Parent's Debit Cards, Minors & Internet Purchases

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Question:

We continually receive disputes involving minor children (under age 18) who have purchased a product on the internet using their parents debit card number for payment. The parent files a claim for unauthorized transaction. Obviously, they refuse to get a police report as we normally require to continue the investigation. The parent tells us the child made the transaction, but they (the parents) did not authorize it. Can the fact that the parents are responsible for actions of minor children living in their house and using their equipment be our defense for denying the claim?

Answer:

First, you cannot condition your investigation upon a consumer's filing of a police report. That's been well-established and I'm surprised to hear that there are banks that continue routinely to impose that requirement. Reg E doesn't give any special status to claims involving children or other relatives. If the consumer makes the claim and the transaction is unauthorized, the consumer is entitled to credit, subject to the limits in section 205.6. There also is no contributory negligence rule in Reg E like there is in the UCC. If you believe that the consumer gave the kid permission to use the card, you may deny the claim. If you believe the consumer benefited from the transaction, you may deny deny the claim. If you believe the consumer is in cahoots with his kid to defraud the bank, you may deny the claim. There is nothing in the regulation that suggests you may deny the claim based on the minority of the individual who made the unauthorized EFT or on the relationship of that individual to your cardholder.

First published on BankersOnline.com 1/07/08