My question relates to a cardholder who knew that his card was lost for 6 months, but never reported it. The fraud service called him wanting to know if 9 gas station transactions were legitimate. At the time, the preauths totaled only $9. The member said that they were not his transactions and the card was placed on hot status. The completion transactions just came in (approx $480) & are unposted. The member has not come in to dispute the transactions.



Can we post the unposted transactions to his DDA account? Since he didn’t give us timely notification under Reg E that his card lost, he would not be eligible to receive provisional credit.
Are we required to chargeback the items in an attempt to recover his funds?
Can we pass on to cardholder any of the chargeback fee costs that we pay to our processor? The total will be approximately $135

When did the first unauthorized transaction hit the member's account? Then when did the statement showing that transaction get delivered to the member? Those are the important dates here; the fact that the cardholder didn't notify you of the loss of the card is, frankly, only a minor consideration.



The member gets 60 days from when the statement was delivered showing the first unauthorized transfer to make his error claim. So your notice was actually timely, and the ten day rule will apply, and you have to do an investigation. But read on, since your investigation may be moot.

As for liability, let's assume that none of the transactions took place before the cardholder knew the card was lost or within two days afterward. If all the transactions took place after two days had passed from knowing of the loss of the card, but before the 60th day from that statement delivery we discussed above, the member is liable for the first $500, and for everything that occurred after the 60th day.

It looks to me that the cardholder's delay in notifying you will work in your favor. Even if you agree that all the transactions are unauthorized, you can lay the liability on the cardholder here because of his failure to act.