We issue Visa Debit Cards. We had a customer just come in and claim that they have 2 fraudulent charged happen on their account. We know that it is one of those trial period things where if they don't cancel, they will get charged.

My question is, can we deny these disputes because when looking at our Shazam log, back earlier this month, Shazam Fraud stopped 3 different charges to this same company (because it looked suspicious). They contacted the customer and the customer authorized them and they did post on their account.

Since these 3 were authorized from the customer, can we by default say, no, you authorized these earlier charges from the same company, so this is a trial period issue that you didn't cancel before the required time frame? Or do we have to treat this completely separate? It is about $180.00 worth of charges.
Thanks!

Can you by default deny it just because there were previously legitimate charges from the same company? Unfortunately, no. USAA was hammered for doing this earlier in the year, especially when customers specifically stated they did not make the disputed charge.

Now, did your customer say they authorized the free trial transaction?

To piggy back on Adam's comments, you cannot deny without an investigation. If the customer admits to authorizing the initial charges, my investigation usually takes the course of trying to locate the terms and conditions to which the customer agreed on the merchant's website. That plus a quick question to the customer of, "Did you cancel / return the merchandise?" will usually provide the documentation that you need to support denying the claim.

Our Customer Service Rep did ask if they signed up for this, and they denied it. It wasn't until after the customer left that the Rep started researching and discovered the Shazam Falcon initially stopped the transaction, but that it was approved 10 minutes later by the customer and the transactions were allowed to post.

I did also ask my co-worker if she could get the terms and conditions from the website, but she said that this one could be hard because she thinks it was a facebook pop up and those are apparently heard to find. Either the website isn't there any more or you can't get any information off the website. I personally haven't dealt with this before, so maybe there is a better way to get this information?

Alternatively we process a chargeback based on the claim of fraud and wait for the authorization and proof of shipping that the stuff was sent to the house. The other thing to keep in mind here is that sometimes the card is stolen by a family member who orders the stuff and they may also have been the person to talk to the fraud monitoring service.

We can't make assumptions in Reg E that we cannot support through documentation. (Ask USAA as Adam noted.)

Ok. Thanks for the help!

Another followup on this. We had a customer contact us today, the exact same scenario, only they are claiming that they never were contacted by our Falcon Fraud department. We have proof that they were contacted via text message. So what can we legally do in this instance? It is the exact same as my above question, where there were contacted by Falcon, it was approved, then a few more came through and were not stopped because the prior items were blocked but approved by the customer. I know that we do have to dispute those...Not sure what to do with the denying they were contacted by Falcon Fraud and those transactions...

Thanks,

Just my opinion, but whether they were contacted by a fraud department is neither here nor there when it really comes down to Reg. E.

I agree with Randy. Your fraud department contacting them is not the same as a notice of error. It could happen at the same time, but just because the fraud department contacted them doesn't mean the customer provided a notice of error.

From the commentary to 1005.11(b)(1):
"5. Discovery of error by institution. The error resolution procedures of this section apply when a notice of error is received from the consumer, and not when the financial institution itself discovers and corrects an error."

Ok. So, we would have to find another way to prove that it was them, since the Falcon Fraud isn't enough because they are claiming that they were never contacted. We can't say, hey, you were contacted and is this your cell phone number and you sent a text saying this is ok. Am I understanding correctly.

can you prove that person received and read the text message, or simply that you sent a text? and i don't mean "well, we sent a text so i know they received it." there are times i don't receive texts, due to a poor service area or just an issue with the cellular carrier.

Although the language of Regulation E has not kept pace with evolving technologies, the spirit of Reg E can be inferred from a review of the commentary to 1005.6.

"2. Knowledge of loss or theft of access device. The fact that a consumer has received a periodic statement that reflects unauthorized transfers may be a factor in determining whether the consumer had knowledge of the loss or theft, but cannot be deemed to represent conclusive evidence that the consumer had such knowledge."

With a call from a fraud service, the same person who compromised the debit card could also have compromised the cell phone and answered the fraud services questions. As Happy points out, we cannot assume that the customer received the message or that they understood what they were being asked when they answered the fraud service's questions.