ATM Card Loaned to a Family Member

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Question:

I know that if a customer loses his ATM card and has the PIN written on it we can’t hold that against him, but can we deny a claim if he loans the card to a family member for a one-time transaction and the family member goes overboard with multiple unauthorized transactions?

Answer:

This issue is specifically addressed in the Official Staff Commentary to Reg E, Section 205.2(m), Comment 2, which states:

Authority. If a consumer furnishes an access device and grants authority to make transfers to a person (such as a family member or co-worker) who exceeds the authority given, the consumer is fully liable for the transfers unless the consumer has notified the financial institution that transfers by that person are no longer authorized.

If the family member engages in the transactions while the customer knows he is in possession of the access device, this commentary holds up, but if the family member gives the access device back, then subsequently steals the access device and engages in unauthorized activity, you're into more of a gray area. You could fight the claim under this provision, but I've heard of cases where banks have attempted that and lost. You may decide instead to concede the liability, but you'll want to make it clear that if the consumer wants to file a claim of unauthorized activity, the bank intends to fully prosecute the case against the family member. Often that will prompt a retraction of the claim.

First published on BankersOnline.com 4/05/10