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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
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Barnum Distributors wants a projection of cash receipts and cash payments for the month of November. On November 28 , a note will be payable in the amount of $\$ 98,500$, including interest. The cash balance on November 1 is $\$29,600$. Accounts payable to merchandise creditors at the end of October were $\$217,000$. The company's experience indicates that 70 percent of sales will be collected during the month of sale, 20 percent in the month following the sale, and 7 percent in the second month following the sale; 3 percent will be uncollectible. The company sells various products at an average price of $\$11$ per unit. Selected sales figures are as follows: || **Units** | | :---: | :---: | |Sept.—actual| 40,000 | |Oct.—actual | 60,000 | |Nov.—estimated | 80,000| |Dec.—estimated | 50,000| |Total estimated for the current year | 800,000| Because purchases are payable within 15 days, approximately 50 percent of the purchases in a given month are paid in the following month. The average cost of units purchased is $\$7$ per unit. Inventories at the end of each month are maintained at a level of 2,000 units plus 10 percent of the number of units that will be sold in the following month. The inventory on October 1 amounted to 8,000 units. Budgeted operating expenses for November are $\$220,000$. Of this amount, $\$90,000$ is considered fixed (including depreciation of $\$35,000$ ). All operating expenses, other than depreciation, are paid in the month in which they are incurred. The company expects to sell fully depreciated equipment in November for $\$ 8,400$ cash. **Instructions** Prepare a cash budget for the month of November, supported by schedules of cash collections on accounts receivable and cash payments for purchases of merchandise.
Find the second derivative of the given function. $$ h(t)=\left(t^2+5\right)^8 $$
The following data refer to the successful Munger division of Buffett, Inc. Munger makes and sells high-end cordless drills. The drills sell for $80 each, and Munger expects sales of 300,000 units in 2014. Munger’s annual fixed costs are$4 million. The variable cost per drill is $48. Buffett evaluates Munger based on residual income. The total investment attributed to Munger is$16 million, and Buffett has a required rate of return on investment of 20%. Ignore taxes and depreciation expense. Answer each of the following parts independently, unless otherwise stated. 1. What is the expected residual income in 2014? 2. Munger receives an external special order for 100,000 units at $60 each. If the order is accepted, Munger will have to incur incremental fixed costs of$850,000 and invest an additional $2 million in various assets. What is the effect on Munger’s residual income of accepting the order? 3. One of the components Munger manufactures for its drill has a variable cost of$4. An outside vendor has offered to supply the 300,000 units required at a cost of $5.25 per unit. If the component is purchased outside, fixed costs will decline by$200,000 and assets with a book value of $760,000 will be sold at book value. Will Munger decide to make or buy the component? Explain your answer. 4. One of Munger’s regular customers asks for a special drill made of tempered steel. The customer requires 15,000 drills. Munger estimates its variable cost for these special units at$54 apiece. Munger will also have to undertake new investment of $1,500,000 to produce the drills. What is the minimum selling price that will make the deal acceptable to Munger? 5. Assume the same facts as in requirement 4. Also suppose that the customer has offered$82 for each special drill. In addition, the customer has indicated that its purchases of the existing product will drop by 6,000 units. a. What is the net change in Munger’s residual income from taking the offer, relative to its planned 2014 situation? b. At what drop in unit sales of the regular drill would Munger be indifferent to the offer?
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