Can someone explain to me Visa's zero liability? I was under the impression that if a customer claims a visa transaction was unauthorized, we hot card the card, send in the dispute and credit the customer back the full amount. Now, I'm being told that we should be only crediting the customer back the amount minus $50.00. I thought the $50 was tied to ATM transactions? Please help.

While Reg E allows you to pass the foist $50.00 of unauthorized transactions to your customer, VISA's policy is more consumer friendly and therefore trumps the Reg E liability schedule. Any VISA signature based transactions would be covered by this. Any PIN generated transactions not processed through VISA (i.e. ATM withdrawals) would not.

Just to restate, in a different what Croman said.
If the trans was Visa & signature then it cleared through the Visa system and their rule of $0.00 applies.
If the trans was pin# then it did not clear through the Vis system ( it cleared using the ATM 'highway' ) so the Reg E limit of $50 would apply.

I'd like to add a question to this. I know that "signature based transactions" are processed through VISA and subject to zero liability, and I know that ATM transactions are not. However, what about when I use my debit card at a merchant, but I put in my PIN number rather than signing it? It's not an ATM transactions; however it is PIN based so does that mean it isn't processed through VISA? If so, how would we as the bank know whether or not the transaction was signature or PIN based?

Sorry for all the questions, any help would be much appreciated!

If the customer types a PIN in, either at an ATM or at a merchant PIN pad, it is a PIN based transaction and runs through the ATM networks. The transaction only goes through Visa when it's signed for.

Thank you for clarifying that! This may be a stupid question (I don't know much about operations), but how do we know whether it was PIN based (non ATM) or signature based? Is it coded a certain way, or do we have to contact the merchant?

Depends on which processor you use for your debit card program. My processor codes withdrawals as WTD, PIN purchases as PUR, and signature purchases as PRV when the card is swiped and PCV when the purchase is completed.
Check with your processor on the coding.

Great, thanks!

Is timely notice from the customer also required to receive the zero liability Visa offers? Or any type of "statute of limitations"?

From the usa.Visa.com website "Cardholders should always regularly check their monthly statements for transaction accuracy. Financial institutions may impose greater liability on the cardholder if the financial institution reasonably determines that the unauthorized transaction was caused by the gross negligence or fraudulent action of the cardholder—which may include your delay for an unreasonable time in reporting unauthorized transactions."