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Customer Failed to Report Card as Lost or Stolen

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While reviewing a suspect fraud journal I noticed suspicious activity on one of our customer's debit cards. Only after contacting the customer did we learn the card had been left in a restaurant ten days earlier. The customer knew they had left the card, but failed to report it as lost or stolen. Are we responsible for charges incurred ten days after the customer was aware they had lost the card?

Section 205.6(b) of Reg E states:

Timely notice not given.
If the consumer fails to notify the financial institution within two business days after learning of the loss or theft of the access device, the consumer's liability shall not exceed the lesser of $500 or the sum of:

a. $50 or the amount of unauthorized transfers that occur within the two business days, whichever is less; and

b. The amount of unauthorized transfers that occur after the close of two business days and before notice to the institution, provided the institution establishes that these transfers would not have occurred had the consumer notified the institution within that two-day period.

These are the Reg E rules. If the unauthorized transactions are VISA, the customer may have $0 liability. Also, the Staff Interpretations to Section 205.6(b) #2 state: Consumer negligence. Negligence by the consumer cannot be used as the basis for imposing greater liability than is permissible under Regulation E. Thus, consumer behavior that may constitute negligence under state law, such as writing the PIN on a debit card or on a piece of paper kept with the card, does not affect the consumer's liability for unauthorized transfers.

First published on 2/16/09

First published on 02/16/2009

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