Good evening, we have a different dispute that came in today. A customer was contacted via phone by an "officer of the IRS" telling him he owed money and had to pay at least a partial payment, via gift card, or else be subject to lawsuit and have a warrant out for his arrest. Our customer went and purchased gift cards and followed the instructions for making the "payment," only to later discover he was a victim of fraud.

Since this customer authorized the transactions, we would normally deny the dispute under Reg E. He was, however, still defrauded. Are we liable under Reg E for the fraudulent activity?

Thanks in advance!

Nope - transactions were authorized. He was just stupid and will pay the price.

The customer authorized the purchase of gift cards and received gift cards. What the customer did with the value of the gift cards after that is not your concern any more than a customer that hands cash out of their wallet to a door to door encyclopedia salesman with a 26 volume set of Britannica's.

The fraud occurred when she gave them to the fraudster.

If she had a gun to her head when she bought the cards the answer could differ. But this is satisfaction with a product or service. The bank carried out her instructions, she was ripped off, and she feels the bank should take the loss. It doesn't work that way.

If I get money from the ATM, count it out on the hood of my car and it blows away, the bank doesn't replace my money. These two scenarios are more similar than they appear at face value and the common denominator is the consumer's judgment.