Answer from Brian: The answer to the question depends on whether or not Reg E applies to the unauthorized withdrawals.
Unauthorized checks and drafts are covered by your state's version of the Uniform Commercial Code and your deposit agreement with your customer. UCC 4-406(f) allows a customer one year after statements are made available to report a forged, altered or unauthorized check. If the customer did not have mail forwarded, and did not make use of internet banking services, the bank does not have to be liable for this choice.
Unauthorized electronic funds transfers do not have a statute of limitations in Reg E. The customer may still make a claim and the bank is still required to investigate. Section 1005.6(b)(3) allows you to hold a custoemr fully liable for unauthorized withdrawals that occur more than 60 days after the delivery date of the statement on which the first charge appeared. 1005.11(b) relieves the bank of its obligation to provide provisional credit or complete the investigation in 45 days, but it still must investigate. If the charges are unauthorized, the bank is obligated to reimburse the customer for the time period from the first disputed charge up to 60 days after the delivery date of the statement. If the customer is due reimbursement, determine if the account would still have be charged off. If the charge off was the result of the unauthorized charges, you must also make the appropraite adjustment to any consumer reporting agencies to which you furnished negative information.
The commentary to 1005.6(b)(4) provides that the liability window can be extended due to "extenuating circumstances" such as hospitalization or vacation. A 5-year deployment is not a situation that would have taken the customer by surprise. I would opine that this clause does not provide additional protection as the customer had the responsibility to make arraingements to receive mail while deployed.
Answer from Andy: I would also ask additional questions. Military tours are not five years. The Air Force was four to six months, with a very few folks going over for 364 days. The Coast Guard was deployed for a year or less. The Army and Marine Corps was generally 12 months but was originally 15 months. The Navy was between six months to a year.
There were many who returned for multiple tours overseas, but they were home for generally a year. There were and are civilains serving overseas and while not SCRA protected, they would be covered by Reg E. But serving there, especially as a civilian, does not mean they were isolated. They snail mailed, emailed, Skyped and did internet banking very often. If this customer was on internet banking, that would be my first stop in the investigation, was she ever logged on? Next, if statements were snail mailed - to where and did you have return mail? There are several key questions to ask. It is not a slam dunk either way but I would be leaning toward the fact that this was a claim of convenience to clear a credit report. Also, remember that your Reg E timelines under Section 1005.11 do not apply because of the delayed claim. "A financial institution shall comply with the requirements of this section with respect to any oral or written notice of error from the consumer that:
(i) Is received by the institution no later than 60 days after the institution sends the periodic statement or provides the passbook documentation, required by Section 1005.9, on which the alleged error is first reflected;"
First published on BankersOnline.com 4/9/12