We've had a customer file a Reg E claim with our Bank and a police report at the same time against the person who stole their card information and used it without their consent. Our customer has won the court case and will soon begin receiving restitution payments. It does not seem right to us for the customer to benefit from us having paid their claim in a situation where under MasterCard rules we likely will not have chargeback rights and have had to take a loss on the customer, yet at the same time the customer is going to receive payment from the thief, in essence double-dipping, receiving double the benefit. Can we refuse to pay their claim or ask them to withdraw their claim? Any help would be greatly appreciated.

If your customer is reimbursed by the Bank under Reg E rules, you become the financial victim, not the customer. The chain of liability is that you should be the injured party receiving restitution from the thief, not your customer.

I recommend contact legal counsel to see what steps your institution needs to take to redirect the restitution to you since you cannot deny the Reg E claim if an error actually occurred.

If you have made them whole, then the customer has no claim as far as the court goes and likely ended up lying to the court whether they realize it or not. The bank would step into the shoes of the customer at that point as far as restitution. You need to talk to your legal counsel.

I have to say, I agree with the above and love the fact that the customer, who likely would not have participated vigorously with the bank as the damaged party, won the case and the bank should be able at minimal cost to interject itself as the payee.

Please let us know if the bank pursues this and what happens.