reg-E 60 day timeframe rlcarey
DingoJ Offline
Member
Joined: Sep 2012
Posts: 72
Originally Posted By: rlcarey
Why don't you test your theories on Andy Z's Reg. E liability calendar?

http://home.roadrunner.com/~zavoina/Reg_E.htm


Thank you for that! Yes, my figuring was correct - all except when it comes to the VISA branded debit card, as then VISA's zero liability applies.

And this just seems crazy to me, but is there really no time limit on how far back a customer can claim and still get zero liability under VISAs operating rules? We are limited to 120 days for chargeback rights, but a customer can claim back even farther than that and still be protected? Really?

Return to Top
#1741282 - 09/17/12 11:46 AM Re: Customer Liability and Reg-E 60 day timeframe DingoJ
rlcarey Online
10K Club
rlcarey
Joined: Jul 2001
Posts: 78,971
Galveston, TX
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#1741368 - 09/17/12 04:12 PM Re: Customer Liability and Reg-E 60 day timeframe rlcarey
DingoJ Offline
Member
Joined: Sep 2012
Posts: 72
Originally Posted By: rlcarey


Oh! Very helpful! Thank you.

ONE LAST question (I promise) that I haven't been able to find yet: When Reg-E and the staff Interpretations talk about the customer discovering their card lost or stolen, that would include fraudulent use and conterfiet cards, right? Not just physically stolen/lost cards.

I think I might be overthinking this one...?

Return to Top
#1741376 - 09/17/12 04:17 PM Re: Customer Liability and Reg-E 60 day timeframe DingoJ
rlcarey Online
10K Club
rlcarey
Joined: Jul 2001
Posts: 78,971
Galveston, TX
Physical loss of the card is the key.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#1741396 - 09/17/12 05:02 PM Re: Customer Liability and Reg-E 60 day timeframe DingoJ
DingoJ Offline
Member
Joined: Sep 2012
Posts: 72
Thank you rlcarey - you are a wealth of informative help!

Return to Top
#1741479 - 09/17/12 08:21 PM Re: Customer Liability and Reg-E 60 day timeframe rlcarey
John Burnett Offline
10K Club
John Burnett
Joined: Oct 2000
Posts: 39,598
Cape Cod
Originally Posted By: rlcarey
Physical loss of the card is the key.


There are two triggering events for determining consumer liability: (1) customer knowledge of the loss or theft of the access device and (2) delivery of a statement reflecting an unauthorized EFT. Days are counted from those events because the customer is deemed to have information that puts him on notice of potential or actual unauthorized activity. Once the consumer is tagged with that knowledge, the clock starts ticking for assignment of liability.

If the consumer never learns of the loss of his card (it's skimmed and counterfeited, or it's "borrowed" and put back or he absentmindedly leaves it in an ATM and doesn't miss it), he's got no reason to suspect a problem. At least, that is, until the first statement shows up and he has a chance to review it and see unauthorized transactions. Congress gave the consumer 60 days (ridiculous, but that's what it is) to notice the problem and save himself from further liability.
_________________________
John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
Bankers' Threads User #8

Return to Top
#1742695 - 09/20/12 07:21 PM Re: Customer Liability and Reg-E 60 day timeframe John Burnett
Carly Girl Offline
Power Poster
Joined: Aug 2004
Posts: 3,773
TEXAS
I'm glad to see that I am not the only person who thinks 60 days is ridiculous!
_________________________

Return to Top
#1750498 - 10/18/12 08:10 PM Re: Customer Liability and Reg-E 60 day timeframe DingoJ
lucyc Offline
Diamond Poster
lucyc
Joined: Jul 2007
Posts: 1,072
What about this?

Customer notifies the bank of unauthorized transactions on 10/18/12. He is in possession of his card.

His claim is as follows:

Tran Date 5/11/12
Statement Date 6/11/12

Tran Date 6/13/12
Statement Date 7/10/12

Tran Date 7/13/12
Statement Date 8/12/12

Tran Date 8/13/12
Statement Date 9/11/12

Tran Date 9/11/12
Statement Date 9/11/12

Tran Date 10/11/12
Statement Date 10/17/12

Our disclosures state under the Error Resolution Notice section that we must hear from the customer no later than 60 days after we sent the FIRST statement on which the problem or error occurred.

Also in our disclosure under the Unauthorized Transfers section we state that if the customer does not tell us about transfers they did not make, including those made by card, code or other means within 60 days after the statement was mailed to them they may not get back any money they lost afte the 60 days if we can prove that we could have stopped someone from taking the money if they had told us in time.

All that being said, what is the customer liable for in my scenario and what is the bank liable for?

