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Reg E and 'Contributory Negligence'

Question: 
We have a customer who submitted a Reg E claim for unauthorized ATM withdrawals. She believes her son did this. The son was prosecuted last year for residential burglary. The customer claims that she went on vacation and her card and PIN were stolen from her safe. She also stated that she left a list (alarm codes, combo for the safe, etc), for her husband who didn't lock it. Obviously, it wasn't hard for the son to get into the safe. The amount of loss is $2555.00. Isn't there anything in Reg E for contributory negligence?
Answer: 

Answer by David Dickinson:Yes there is, but it's not in your favor. Reg E states: Negligence by the consumer cannot be used as the basis for imposing greater liability than is permissible under Regulation E. Thus, consumer behavior that may constitute negligence under state law, such as writing the PIN on a debit card or on a piece of paper kept with the card, does not affect the consumer's liability for unauthorized transfers. [Staff Interpretations to Section 205.6(b) #2]

However, the definition of "Unauthorized Electronic Funds Transfer" [Section 205.2(m)] does not include authorized access: By a person who was furnished the access device to the consumer’s account by the consumer, unless the consumer has notified the financial institution that transfers by that person are no longer authorized.It sounds to me like the son was not authorized to use the mother's card/PIN; therefore, these are unauthorized transactions. That he was previously prosecuted for burglary is not a factor in her claim.

Answer: 

Answer by Andy Zavoina:The mother didn't do, authorize or benefit from the transfers. The son stole her card and used it. This is a cost of doing business, and from the brief description it sounds like a valid claim.

Two things to consider: you don't have to issue a new card if you feel the consumer was negligent, and you should ask her to file a police report and know that (assuming it is true) your bank will push the police to arrest the son and prosecute him, as you will be taking a loss on this, in addition to her $50 or $500 (I assume) loss. The police report should be encouraged, but can't be required.

First published on BankersOnline.com 10/25/10

First published on 10/25/2010

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