So I am reviewing some customer interactions with staff and when the customer has an unauthorized transaction on their debit card, the banker explains the error resolution process and says oh yes, we will have to cancel your card. Upon hearing that, the customers withdraw their claims.

Technically, we are following the rule, but the impact is that the customer is not receiving the full benefits of Reg E. Anyone else see a problem with this?

Our approach is that if a customer has notified us that they have unauthorized card activity on their account, we MUST close his/her card. We don't give them a choice as not closing the card could result in far greater losses to the bank down the road. If closing the card right away would be too much of a burden on the customer, we do offer to order a new one right away and close the old one once the new one arrives so that the customer is never without one.

I think that if you're conveying the idea that the customer won't have card access, you could be denying the customer his rights under Reg E. If you're selling the idea of cancelling the card and replacing it, so the customer won't be inconvenienced, you're not creating a chilling effect on the exercise of the customer's rights.

The challenge, of course, is how to handle the situation when your bank fully intends to discontinue the customer's further card access due to careless card management resulting in excessive or repetitive fraudulent activity.

Thank you both. On the idea of not closing the card right away, I understand it takes a week to get a new card here. What do you do with the old one while waiting for the new one? Do you put some sort of restriction on it?

While it is an inconvience to the customer, you are setting the bank up to take additional losses if you keep the old card active. Also, if you attempt to file a fraud related chargeback on an active card, VISA/MasterCard will automatically reject your claim and the bank will lose any chargeback rights leaving you on the hook for any transactions that the customer disputes.

Once I am aware of fraud on a card, it is not negotiable to keep the card open. The customer may be willing to take a small financial hit to withdraw their claim, but what happens when the next unauthorized charge is $1,000?

As a personal promotion side note, I will be discussing other loss mitigation strategies at my upcoming webinar on August 7th.

Debit Card Fraud Mitigation

We really deal with the old card on a case-by-case basis. If there is high dollar fraud, counterfeit card fraud or a large number of fraudulent transactions occurring on the card, for example, we may lower the POS limits to $1.00, but leave the ATM withdrawal limit as is to afford the customer the opportunity to get to an ATM and withdraw cash. If, however, the fraudulent activity consists of one transaction that occurred three weeks ago and the customer didn't notice it until they received their bank statement, for example, we may elect to leave the old card as is until the new one arrives, but monitor the activity. We recognize that there is a certain amount of risk to leaving the old card open at all, but in most cases where the customer insists they cannot be without a card, the risk is low enough to justify doing what is necessary to keep the customer happy. To date we have had no issues with this approach.

Thank you all again!