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Reg E, Rep Payee & the Dishonest Account Holder

Answered by: 
John Burnett

Question: 
We have a situation where a Representative Payee on an account filed a Reg E for unauthorized ATM withdrawals. The investigation revealed that the account holder had stolen the Rep Payee's card and made the withdrawals. The Rep Payee filed a police report, but since it was only $123.50 the police aren't going to even look into it. Can we deny the claim on the basis that it is ultimately the customer's money and they benefited from it or do we need to pursue it further since under the agreement they are not authorized to access the money with the Rep Payee in place so it is truly an unauthorized withdrawal?
Answer: 

I do think you have a strong argument for denying the claim based on the fact that the beneficial owner of the funds was the person that received the benefit of the transaction. I am not aware of any official statement or court case interpreting Regulation E in that way, but any other result would provide unjust enrichment to either the representative payee or the beneficial owner of the funds.

First published on BankersOnline.com 3/30/09

First published on 03/30/2009

Filed under: 
Technology
Filed under technology as: 
ATM
IT
Representative Payee

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