ATM Withdrawals - Authorization Previously Allowed

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Question:

Are we required to return funds for an unauthorized ATM withdrawal when the customer admits to have given authorization for the same person to use the card previously?

Answer:

Review the Official Staff Interpretation comments to section 205.2(m) of Reg E. Comment 2 gives you an out in this situation unless the consumer has, after giving someone permission to use the card, contacted the bank to state that that person no longer has permission. There is also Comment 3, which states that any use of the card through robbery or fraud is an unauthorized transaction (refundable to the depositor). Some people believe that the permission to use a card that is described in Comment 2 ends when the card is returned to the control of the customer and if the card is later taken without permission Comment 3 will control. There are others who believe that the permission described in Comment 2 is evergreen until the bank is notified. I think that genuine difference of opinions will last until the Fed issues a clarifying comment or a federal court rules on the question.

First published on BankersOnline.com 2/02/09