A client is disputing ATM withdrawals made at one of our bank's terminals as well as some made at outside ATMs. The client provided his debit card to his child and claims that a third party stole the card, performed the ATM transactions and then returned the card to its prior location undetected. Later he was given back the card which is currently in his possession.

Our inclination is to deny the case because the client fully sacrificed access to his debit card to a third party without informing us about it beforehand. We want to argue that, in effect, he relinquished authorization rights for the period during which he was not in possession of the debit card.

Are we right to deny the client's case on these grounds? This is a bit of an odd case for us, so any advice would be much appreciated.

Thank you.

Welcome to BOL If you conclude that the child performed the transactions, you can deny the case citing 1005.2(m).

(m) “Unauthorized electronic fund transfer” means an electronic fund transfer from a consumer's account initiated by a person other than the consumer without actual authority to initiate the transfer and from which the consumer receives no benefit. The term does not include an electronic fund transfer initiated:
(1) By a person who was furnished the access device to the consumer's account by the consumer, unless the consumer has notified the financial institution that transfers by that person are no longer authorized;
(2) With fraudulent intent by the consumer or any person acting in concert with the consumer; or
(3) By the financial institution or its employee.


However, note that to qualify the transaction has to be performed by the person granted access to the card. The customer still retains Reg E protections if the card was stolen from Junior. Also, you do not have to give this customer another card.

I would also add that Reg. E requires you to conduct an investigation. It does not specify standards of proof in order for you to make your determination. If you are comfortable based on the evidence that it is likely that Junior performed the transactions, you can deny the claim. Of course if they want to fight you on it, and Junior is willing to state under oath that he/she did not do the transaction and did not provide the card and PIN to anyone else, you don't have a lot to go on.

Thank you both for your help. I appreciate the quick explanation and advice.

"Our inclination is to deny the case because the client fully sacrificed access to his debit card to a third party without informing us about it beforehand."

This happens every day and your bank would not want to add the call center staff necessary if any size customer base actually did call you. Plus there'd be a ton of card reissues and those pose problems and costs, and customer fees and dissatisfaction. Your card agreement may say don't give it out, but doing so does not remove Reg E protections the consumer has. Remember, a consumer can write a PIN on the card and that doesn't increase Reg E liability.

If the child had the card and used it beyond what the parent authorized them to, that is on them. If a 3rd party actually stole it, then the claim could be valid. We had a case of interest to you once. Teachers - females who carried a purse - were having claims but never lost their cards. They could prove they were in school when the transactions happened. It wasn't skimming, but a student was taking the cards from unsecured purses, giving them to her mom and mom would go make debits, return the cards to her child who replaced the cards and nobody was the wiser. At least not until the common bond was finally discovered, but the claims were valid. So as noted, do your investigation and see where the facts lead you. The burden however, is on you so hope the child is on camera. Then, determine if you even want to reissue a card to this customer.