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Replacement Card Conundrum

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We had a customer ask us to replace a damaged card. She never received or reported that she didn't receive her replacement card. In the mean time, the new and old card are being used. Three months pass before she discovers and reports to the bank that she did not get her replacement card. Is she liable since she did not report this to the bank? She knew she asked for a replacement card; knew she didn't get it, and never contacted us.

Under the definition of access device in section 205.2 of Regulation E, a replacement card is not an accepted access device unless it is received by the consumer. Although the consumer was remiss in not detecting unauthorized transfers on her periodic statements, you can't impose liability for the unauthorized transactions made with the replacement card if they were made on or before the end of the 60-day period counted from the delivery date of the statement reflecting the first such unauthorized transaction. While there is no Regulation E requirement that replacement cards be sent in unactivated condition (requiring activation before use), this experience argues strongly for something like activation to prevent or mitigate the risk that replacement cards can be intercepted and compromised.

First published on 8/31/09

First published on 08/31/2009

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