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Dispute/Unauthorized ATM for Disabled Person

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Question: 
We have a customer that is highly disabled and unable to take care of herself without outside help. She needed cash and gave her ATM card to this person along with the PIN so that she could get cash. The helper withdrew unauthorized additional funds. Our customer filed dispute with us. My questions are we released from giving her funds back since she gave the PIN? Also, can we make her file a police report and press charges against the person or we'll withhold her funds?
Answer: 

Reg E Section 1005.11(b)(1) is very clear on what information the customer must provide to make a claim. This includes the customer's name, account number, and why the customer believes an error exists. 1005.11(b)(2) allows you to require this notification be in writing as a condition of providing provisional credit. Banks have been cited for UDAAP violations for requiring anything else, including police reports.

The question of liability depends on the sequence of events. The staff interpretations for the definition of an unauthorized funds transfer Section 1005.2(m) provide some senarios.

1005(2)(m) 2. Authority. If a consumer furnishes an access device and grants authority to make transfers to a person (such as a family member or co-worker) who exceeds the authority given, the consumer is fully liable for the transfers unless the consumer has notified the financial institution that transfers by that person are no longer authorized.

3.Access device obtained through robbery or fraud. An unauthorized EFT includes a transfer initiated by a person who obtained the access device from the consumer through fraud or robbery.

4. Forced initiation. An EFT at an ATM is an unauthorized transfer if the consumer has been induced by force to initiate the transfer.

If the customer willingly gave the card to this person and they performed additional withdrawals prior to returning the card, the customer is liable for the charges. If the card was returned and later stolen, or if the customer was coerced into providing the card information, then the bank is obligated to reimburse her. Regardless of the outcome of the investigation, given the risk of this individual having a card, the bank must decide if it is willing to give her another one and let history repeat itself.

First published on BankersOnline.com 5/7/12.

First published on 05/07/2012

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