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#4985 - 09/26/01 07:12 PM Unauthorized claims
Anonymous
Unregistered

In reference to OCC AL 2001-9 I'm questioning a section that states "A national bank may request a customer's reasonable cooperation in any such investigation. However, it may not deny a claim of error based solely on the cardholder's failure to comply with such a request. Is this the opinion of all regulatory agencies? If, for example, a customer refuses to assist us with an invesetigation, and our 10 days expires before we have substantial evidence that the transaction was authorized then we take the loss. If that's the case, a customer can claim a transaction was unauthorized and then refuse to assist or cooperate with us; seems like an easy way to abuse the system.

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#4986 - 09/26/01 07:59 PM Re: Unauthorized claims
John Burnett Offline
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John Burnett
Joined: Oct 2000
Posts: 40,086
Cape Cod
Yes, Melissa, there is a grinch!

The OCC stated the facts correctly. The EFT Act is a consumer protection law. It's been around for over twenty years, and is probably in need of being brought up to date. However, it's a given that taking "rights" away from consumers is not something that Congress will be happy to do.

Unfortunately, when it comes to error resolution processing under §205.11, the financial institution is given the onus to prove that the transaction occurred when, how and as stated, and that it was authorized. Frankly, it's a wonder that banks haven't been defrauded a lot more than they have by use of this provision. It's a testament that most people are still honest!

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#4987 - 09/27/01 02:16 AM Re: Unauthorized claims
Andy_Z Offline
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Ditto, John. It is a consumer Reg which originated when "to err is human, to really screw up takes a computer". It favors the consumer all the way.

The only place the Reg really helps the bank is in an allowance to charge a fee for an investigation. And for fear or dislike of any number of things we don't do that.

Remember that the consumer doesn't have to provide an account number, so long as you can identify the account. Also, if I put a notice in the mail tonight and you don't get it for a week, you were officially notified when I put it in the mail. You are also responsible for the charges between my posting the letter and you getting it.

I also have to wonder if part of that "reasonable cooperation" includes banks still wanting to require a police report. You can't do that.

You have to know that the reason this was published was because banks weren't abiding by the rules.

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Andy Zavoina
Opinions stated are not necessarily that of my employer.

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#4988 - 09/27/01 01:12 PM Re: Unauthorized claims
De Vonne Offline
Member
Joined: Jan 2001
Posts: 84
Andy,

I wasn't aware that requiring a police report is prohibited. Where can I find that in the reg?


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#4989 - 09/27/01 02:01 PM Re: Unauthorized claims
Elwood P. Dowd Offline
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Elwood P. Dowd
Joined: Aug 2001
Posts: 21,939
Next to Harvey
As noted, you cannot condition reimbursement on the consumer's filing of a police report or because he or she failed to cooperate to your satisfaction. However, you may have at least one tool.

See 12 CFR205.11(b)(2) Written confirmation. A financial institution may require the
consumer to give written confirmation of an error within 10 business days of an oral notice. An institution that requires written confirmation shall inform the consumer of the requirement and provide the address where confirmation must be sent when the consumer gives the oral notification.

If you do require written confirmation, then you are entitled to the benefits of 205.11(c)(2)(i) which allows you to extend the investigation period to 45 days if you provisionally recredit the consumer's account:

… An institution need not provisionally credit the consumer's account if:
(A) The institution requires but does not receive written confirmation within 10 business days of an oral notice of error;

If you interpret "written confirmation" as having a form for the consumer to fill out that includes the details you need, there are alternative benefits. First, if they fill it out you have what you need and it fixes the consumer's story regarding the unauthorized transfer. (Occasionally, it seems that sometimes their stories change with each telling.) Alternatively, if they do not send the form back in a timely fashion, you are entitled to take 45 days to investigate without provisionally recrediting the account.

While you cannot condition your liability on the consumer's cooperation, his or her failure to cooperate may buy you some time.


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#4990 - 09/27/01 02:28 PM Re: Unauthorized claims
Andy_Z Offline
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The Reg won't say that you cannot require a PD report. Nor does it say that you can condition the claim on that alone. While it does help validate a claim, you can't force a person to do this.

This is one reason the guidance was issued. In a nutshell, you have to prove the customer did it, authorized it or received benefit from it. Short of that, the claim is valid. There certainly will be exceptions, but I find this generally to be true.

To often a claim is denied because the bank knows it is bogus but can't prove that. After the consumer complains to a regulator it gets reviewed. When seen in this sterile environment it appears obvious that many claims should be paid, but the big bad, greedy bank simply wouldn't. That is a perception. But if enough of these happen guidance is issued that will try to correct these issues. What we need is clarity, consistency and not a knee jerk reaction. That was the direction I saw in the OCC's paper.

Remember, this is just my opinion. It is worth at least as much as you paid for it.

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Andy Zavoina
Opinions stated are not necessarily that of my employer.

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AndyZ CRCM
My opinions are not necessarily my employers.
R+R-R=R+R
Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell

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#4991 - 12/11/01 04:55 PM Re: Unauthorized claims
Jan94 Offline
Platinum Poster
Joined: Mar 2001
Posts: 828
USA
We have a situation involving a check card for an employee. The employee has claimed 16 EFT errors due to unauthorized transactions just this year. The bank has reviewed the transactions and believes that the customer was ordering items via the Internet and just didn't want them anymore. The bank feels this employee is abusing the system. Can the bank take any action such as closing the account if it can "prove" the errors were authorized?

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#4992 - 12/11/01 06:07 PM Re: Unauthorized claims
Andy_Z Offline
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Andy_Z
Joined: Oct 2000
Posts: 27,748
On the Net
Your account agreement should specify that you can close the account at any time. It doesn't matter if it is an employee or not, nor does it matter that you show any proof as to the claims being valid. The fact that there are so many can make that account unprofitable. That is how you justify it internally, and to the customer if you wish. Whether or not you explain why to the customer is up to you.

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Andy Zavoina
Opinions stated are not necessarily that of my employer.

_________________________
AndyZ CRCM
My opinions are not necessarily my employers.
R+R-R=R+R
Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell

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#4993 - 12/11/01 06:18 PM Re: Unauthorized claims
BrendaC Offline
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BrendaC
Joined: Sep 2001
Posts: 6,029
Sweet Home AL
I feel particularly challenged when I feel someone is trying to pull one over on us. Put on your Sherlock Holmes detective hat, Angela, and get your magnifying glass out. Track the internet purchases. Find out how items were delivered. What internet address was used? If physical items were delivered, is there a signed UPS receipt? To what address were items delivered? There is an audit trail there, just follow the tracks.
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#4994 - 12/12/01 06:42 AM Re: Unauthorized claims
Anonymous
Unregistered

Regarding police reports, the FRB considered allowing banks to require that the person claiming that an unauthorized took place file a police report.

In this case, it was in connection with a revision to the "reasonable investigation" requirements for credit card transactions in 226.12(c) of Reg Z. However, the Fed's commentary on the topic is relevant for Reg E investigations as well.

While the language was in the proposal, it was struck from the final rule because the FRB felt that it may have a chilling effect on a customer wishing to seek protection under the regulation.

If anyone would like the cite from the FR, email me at mybankcomplies@yahoo.com. I don't have in front of me at the moment.


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