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#1353636 - 03/08/10 03:14 PM Regulation E and fraudulent debit card transaction
tsmith Offline
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tsmith
Joined: Feb 2006
Posts: 40
Alabama
Can someone tell me the 'rules' per Regulation E regarding fraudulent debit card transactions if the customer gives their pin to an unauthorized person?

Any help would be greatly appreciated!

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#1353751 - 03/08/10 05:04 PM Re: Regulation E and fraudulent debit card transaction tsmith
Buccs Offline
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Joined: May 2009
Posts: 3,567
Ohio
I'm not sure of the specific regulatory citation, but every bank I've worked at has treated the PIN as explicit authorization by the customer. If the customer acknowledges they gave the PIN to the person who conducted the fraudulent transaction, they essentially allowed the transaction by not exercising due dilligence in protecting the PIN.

Typically in these cases we attempt to assist the customer in recovering the funds, but require that they press charges against the unauthorized person before we will assist them in trying to get their money back, and even then we will only help them document the wrongdoing of the other party and won't issue a refund under Reg E. rules.

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#1353910 - 03/08/10 07:53 PM Re: Regulation E and fraudulent debit card transaction Buccs
BrianC Offline
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BrianC
Joined: Nov 2004
Posts: 5,977
Illinois
The answer is, "It depends."

Question: How was the PIN "given" to the unauthorized person?

a. I wrote it on the back of my card and my wallet was stolen.
If the consumer reports the theft within two business days of discovering the missing card, their maximum liability is $50.00.

See Reg E 205.6 (b)(1)

b. I used my card at an ATM that apparently had a skimming device attached and a copy of my card may have been made as I am still in possession of my card.
Since this transaction did not involve the physical theft of the access device, the customer need only notify the bank within 60 days of the statement date the transaction(s) first appear.

See 205.6 (b)(3)

c. I gave my PIN to a friend/family member to withdraw cash. They gave the card back to me, but later stole it from my wallet.

According to Reg E, you CANNOT require your customer file a police report, not can you deny their claim on the basis of their refusal to file one. Make sure that they understand that if the bank pays their claim, the bank becomes the victim and can/will file a police report and prosecute the individual responsible.

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d. I gave the PIN number to a friend/family member to get cash for me, and instead they kept the card and racked up a bunch of charges.
The Commentary to Reg E says that the consumer is considered to have authorized all the transactions since the card was never resecured. The bank may deny the claim.

See Staff interpretations 205.2 (m)(2)

e. I got an email/cel phone message stating my account had been suspended, and I had to reply with my card/PIN number to reactive, so I did.
The customer is the victim of a phishing scam. Although gullible for falling for it, the are not liable for any authorized charges according to Reg E.

See Staff interpretations 205.2 (m)(3)
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#1876000 - 12/04/13 06:24 PM Re: Regulation E and fraudulent debit card transaction tsmith
Red Raiders Offline
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Red Raiders
Joined: May 2013
Posts: 1,053
Compliance Land
On "e" above I don't see where it states the customer is not liable for any of the charges. 1005.2(m) & the commentary state fraud can cause a transaction to be unauthorized but I don't see where it states zero liability. When you go to 1005.6 it discusses $50 or $500 liability for unauthorized transfers. Can someone please clarify this for me? We have this exact situation now. smile
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#1876001 - 12/04/13 06:31 PM Re: Regulation E and fraudulent debit card transaction tsmith
CULady Offline
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Joined: Sep 2007
Posts: 493
WA
My understanding is the $50/$500 only applies if the card is lost or stolen. If they still have their card in their possession, the $50/$500 does not apply.

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#1876006 - 12/04/13 06:38 PM Re: Regulation E and fraudulent debit card transaction tsmith
Red Raiders Offline
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Red Raiders
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Posts: 1,053
Compliance Land
Management is going to ask where it says this and I can't find it. I agree based on what I have read of people's opinions but I can't find it in black and white in the reg.
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#1876012 - 12/04/13 06:50 PM Re: Regulation E and fraudulent debit card transaction tsmith
CULady Offline
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Joined: Sep 2007
Posts: 493
WA
I know that we have it in our Membership Agreement. It states: "If you tell us within 2 business days after you learn of the LOSS OR THEFT OF YOUR CARD OR PIN, you can lose no more than $50..." Emphasis was added by me.

Reg E 1005.6 (1) Timely notice given. If the consumer notifies the financial institution within two business days after learning of the loss or theft of the access device, the consumer's liability shall not exceed the lesser of $50 or the amount of unauthorized transfers that occur before notice to the financial institution.
(Excerpt from: http://www.bankersonline.com/regs/12-1005/12-1005-006.html)

Says the same thing, loss or theft of the access device.

Hope this helps.
Last edited by CULady; 12/04/13 06:52 PM.
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#1876059 - 12/04/13 07:45 PM Re: Regulation E and fraudulent debit card transaction tsmith
Red Raiders Offline
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Red Raiders
Joined: May 2013
Posts: 1,053
Compliance Land
I think it is clear that $50/$500 can be charged if the card is lost or stolen but what I think I am going to have to prove is that since the card never left the customer's possession that we are on the hook for the whole thing. I will pass this along and see what happens!
Last edited by raidersn2000; 12/04/13 09:42 PM.
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#1876964 - 12/06/13 11:45 PM Re: Regulation E and fraudulent debit card transaction tsmith
BetsyS Offline
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Joined: Jun 2009
Posts: 468
"Zero Liability" is not a requirement under Reg E,you won't find it there. It's a protection that is offered by card networks (ie, Visa & MasterCard) and documented in their Operating Rules. If you offer one of their products you're bound to honor it through your contracts with them.
Last edited by BetsyS; 12/06/13 11:45 PM.
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