Hello,

We have a customer that came in last week to withdraw money and he could not find his debit card. Since the end of May, somebody used his debit card at gas stations in Mexico. 20000 are gone. The activity ended in August 19th.
He calims that all the actiivty is unauthorized.
Whats the banks liability here?

Based on 1005.6(b)(3) the customer is liable for any charges that occurred more than 60 days from the transmission of the statement on which the first charge appeared. So if the first statement was May 31st, for example, then you could hold the customer liable for any charges that take place on July 31st and following.

Also note that since the customer did not provide timely notice, you are not required to provide provisional credit in 10 business days or complete your investigation within 90 days.

With respect to VISA/MasterCard, failure to review statements can be considered customer negligence and negate Zero Liability even though it does not negate Reg E liability. Also, if these were all unattended terminals (MCC 5542) you have chargeback rights for up to 120 days after the transaction date so using the chargeback process, you could recover most of the funds.

what does unattended terminals mean ?
we have never been able to get back funds using MCC 5542.

Brian,
I forwarded the question & your answer to numerous banks & I'm shocked at the number who disagree with you. Almost all said they would NOT reimburse the customer for the 1st 60 days, but would attempt chargebacks on the transactions after that. This has set off a firestorm. all came back & said auditors would disagrfee with you. what can I look at to understand ?

Midwest - I don't think I can explain it any better than Brian - so I won't try, but look at the section he references. Click on Read a Reg at the top of this page, and go to the section of Reg E Brian mentioned. It's very clear. I know that many bankers and some auditors and examiners mis-interpret the timing. But they're misinterpreting it.

As for the unattended terminals, I believe you can recover because it was a stolen card. Isn't that correc Brian? You can't recover from unattended terminals in a counterfeit card situation, but I believe the difference was that this was a stolen/missing card. Correct?

From the commentary:

6(b)(3) Periodic Statement; Timely Notice Not Given

1. Unlimited liability applies. The standard of unlimited liability applies if unauthorized transfers appear on a periodic statement, and may apply in conjunction with the first two tiers of liability. If a periodic statement shows an unauthorized transfer made with a lost or stolen debit card, the consumer must notify the financial institution within 60 calendar days after the periodic statement was sent; otherwise, the consumer faces unlimited liability for all unauthorized transfers made after the 60-day period. The consumer's liability for unauthorized transfers before the statement is sent, and up to 60 days following, is determined based on the first two tiers of liability: up to $50 if the consumer notifies the financial institution within two business days of learning of the loss or theft of the card and up to $500 if the consumer notifies the institution after two business days of learning of the loss or theft.

Of all of the misunderstandings of Regulation E, I think this is among the top two or three. Also at or near the top of the list is the idea that Visa/MasterCard or NACHA rules trump Regulation E (they can't and never will) unless they provide more protection to the consumer than Reg E does (the zero liability provisions of MC and Visa leap to mind); and the idea that you can compel a consumer to put ANYTHING in writing as a condition of providing the consumer his/her rights under the error resolution rules in 1005.11. None of the three ideas is correct.

Amen John!

I belong to a card networking educational association, and asked an FDIC examiner to speak to our group on the most common Reg E violations they find, and you just named them. It was an eye-opener for most of the attendees; a lot of panicked looks. I'm planning on a follow-up.

Midwest & Compl101, If you've never attended one, I recommend Brian's or any of the BOL Reg E webinars.

To answer ItNeverEnds...you are correct. VISA/MasterCard offer chargeback rights if a stolen card is used at an unattended terminal. The cardholder letter or issuer certification must state that the card was stolen at the time of the transaction for V/MC to accept the claim.

We do still lose a lot of the MCC 5542 because the issuer is held liable when a counterfeit card is used to make the purchase and the cardholder still has their own card in their possession.

BetsyS, again thank you for the kind endorsement.