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Rules for Denying Debit Card Claims

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A customer has given his debit card PIN to his partner in Dec. 2010. The partner uses the card in Jan./Feb. 2011 to do $23,000 in ATM withdrawals and over $7,000 in POS transactions. Can the claim be denied because the customer did not change or protect the card and or PIN?

A literal reading of Regulation E's definition of "unauthorized electronic fund transfer" states that the term does not include a transfer made by an individual who was given the access device by the cardholder, unless the cardholder notifies the bank that the individual is no longer authorized to use it.

I have often opined that if the card is returned to the cardholder's custody and subsequently taken by the previously authorized individual without new permission, transactions by the card thief would be unauthorized. There is nothing in the regulation or the Electronic Fund Transfer Act that supports that opinion other than the decided consumer-protection slant of the law and regulation.

A bank faced with $30,000 in purportedly unauthorized EFTs under the circumstances you've described would be justified, I think, to consider denying the claim based on the strict reading of the regulation, subject to the risk that a court suit by the customer might have a different result.

First published on 4/11/11

First published on 04/11/2011

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