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#582711 - 07/12/06 09:18 PM Transferred authority or authorization
C_Groat Offline
Member
Joined: Mar 2006
Posts: 70
Salt Lake City, UT
During a recent Reg E review, an internal auditor advised us that by giving a card to a third party to use only for transaction x, but third party makes transaction x and y before returning the card to the cardholder, y is unauthorized and we need to issue a provisional credit. I say the cardholder transferred authority or authorization to the third party by giving them the card and is responsible for both x and y as they did not terminate the authorization or receive the card back. As long as we complete our investigation within the first 10 days and send a letter that no error occurred explaining why, that we should not need to issue a provisional and we do not need to investigate any further. Is my view correct? Is there any specific guidance written any one can share to provide substance to my point, if correct that is?

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eBanking / Technology
#582712 - 07/12/06 10:00 PM Re: Transferred authority or authorization
BrianC Offline
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BrianC
Joined: Nov 2004
Posts: 6,067
Illinois
From the Staff Commentary to Reg E 205-2(m)

2(m) Unauthorized Electronic Fund Transfer

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.

The key in your original post is that your customer did not resecure the card. If they furnish card and PIN, then take the card back, but the person later steals the card, the customer would have a claim for unauthorized charge.
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#582713 - 07/12/06 10:13 PM Re: Transferred authority or authorization
C_Groat Offline
Member
Joined: Mar 2006
Posts: 70
Salt Lake City, UT
Excellent, that is what I need. Thank you.

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#582714 - 07/17/06 02:57 PM Re: Transferred authority or authorization
Andy_Z Offline
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Andy_Z
Joined: Oct 2000
Posts: 27,378
On the Net
I agree with crowman and appreciate that the finer points here were emphasized, such as getting the card back. Many bankers see the 2(m) cite as an evergreen authority and more often than not, that is the error because a claim is denied because "three years ago you let this person use your card, you never told us they couldn't so your claim Mr. Customer is denied." Getting the card back is critical and does end that authority, IMHO.
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