ATM withdrawals

I have a member who gave his wife his ATM card to use, she is not on the account. The card was taken from her and used for ATM withdrawals. Do we have to take the loss or can we deny? The member filed a police report and the police were unable to obtain photo's.
Thanks

Your customer gave his wife permission to use the card, not the individual who stole it. Reg E covers these transactions. Depending on when the customer learned of the theft and notified the bank, you can use the liability schedule in 1005.6 to assign a portion of the liability to the cardholder.

Since the cardholder failed to maintain the security of the card/PIN, you also have to decide whether or not it is worth the risk to give this customer another card.