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Reg E- Consumer Liability

Terms in this set (15)

What is an unauthorized electronic fund transfer?
An EFT from a customer account that meets the following criteria:
1. Initiated by someone other than the customer
2. Without authority to initiate the transfer
3. From which the customer receives no benefit
Benny gave his debit card and PIN to his cousin to withdraw $40. His cousin withdrew $500 and gave $40 to Benny. Benny discovers this on his next statement and calls the bank to advise there was an unauthorized transfer on his account. Is the bank liable for the $460 difference?
No if a customer furnishes an access device and grants authority to make transfers to a person who exceeds the authority given, the customer is still fully liable for the transfers unless the customer notifies the bank that the person is no longer authorized
Carol loves to shop sales and usually uses her credit card to make purchases but forgot it one day and had to use her debit card instead. Upon closer inspection of her purchases later, she notices the item is damaged and tries to return it to the store. The manager refuses to refund as all sales purchases are final. Carol calls the bank and demands the money be returned to her account. Does this transaction fall under Reg E protections and will the Bank refund Carol?
No it was an authorized transfer on her account. Carol may have some recourse under the chargeback procedures for Visa and MasterCard transactions, but not under Reg E
What is a chargeback?
The reversal of the dollar value (financial liability) in whole or part, of a particular transaction by the card issuer to the acquirer, and usually, by the merchant bank to the merchant. Generally arise from customer disputes, fraud, processing errors, authorization issues, and non-fulfillment of copy requests
Carol loves to shop sales and usually uses her credit card to make purchases but forgot it one day and had to use her debit card instead. When she received her bank statement later that month, she saw her account was debited 4 times for the same $75 transaction. Does this transaction fall under Reg E protections and will the Bank refund Carol?
Yes- the 3 additional transactions are unauthorized and covered by the protections of Reg E. Assuming timely notification, the bank would need to investigate the issue and limit Carol's liability
How can a customer notify the bank or an unauthorized EFT?
Orally or in writing. The bank is considered notified if the customer tells any bank employee
When can the bank require written notice of unauthorized transactions?
If the initial Reg E disclosures included a statement informing the customer of the written requirement AND at the time the customer gives an oral notice the bank specifically requests the customer confirm it in wiring and provided the address to send the confirmation
True or False: If the customer fails to provide written notice within the banks' specified timeframe, the bank can delay or forego an investigation
False- however the bank is not required to provisionally credit the customer's account if the written notice is not provided within 10 days of the oral notice
True or False: Notice of an unauthorized transaction or error provided by a third party on the customer's behalf is a valid notice
True- however the bank may require documentation from the third party to ensure the party is acting on the customer's behalf
What is constructive notice?
When the institution becomes aware of circumstances leading to the reasonable belief that an unauthorized EFT to or from the customer's account had been or may be made

Ex: Dr Martin is a 98 YO retiree who has banked with your bank for 50 years. When he came into the bank to deposit a birthday check from his daughter, the teller noticed that Dr Martin's account balance was significantly lower than usual. Further investigation showed withdrawals made at places Dr Martin never frequents. The bank can begin investigating even though Dr Martin never personally informed the bank these were unauthorized
True or False: The bank has a duty to scan or monitor customer accounts for possible unauthorized transactions
False- The bank has no obligation under Reg E, however must monitor accounts for suspicious activity under the BSA
How many different levels of liability are there involving an access device?
Three: timely notice given ($50), timely notice not given ($500), timely notice not given and access device use continues (unlimited)
What is the level of customer liability regarding unauthorized EFTs is no access device is involved?
The bank may only hold the customer liable for an unauthorized EFT not involving an access device if the transfer occurred more than 60 calendar days after transmittal of a periodic statement showing the first unauthorized EFT and before the customer gives notice, provided to the institution established the unauthorized EFT would not have occurred had the customer notified the institution within the 60 day period
Dean is a customer that does not pay attention to his account balance and most of the time never opens his bank statements. A few weeks ago, shortly after his direct deposit was made, Dean started receiving multiple notices from his bank that his overdraft line was advancing to cover overdrafts. Dean was pretty sure this was incorrect so he opened a few bank statements and found there were monthly $500 unauthorized EFT withdrawals made by a company unknown to him. Dean found that the first transaction occurred three years earlier. What is the bank's liability in this case?
The bank must reimburse any unauthorized EFTs made within 60 days of the first statement where the charges originally occurred (transactions in the first 2 months). All the remaining charges are Dean's responsibility as they would have been prevented if he had notified the bank timely
Patel calls the bank concerned about a missing debit card. He noticed it was missing a few hours ago when he wanted to pay for flowers for his wedding anniversary and it was not in his wallet. Has Pavel met the timing requirements to avoid additional liability?
a) No, he needed to wait 2 days before reporting it
b) Yes, he noticed it was missing and reported it immediately
c) No, he has to wait and see if there was any unauthorized transactions
d) No, because he should have been more careful with his card
B
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