Return to Top
#1750594 - 10/19/12 12:21 PM Re: Customer Liability and Reg-E 60 day timeframe DingoJ
lucyc Offline
Diamond Poster
lucyc
Joined: Jul 2007
Posts: 1,072
Bump

Return to Top
#1750709 - 10/19/12 03:28 PM Re: Customer Liability and Reg-E 60 day timeframe DingoJ
BrianC Offline
Power Poster
BrianC
Joined: Nov 2004
Posts: 6,243
Illinois
Reg E 1005.6 places unlimited liability on the customer for transactions that take place more than 60 days after the statement date on which the first charge appears. So the customer has liability for any transactions that occur more than 60 days after 6/11/12. (Which by my math would be 8/13/12-10/11/12) The bank would have liability for the transactions on 5/11, 6/13, and 7/13.

Check out Andy Zavoina's Reg E Liability Calculator
_________________________
Sola Gratia, Sola Fides, Sola Scriptura, Solus Christus, Soli Deo Gloria!
www.tcaregs.com

Return to Top
#1750762 - 10/19/12 04:07 PM Re: Customer Liability and Reg-E 60 day timeframe DingoJ
lucyc Offline
Diamond Poster
lucyc
Joined: Jul 2007
Posts: 1,072
Thank you for the information. I was getting confused by the fact that the customer did not notify us within 60 days of the statement that included the first unauthorized transaction,they were in possession of their card and these were POS transactions.

Return to Top
#1750886 - 10/19/12 07:25 PM Re: Customer Liability and Reg-E 60 day timeframe DingoJ
BrianC Offline
Power Poster
BrianC
Joined: Nov 2004
Posts: 6,243
Illinois
Since the customer's notification was not timely, 1005.11 eliminates the obligations to provide provisional credit and to complete your investigation in 90 days. It does not allow you to issue a blanket denial of the claim or refuse to investigate.
_________________________
Sola Gratia, Sola Fides, Sola Scriptura, Solus Christus, Soli Deo Gloria!
www.tcaregs.com

Return to Top
#1750922 - 10/19/12 08:11 PM Re: Customer Liability and Reg-E 60 day timeframe DingoJ
MarieR Offline
Platinum Poster
Joined: Nov 2005
Posts: 614
What do you do with the notificaiton if it is after 60 days? If the customer holds the liability for the charge why would we need to investigate and then issue a letter saying that they hold the liability for the charge and that we are not refunding anything? I guess it would need to go on our log and then be closed the same day being past the required time for our liability and close it without any refund? Just curiuos because I think we just tell the customer that there isn't anything we can do and I would like to make sure we are handling it correctly.
_________________________
CRCM

Return to Top
#1751004 - 10/22/12 12:21 PM Re: Customer Liability and Reg-E 60 day timeframe DingoJ
lucyc Offline
Diamond Poster
lucyc
Joined: Jul 2007
Posts: 1,072
Sorry but now I'm confused. In my scenario the customer initated the claim in October for transactions as far back as May. My understanding was the we would be liable for the transactions within 60 days of May (first time the unauthorized transaction posted).

Are you now saying that since they did not notice the transactions within the 60 day timeframe from the first transaction(May transactions should have been reported in July) then we should take the claim but have the right to deny it?
Last edited by lvc; 10/22/12 12:21 PM.
Return to Top
#1751012 - 10/22/12 01:06 PM Re: Customer Liability and Reg-E 60 day timeframe DingoJ
John Burnett Offline
10K Club
John Burnett
Joined: Oct 2000
Posts: 39,598
Cape Cod
1. The date of the customer's claim establishes that you don't have to follow the time limits and notice requirements of section 1005.11 in investigating the claim.

2. If the claim is that the transactions were not authorized, then you want to investigate whether they were, in fact, authorized. For example, if you can document that your customer authorized all the transactions, you can deny the claim altogether.

3. The 60-day period is counted from the sending of the statement reflecting the first unauthorized transaction in the series. Why? Because delivery of the statement puts the customer on notice of the unauthorized activity, and Congress said that it's not unreasonable to require the customer to pay attention to the statement and advise the bank within 60 days to "stop further bleeding" of the account.

4. Assuming that all the transactions prove to be unauthorized, if a lost/stolen access device was not involved, or if the customer never knew that the card had been lost or stolen (or otherwise compromised), the customer claim has to result in a reimbursement to the customer of the unauthorized transactions that occurred before the end of the 60-day period as determined under item 3 in this list.
Last edited by John Burnett; 10/22/12 01:07 PM.
_________________________
John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
Bankers' Threads User #8

Return to Top
#1751093 - 10/22/12 04:02 PM Re: Customer Liability and Reg-E 60 day timeframe DingoJ
lucyc Offline
Diamond Poster
lucyc
Joined: Jul 2007
Posts: 1,072
OK, Thanks for the clarification.

