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Reg E Denying Claim if Not Counterfeit Situation

A customer files a claim after two months of unauthorized ATM withdrawals. The customer has possession of card, states never disclosed PIN. Withdrawals made on same days as other legitimate debit activity, withdrawals $20 - $200, ATMs w/in half mile of customer's home (customer used same ATMs in past). This is not a counterfeit situation because the customer states that her boyfriend took the card/PIN and made withdrawals and put the card back in her wallet. (High suspicion here that customer colluded, gave card/PIN to boyfriend). Under Reg E, can this claim be denied based on this evidence?

Answer from John: If you decide that you believe the customer made or authorized the transactions based on the information at your disposal, you can deny the claim. Just follow the requirements of section 1005.11 with respect to notifying the customer of your decision and providing documentation backing up your decision.

Understand that there is always a risk when denying such a claim that the consumer will press for a reversal of your decision and threaten legal action.

Whatever you decide, this customer sounds like a strong candidate for a debit-card-ectomy or even a deposit-account-extraction procedure, either of which could reduce the risk of recurring pain and aggravation dealing with a loser of an account.


Answer from Andy: Regrettably I have seen this before. There is a strong chance there is a valid claim as your consumer did not do, authorize, or benefit from the transactions. Even if the PIN was written on the card, your consumer customer may have a valid claim. While you can't require a police report, you can ask that one be filed. Do not make false threats, but if you can say something to the affect that the bank will likely ask the police to investigate the theft because once you pay the claim, you suffer the loss. The customer will share some of that loss and since she was ground zero for repeated thefts, you expect that she will be questioned and could be asked to testify against the (ex?) boyfriend. It would be easiest if she filed that report during the investigation period. What is her reaction - that may indicate if this is an attempt to defraud the bank. Still, you must base your decision on the facts you document in your investigation.

First published on 5/27/13.

First published on 05/27/2013

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