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#2223754 - 10/15/19 09:16 PM Reg E-Unknown date of liability commencement
KDunn Offline
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We received a debit card fraud alert on one of our customers who is elderly with potential medical problems. The customer came in and proceeded to claim they did not originate numerous transactions appearing on their statements. While in the office, the CSR went as far back as January 2019 and there were claims of unauthorized transactions. Just since January, we're talking thousands of dollars. There is another family member jointly on the account and it is impossible to state at this time if fraud even exists.

Obviously the customer is not reviewing their statements and will be liable for the majority of the transactions for failure to notify us on a timely basis. The customer signed a fraud affidavit however, how do we assess our liability for amounts beyond the first $500 if we cannot establish a starting time? I told our CSR to contact the customer and have them review their statements to give us a definitive date. Can we even begin a dispute resolution under the circumstances?

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eBanking / Technology
#2223773 - 10/16/19 01:08 PM Re: Reg E-Unknown date of liability commencement [Re: KDunn]
burkemi Offline
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The "start date," as you call it, is the date of the earliest transaction. You said the CSR reviewed through January 19...what date? 1/2/19? 1/3?....that is the date you must adhere to. You say your customer has already signed a dispute form so you must begin your investigation and either resolve and close the dispute within 10 days or provide provisional credit and extend your investigation an additional 35/80 days (45/90 days from the start date).

Your customer should receive credit for the transactions that occurred on the earliest statement date, plus 60 days. So if the earliest transaction is on 1/2/19 and the statement cut on 1/15 your statement date calculation is 1/15+60 days. Your customer is liable for all transactions occurring AFTER that 60 days. However, you are likely contractually bound through Visa/MC to file fraudulent disputes on the recent transactions. You won't have to provide provisional credit or follow the Reg E timing for these, but if you are able to recover the funds through chargebacks you must provide them to your customer.

Concerning the $500 liability to your customer... Was the card reported as lost/stolen? If not, that liability tier doesn't apply. If it was lost/stolen, when did your customer first realize the card was missing? If it was reported to you within 2 days the customer realized it was lost/stolen, the liability is $50.
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#2223774 - 10/16/19 01:13 PM Re: Reg E-Unknown date of liability commencement [Re: KDunn]
burkemi Offline
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Of course, most of that reply is assuming this is a card-based dispute. That's where my thoughts always turn.
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#2223780 - 10/16/19 03:14 PM Re: Reg E-Unknown date of liability commencement [Re: KDunn]
KDunn Offline
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Thanks Burkemi! The fraud is debit card-based but virtually all of the transactions are online--and primarily with four merchants. Our CSR only went back to Jan 2019 while the customer was in the office Saturday morning. That was the reason for contacting them to review their statements and let us know the fraud start date. I sat with the CSR this morning and we are seeing similar transactions beginning in Mar 2017. The statements drop at the end of each month so we will go 60 days from 4/1/2017 to determine our period of liability. Our card processor limits us to 15 transactions per PAN on investigations. They suggested submitting the 15 with the highest dollar amount. We'll be contacting the processor to find out how far back they can investigate then use the 15 in that time period. The other family member indicates there are piles of unopened mail at the customer's home. Unfortunately, this is a situation where even the 60-day rule is unfair to the FI.

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#2223786 - 10/16/19 03:33 PM Re: Reg E-Unknown date of liability commencement [Re: KDunn]
burkemi Offline
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Reg E is rarely "fair" to us financial institutions. Best of luck!

(Now is a really good time to exercise your right to refuse another card to this customer...)
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#2223800 - 10/16/19 04:30 PM Re: Reg E-Unknown date of liability commencement [Re: KDunn]
KDunn Offline
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Agreed.

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#2223840 - 10/16/19 08:15 PM Re: Reg E-Unknown date of liability commencement [Re: KDunn]
John Burnett Offline
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I don't recommend researching back past the first transaction your customer claims wasn't unauthorized unless the customer says something like "I have never authorized those _____ to charge my account." It's sometimes the case that the customer approved transactions (let's say they are monthly debits for a gym membership) and then revoked the authorization.

So whether to go look at earlier transactions depends on the specifics of the error claim.
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#2223852 - 10/16/19 09:15 PM Re: Reg E-Unknown date of liability commencement [Re: KDunn]
Andy_Z Offline
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It could work to your advantage, going back. Assume the thief donated $1 to a charity, waited a week or two, charged an iTunes, and did some small things before getting heavily in the theft amounts. You could have liability for a smaller amount if they made those test charges and waited any period of time.

I hope his family joins in and helps set up a process to manage mail, finances, and who knows what else, meds, property, etc...
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#2223893 - 10/17/19 03:41 PM Re: Reg E-Unknown date of liability commencement [Re: KDunn]
KDunn Offline
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John & Andy, we are thinking the same as I considered the consequences implied by each of your responses--including potential negative customer relations if we decided to research backwards. My thoughts aligned with Andy in that we would likely reduce our liability by doing so. Another concern was if we limited to what was preliminarily presented to the customer, they may continue with additional claims of prior transactions. Given all the factors, I had the CSR perform the research and it appears the first unauthorized transaction took place in March 2017. The statement that transaction appeared on dropped at the end of the month so we can establish our liability period under Reg E. We are compiling a worksheet listing dates, amounts, and merchants for each transaction the customer is claiming--essentially all online transactions. We will then attach all monthly statements as supporting documentation. We then plan to call the customer back in to review all findings and sign a statement/affidavit that what we've compiled constitutes the full extent of the fraudulent activity. It likely would not limit our liability in court but will at least give us something to stand on. Our next step is to find out how far back our card processor is able to research then select the 15 largest transactions for potential reimbursement.

This is indeed an unfortunate incident and certainly preventable. It highlights the importance of reviewing your records regularly. Also, that if a family member signs-on to an account for protection, they should be taking more responsibility for the oversight of the parent's financial matters. If you can think of any better way to handle the matter or any additional considerations I would welcome the discussion. Have a good one gentlemen!

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#2223918 - 10/17/19 06:45 PM Re: Reg E-Unknown date of liability commencement [Re: KDunn]
BrianC Online
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VISA/Mastercard accept chargeback requests up to 120 days from the transaction date so your lookback period for that part of your investigation will be the most recent four months.
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#2223964 - 10/18/19 02:56 PM Re: Reg E-Unknown date of liability commencement [Re: KDunn]
KDunn Offline
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Thanks Brian! We can go ahead and get those turned in. I figured there would have to be some type of time limit.

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