ATM Withdrawal Limit Decrease for some customers

If we feel it is necessary to reduce the withdrawal limits for some customers, for instance if they made a prior ATM deposit that was returned, fraudulent, etc. can this be done at our discretion? And wouldn't at least 21 days advance notice be required, based on 1005.8(a)(1)(iv) below?

Under a "Cash Withdrawal Limitation" section, our Reg. E disclosure states: "Bank reserves the right to change dollar amount limits at any time upon prior notification."

And Regulation E states, with regard to Change in Terms:

1005.8(a)(1) Prior notice required. A financial institution shall mail or deliver a written notice to the consumer, at least 21 days before the effective date, of any change in a term or condition required to be disclosed under § 1005.7(b) of this part if the change would result in:

(i) Increased fees for the consumer;

(ii) Increased liability for the consumer;

(iii) Fewer types of available electronic fund transfers; or

(iv) Stricter limitations on the frequency or dollar amount of transfers."

If you are reducing a withdrawal limit due to fraud, you could make the argument that the change is to secure the payment network, but you will still have to notify the affected customers within 30 days.

1005.8(a)(2) Prior notice exception. A financial institution need not give prior notice if an immediate change in terms or conditions is necessary to maintain or restore the security of an account or an electronic fund transfer system. If the institution makes such a change permanent and disclosure would not jeopardize the security of the account or system, the institution shall notify the consumer in writing on or with the next regularly scheduled periodic statement or within 30 days of making the change permanent.

I guess my question is, if you are concerned about a customer depositing fraudulent checks, why do they still have a card? See the commentary to this section.

2. Changes not requiring notice. The following changes do not require disclosure:

i. Closing some of an institution's ATMs;

ii. Cancellation of an access device.

Thanks BrianC! I wasn't aware of this prior notice exception...I should have continued reading the regulation! And yes, good thought on just cancelling the card altogether, given the situation.

If the customers are defrauding the bank, cancel the card - it's owned by the bank, and get rid of the depositor or eliminate them from getting a card again at the least. That doesn't mean they won't try to defraud the bank in another way, so I'd ask, can the bank afford to keep them?

Debit cards are not a right.