The bank is starting to receive several disputes where the customer has allowed the child or grandchildren to purchase one item thru the game system - Play Station, Xbox, etc. Then there are additional charges which the customer admits was the child or the grandchildren. The customer admits there was no password for purchases on the system. The customer states that he tried to call the company to resolve, but he had to wait too long. Now he has disputed with the bank.

Is this considered authorized because the card information was left in the system without a password without notifying the bank, or unauthorized because the customer didn't authorized this specific charge? What is the banks liability under Reg E and under Visa? Thanks.

Reg E 1005.2(a)(1) has a very broad definition of access device.
(a)(1) “Access device” means a card, code, or other means of access to a consumer's account, or any combination thereof, that may be used by the consumer to initiate electronic fund transfers.

Reg E 1005.2(m) and its commentary note the consequences for giving a third party the authority to use the access device.

(m) “Unauthorized electronic fund transfer” means an electronic fund transfer from a consumer's account initiated by a person other than the consumer without actual authority to initiate the transfer and from which the consumer receives no benefit. The term does not include an electronic fund transfer initiated:

(1) By a person who was furnished the access device to the consumer's account by the consumer, unless the consumer has notified the financial institution that transfers by that person are no longer authorized;
(2) With fraudulent intent by the consumer or any person acting in concert with the consumer; or
(3) By the financial institution or its employee.

Commentary: 2. Authority. If a consumer furnishes an access device and grants authority to make transfers to a person (such as a family member or co-worker) who exceeds the authority given, the consumer is fully liable for the transfers unless the consumer has notified the financial institution that transfers by that person are no longer authorized.

In other words, granting authority to junior to attach the access device to the Xbox means that any subsequent purchases junior makes is also authorized. Time to start withholding allowance because the bank has no obligation here since these transfers do not meet the definition of "unauthorized."

Thanks, Randy. Good to know my answer hasn't changed in the last seven years.

Thank you very much!