Our customer is claiming that multiple debit card transactions that have cleared her account in the last 60 days are unauthorized. We have been conducting an investigation and in contacting the merchants have determined that all of these transactions are for memberships to adult websites. Of course, these memberships were initiated from the customers email address. When we asked the customer about this she questioned her teenage son and he admitted to establishing these memberships but says that he canceled them after the free trial. He does not have proof of cancellation. Our financial institution has no chargeback rights because address verification and the CVV value were entered. Visa says that they do not support family fraud but Reg E requires we reimburse our customer for unauthorized charges. Because the son involved and is a minor technically the parent would be responsible for charges he incures...Can we deny the disputes or do we have to give the cardholder credit and then prosecute the son to recover our loss?

I would explain the situation to the customer and put it too them just that way. You will go ahead and honor there claims and then turn the information over to the local DA and also sue them to recover your damages. I have dealt with dozens of similar circumstances and not once have they not withdrawn their claim.

Ditto. Always back off refund request when they realize family member will still wind up paying and/or face possible jail time.

Although I recommend following the same guidance already provided, I have had mom say, "put him in jail if you want, give me my money".

Luckily I haven't had to review claims such as this, was it PINless and/or can you establish that she had provided him access in the past? You may have an out?

§205.2 Definitions. Footnote 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.

We can not establish previous authority nor is it a pin based transaction. Do we have recourse against the underage Son? (provided the mother doesn't rescind the disputes)

I don't see why not - he obtained funds through fraudulent means. Just because he's a minor doesn't mean you can't bring an action against him

The fact that he is minor does not impact your fraud claim. The merchant would not be able to collect from him if he purchased non-essential items i.e. food since a minor can void those contracts.

We encourage the people at our institution taking the Reg E claim to casually ask questions in cases like these to see if maybe the unauthorized person has used the card before. When you (or someone else speaks to her) to explain the process, ask how he knew where the card was, if he has ever used it to go to the store for her - drug store- to buy gas, etc, If she says yes to anything, he has been authorized. Just don't let her know why you are asking these questions or you will get that he never used the card before.

Yes you can go after a minor. Ironically the parents may be responsible for his actions.

Also, remember that the card belongs to you and it is a privilege to have that. Mom shouldn't have one any more.

I would force the issue as stated in previous replies..We will give you your money, but we get the boy! I have been involved in a similar situation but we found out the excuse, my minor child did it, was used because they thought we would not be able to file claim against a minor.

In reply to:

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We will give you your money, but we get the boy!

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Sounds like the old west.

1) Personally, I don't want collateral that I have to feed or clean up after.
2) I wouldn't sell my kids for a million dollars, and I wouldn't buy another one for a buck.

I'm wit' ya on that - KOT! Reminds me of another saying..."I really love kids, but I wouldn't want to eat one!"

Re: you get the money but we get the boy...

Ever read "The Ransom of Red Chief"?

Don't believe I have...I spend too much time reading regs, laws, bulletins and THE THREADS!

In "The Ransom of Red Chief," kidnappers pick a boy who is such a terror that they end up paying the parents money to take the kid back.

If this is an ACH to a DDA account, how long would we have before we could return it as unauthorized?

It's been a long time since I read that one but I believe he was the son of the local bank president!

60 days according to NACHA to return it to the originating institution - however the customer has 60 days from when it appeared on his/her periodic statement. The bank eats the ones that fall in between.

So NACHA states 60 days from the date of the actual transaction?

You may ask for confirmation, as I don't have the NACHA book handy, but I believe that's what it says in a nutshell

NACHA doesn't allow use of the ACH to return it if it's more than 60 days from the item's settlement date (usually the date it posts to customer account). You can feel free to attempt to collect it directly from the originating bank, however. (Cynics may insert "As if!" here)