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#2256158 - 06/30/21 02:55 PM Business Debit Card- Trans Unauthorized by family
TeamComply Offline
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Customer is alleging fraudulent/unauthorized transactions on his account, he has a business debit card tied to his account. He indicated that he gave his kids authorization to use his card, and after reviewing transactions on his account, used some choice words, in reference to some of the transactions….as though he maybe knew his son used his card outside of what he had authorized. Some of the transactions are to Cash app and include his son’s name. Others are to footlocker, etc. and if we submitted for investigation we believe would likely include information showing products being shipped to the father/son’s address. The customer (father) did not indicate that he ever revoked the authorization he gave his son to use his debit card. Based on this information, can any of these transactions be denied or is the bank going to have to eat it?

The official staff interpretation to Reg. E 1005.2(m) unauthorized electronic funds transfer states:
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.

So does this make the consumer liable, since he gave son authorization, and son then did more transactions then were authorized, but customer never notified bank that he revoked authorization?

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eBanking / Technology
#2256160 - 06/30/21 02:58 PM Re: Business Debit Card- Trans Unauthorized by family TeamComply
rlcarey Online
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rlcarey
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Galveston, TX
First - why is a business card attached to a personal account and did you deliver a Regulation E disclosure when you issued the card? You appear to have more problems than just figuring out this one situation.
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#2256165 - 06/30/21 03:57 PM Re: Business Debit Card- Trans Unauthorized by family rlcarey
TeamComply Offline
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It's a business account, held by a sole proprietor (the father) for his painting business. This account and card was opened a number of years ago, and at the time, we unfortunately did give the Reg. E disclosure.
Last edited by TeamComply; 06/30/21 05:13 PM.
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#2256443 - 07/08/21 07:02 PM Re: Business Debit Card- Trans Unauthorized by family TeamComply
John Burnett Offline
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John Burnett
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Cape Cod
As you undoubtedly realize, the bank should never have provided Reg E disclosures on that account or with the card if the account is for a business. What you are left with is a large gray area and an unknown number of accounts with similar gray areas.

But if this WERE a consumer account, you would have a pretty clear argument that none of the transactions meets the definition of "unauthorized electronic fund transfer" precisely because the son had received an authorization to use the card and, as far as I can see, he never gave Dad the card back, and, as you stated, never told the bank to shut down the kid's use of the card, either.
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#2256447 - 07/08/21 07:14 PM Re: Business Debit Card- Trans Unauthorized by family TeamComply
John Burnett Offline
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John Burnett
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Cape Cod
And since it's not a consumer account, you CAN play a little bit of hardball with this customer when you apply the Reg E rule on authorized card users and unauthorized transactions. If you retain this customer, you should be certain the account is classified as a business account and that you provide the account owner with your business debit card agreement (you DO have one of those, right?) so that things are clear between the bank and the customer concerning his responsibilities around the use of the card(s).
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