Return to Top
#1759784 - 11/20/12 11:24 PM Re: Customer Liability and Reg-E 60 day timeframe John Burnett
DingoJ Offline
Member
Joined: Sep 2012
Posts: 72
Oh! Because this from Reg-E:

(1) Timing; contents. A financial institution shall comply with the requirements of this section with respect to any oral or written notice of error from the consumer that:
(i) Is received by the institution no later than 60 days after the institution sends the periodic statement or provides the passbook documentation, required by §205.9, on which the alleged error is first reflected;

...is simply talking about timing, (and whether or not a FI needs to follow the outlined timing, based on the +60 day notice) and not about the ability to completely denie the claim based off of the +60 day notice.

I think you guys are starting to rub off and I'm finally getting it! smile

Return to Top
#1759789 - 11/20/12 11:32 PM Re: Customer Liability and Reg-E 60 day timeframe DingoJ
DingoJ Offline
Member
Joined: Sep 2012
Posts: 72
Originally Posted By: DingoJ
Oh! Because this from Reg-E:

(1) Timing; contents. A financial institution shall comply with the requirements of this section with respect to any oral or written notice of error from the consumer that:
(i) Is received by the institution no later than 60 days after the institution sends the periodic statement or provides the passbook documentation, required by §205.9, on which the alleged error is first reflected;

...is simply talking about timing, (and whether or not a FI needs to follow the outlined timing, based on the +60 day notice) and not about the ability to completely denie the claim based off of the +60 day notice.

I think you guys are starting to rub off and I'm finally getting it! smile


Ok, one more thought...
So if the customer does not give timely notice, then this puts no limitaion on how long the investigation can remain open?

Return to Top
#1759808 - 11/21/12 05:44 AM Re: Customer Liability and Reg-E 60 day timeframe DingoJ
DingoJ Offline
Member
Joined: Sep 2012
Posts: 72
Ok, it wouldn't let me edit my post above, so even though it sounds a bit like I'm talking to myself; I did have a chance to think about it - let me know what you think.

If the consumer did not report the error within 60 days of the first time the error appeared on their statment, we are not obligated to issue provisional cedit, or even complete the claim within 10, 45, or even 90 days.

We ARE, however, still obligated to complete the case and determine that an error either has occurred or not. It wouldn't make sense then, for an auditor to stumble upon a case that has been open for +90 days with no real investigation taking place. We would still want to make our determination and close the case either way.

Dang I love Reg-E! This stuff is fun. Seriously. smile And these forums are great!

Return to Top
#1759871 - 11/21/12 02:54 PM Re: Customer Liability and Reg-E 60 day timeframe DingoJ
BrianC Offline
Power Poster
BrianC
Joined: Nov 2004
Posts: 6,243
Illinois
The "investigate promptly" portion of 1005.11(c) does still apply. I agree that letting a claim sit around simply because the customer notice was not timely would be open to criticism.
_________________________
Sola Gratia, Sola Fides, Sola Scriptura, Solus Christus, Soli Deo Gloria!
www.tcaregs.com

Return to Top
#1759965 - 11/21/12 04:22 PM Re: Customer Liability and Reg-E 60 day timeframe DingoJ
John Burnett Offline
10K Club
John Burnett
Joined: Oct 2000
Posts: 39,598
Cape Cod
One qualifier -- Once you've established that the claim was received after the 60-day deadline under §1005.11, you are off the hook for any claim except one for an unauthorized EFT. In other words, the math error or missing EFT or wrong dispense amount, etc., claims won't need to be pursued. But a claim that a transaction was not authorized will still have to be addressed, but not under section 1005.11. You'll still have to determine if it was authorized and then apply the limits on consumer liability in 1005.6 if you can't determine that the consumer authorized the transaction.

Official Comment 11(b)(1)-7:
"7. Effect of late notice. An institution is not required to comply with the requirements of this section for any notice of error from the consumer that is received by the institution later than 60 days from the date on which the periodic statement first reflecting the error is sent. Where the consumer's assertion of error involves an unauthorized EFT, however, the institution must comply with § 1005.6 before it may impose any liability on the consumer."
_________________________
John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
Bankers' Threads User #8

Return to Top
#2119505 - 02/24/17 08:22 PM Re: Customer Liability and Reg-E 60 day timeframe DingoJ
Gary Offline
New Poster
Joined: Feb 2017
Posts: 1
Has any one created a calculator for this scenario?

Return to Top
#2119556 - 02/24/17 10:29 PM Re: Customer Liability and Reg-E 60 day timeframe DingoJ
BrianC Offline
Power Poster
BrianC
Joined: Nov 2004
Posts: 6,243
Illinois
BOL's very own Andy Zavonia.

https://www.bankersonline.com/tools/42546
_________________________
Sola Gratia, Sola Fides, Sola Scriptura, Solus Christus, Soli Deo Gloria!
www.tcaregs.com

Return to Top
Page 1 of 2 1 2

Moderator:  Andy_Z, John Burnett