Fraudulent Check Card Transactions

Answered by:

Question:

I have been dealing with fraudulent check card transactions for a while. But I have not found a definite answer to the following question. If a customer still has their card and they are claiming that they have fraudulent transactions in their account does the $50 and $500 liability still apply? Or is the customer not liable at all? If this is covered by Reg E where in the Reg is this covered? I would think with so many compromised cards they would address this issue a little more specific on the reg. If anyone has any opinions on the matter I would appreciate your input.

Answer:

If the unauthorized transactions were completed with a counterfeit card (as would be the case if you're dealing with ATM withdrawals, for example), you should treat the transaction as having been completed with an unaccepted access device, and the customer's liability is $0. If the transaction was completed with the customer's access device without the customer's knowledge or authorization (card "borrowed"), the customer's liability would be capped at $50, since the customer never learns of the loss or theft of the card, so the two-day period never starts. However, the customer will still be liable for unauthorized transfers occurring after the end of the 60-day period that follows the availability of the statement showing the first such unauthorized transfer.

First published on BankersOnline.com 11/06/06