We have a customer who loaded a prepaid card with $2,000. Around seven (7) days later a money order was purchased at a US Postal Office just below $2,000. We have opened an investigation and have requested a copy of the police report but are very suspicious of this series of events. We believe that the PIN was used at the terminal to purchase the MO (This is pending confirmation).

If the PIN was used, can we deny this claim? If the PIN was not used do we have any options to deny this claim?

Thank you in advance.

Is this prepaid card covered under 1005.18(e)(3)? If it is, then your error resolution determination would not differ from as if the same transaction was conducted using a bank debit card.

Remember I can write my PIN on my card with no increased liability. I phrase that aggravated ignorance is not a reason to deny a claim. The burden is on the bank to determine, did the consumer do it, authorize it or benefit from it. For this reason a question to ask when the claim is filed includes, "was the PIN on or with the card?" and " Who else may have known your PIN based on past usage?"

The evidence you gather to determine usage/authorization is up to you. If the person complains you may end paying a denied claim. A pattern or practice of this could easily trigger a larger review of files as well, but the decision to pay or not is the bank's supported by the evidence you gather. More than once I felt good about paying a claim that I just knew was false, but I would inform the consumer that they were not getting another card from us. The deposit could stay because I was getting monthly fees off that. But from the bank side, we had to minimize risk and it was too high with some accounts. It takes a lot of monthly fees to make up $2,000.

I just want to make sure that I understand. Even though the PIN may have been used, that by itself, is not enough to deny the claim? We do plan to conduct an investigation and have already begun (Requested a copy of the Police Report, CCV footage, etc.) but I was hoping that the use of the PIN would add some evidence to the fraudulent submission side.

Unfortunately the use of the PIN does not prove the transaction was authorized. As Andy stated, I could write my PIN on my debit card and if the transaction was unauthorized I couldn't be held liable.

This enforcement action is an example of what happens when relying on the PIN being used as a basis for denying a claim:

AchieveCard Order for Restitution

"Within 30 days from the effective date of this Order, Achieve shall prepare a comprehensive Restitution Plan (“Restitution Plan”) for the following categories of consumers identified by Achieve, pursuant to criteria established by the FDIC, as having incurred fees and/or unpaid error resolution claims on any Achieve product offered pursuant to an arrangement with an insured depository institution (hereinafter “Eligible Consumers”):

(b) any consumer who, between April 8, 2011 and November 30, 2012, submitted a claim for resolution of a dispute involving a PIN-based transaction or transaction exceeding $500 and that claim was either abandoned by the consumer or denied by Achieve

This has been very helpful. Thank you all.