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#2260495 - 09/30/21 02:55 PM Reg E Question involving Cash App/Debit Card
Amanda Offline
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Joined: Sep 2020
Posts: 23
We have a customer who gave his debit card to his girlfriend back in June and she used it for cash app. Earlier this month, he came in and decided to stop letting her using his debit card so he wanted to restrict the card but didn't want a new debit card with new numbers. A week later, he decided to un-restrict his card and told the branch that his girlfriend is aware not to use his debit card anymore via cash app. He calls the branch daily to get his balance/transaction activity and found out she is still using his debit card information and the girlfriend committed suicide a couple of days ago and now he is wanting to dispute ALL transactions starting back in June to current. I don't think we should be held liable because he put himself in risk for giving that debit card to his girlfriend and even though he restricted his card earlier but knew that the girlfriend continued to conduct transactions even though she knew not to do it anymore and he refused to hot card the debit card and get a new debit card with new numbers. Because he was aware of these charges and didn't take the necessary steps to stop, we shouldn't be held liable.
What are your thoughts?

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#2260498 - 09/30/21 03:11 PM Re: Reg E Question involving Cash App/Debit Card Amanda
BrianC Offline
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BrianC
Joined: Nov 2004
Posts: 6,685
Illinois
Quote
Earlier this month, he came in and decided to stop letting her using his debit card so he wanted to restrict the card but didn't want a new debit card with new numbers
Quote
he refused to hot card the debit card and get a new debit card with new numbers

First, it is the bank that decides whether or not to cancel the card. The customer should have no say in this discussion.The customer provided notice that he had previously granted authority to a third party to use his access device, but was revoking that authority. See the definition of "unauthorized in 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.

Your customer is liable for any transaction between the time that he granted a third party to use the access device and the time that he notified you that the third party was no longer authorized. The bank is liable for transaction that occurred after you were notified that the third party was not authorized to use the card any longer. Whether the customer wanted the card cancelled or not is irrevelant. The bank, not the customer, accepted the liability risk for not cancelling the card. You cannot increase a customer's liability based on any type of agreement once you have knowledge that the third party is no longer authorized.

See the commentary to 1005.6(b)

3. Limits on liability. The extent of the consumer's liability is determined solely by the consumer's promptness in reporting the loss or theft of an access device. Similarly, no agreement between the consumer and an institution may impose greater liability on the consumer for an unauthorized transfer than the limits provided in Regulation E.
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#2260499 - 09/30/21 03:17 PM Re: Reg E Question involving Cash App/Debit Card Amanda
rainman Offline
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rainman
Joined: Nov 2004
Posts: 3,237
You really haven't given enough information to make a determination. Clearly all charges before his first visit "earlier this month" were authorized. He gave her the access device and authority to use it. What happened after that is unclear. What does it mean that he "restricted" the card?

Your statement "Because he was aware of these charges and didn't take the necessary steps to stop, we shouldn't be held liable" is not accurate; that's not how Reg. E works. Once he tells you that she is no longer authorized to do charges, his liability for her transactions ends.

On the other hand, it sounds like he may have "reauthorized" her to use the card. (Is that what you mean when you say he decided to "un-restrict" his card?) If that is the case, he would be liable for transactions after he "reauthorized" her. But if he didn't reauthorize her to use the card, then he would not be liable for those transactions. "His girlfriend is aware not to use his debit card anymore via cash app." Does that mean she was authorized to use it at the ATM or in a store? Or is it that he felt safe to "un-restrict" the card because she knew she wasn't supposed to use it at all? If it's the latter, then your bank is on the hook for everything after his first visit.

This is why you don't let the customer decide not to block the card after he tells you about the unauthorized use. Your bank took on the risk for transactions that occurred after that (unless he gave her permission to use the card again, in which case her use after he gave her that permission would be authorized).
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#2260501 - 09/30/21 03:25 PM Re: Reg E Question involving Cash App/Debit Card BrianC
Amanda Offline
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Joined: Sep 2020
Posts: 23
Thank you! This is very helpful!

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#2260503 - 09/30/21 03:28 PM Re: Reg E Question involving Cash App/Debit Card rainman
Amanda Offline
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Joined: Sep 2020
Posts: 23
It was my understanding that he had an conversation with his girlfriend and she was told that she was not allow to use the debit card again so he came back to the branch to unresrict or unwarm the card because he didn't want a new debit card. But found out later that she continued to use the debit card even though she was told not to use it again.

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#2260517 - 09/30/21 04:11 PM Re: Reg E Question involving Cash App/Debit Card Amanda
rainman Offline
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rainman
Joined: Nov 2004
Posts: 3,237
So he did not reauthorize her to use the card, the bank did not block and reissue, and then she used it.

He just drew the card from "Community Chest" in Monopoly: Bank error in your favor. Collect $(however much she charged after his first visit to the bank).
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#2260559 - 09/30/21 10:44 PM Re: Reg E Question involving Cash App/Debit Card Amanda
Rocky P Offline
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Joined: Jun 2003
Posts: 7,650
Florida
Taking the card is immaterial if he has the account numbers, expiration date and secret code.
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#2260623 - 10/01/21 09:50 PM Re: Reg E Question involving Cash App/Debit Card Amanda
Andy_Z Offline
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Andy_Z
Joined: Oct 2000
Posts: 27,748
On the Net
What Brian said. Once the bank was notified of the unauthorized use, liability shifted to the bank. Read the back of your card. I'll bet is says something to the effect that the card is the property of the bank. It was the bank's choice to cancel the card. And the bank may not impose greater liability on the consumer that they have under the law and Reg.

What he did was wrong. What the bank did is a lesson learned and paid for in the claim.
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