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Customer Negligence in Stolen Debit Cards

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Scenario: John Doe has his and his wife's VISA-branded debit cards stolen (he has possession of both of them). The PINs are written on or in his wallet with the cards. He notifies us within a day of the loss. The Card thief uses the cards, and between both cards, spends approximately $2,700. Several transactions are at an ATM. Others are POS transaction, and we're determining now if they're PIN or Signature-based. What will the bank's liability be on all these transactions, taking the customer's negligence into account?

The Staff Interpretations to Reg E state very cleary that consumer negligence cannot be taken into account when figuring consumer liability. As a result we must look at the liability schedule as provided in section 205.6 of Reg E. Since the bank was notified within one day of the loss, the bank must limit the consumers' liability to $50.00 per individual.

Also VISA provides Zero Liability protection to any signature based purchases.

I would recommend against issuing the negligent couple another set of cards and repeating this exercise again.

First published on 7/4/11

First published on 07/04/2011

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