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Reg E

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Question: 
We have a customer who has filled out the EFT claim form claiming that a POS item that is showing that the PIN was used is an unauthorized/fraudulent transaction. Operations talked to him and asked if the card was stolen. He said no and that there were no other items on the statement aside from this one to indicate that the card was compromised. Is there something in Reg E that limits our liability when the PIN is used and the customer has no explanation was to it could have been compromised?
Answer: 

No. You are still required to investigate the claim, provide provisional credit, etc. Was the PIN-based transaction in the same general geographic area where your customer lives or somewhere else?

A drastic change in geography is generally the result of a skimmed or phished card. Local use may indicate that someone close to the cardholder knew the PIN (possibly from looking over the customer's shoulder when he used an ATM) That individual may have then taken the card without the cardholder's consent and returned it without his knowledge.

It is not up to the cardholder to explain what happened. The regulation puts the investigation requirements on the institution.

First published on 03/10/2014

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