Answer:
Answer by Michael Guard:
Follow the required investigatory procedure. Document your findings. Inform the customer that you did not find evidence to support the claim of unauthorized withdrawal. Then, if you deny his claim, the down side is you could end up with the customer suing you. The good news is that neither side has any strong evidence to support their assertion. In the lawsuit the customer will carry the burden of proof, and all he has is his story. The bank, on the other hand, has the right to rely on the fact that the customer is responsible for their PIN. Based on these facts, the bank has the advantage. Unless the PIN is utilized someplace with a camera there may never be any real evidence on either side.
At the very least, I would immediately change the PIN on the account, if you want to bother to keep the customer. Then log any continued use of the old PIN. If the old PIN is never used again, you have more evidence for the bank, because how would the customer's alleged thief know the PIN has been changed unless he is the thief or is in collusion with him.
Answer:
Answer by Andy Zavoina:
Some important things to remember are that Reg. E is a consumer regulation. In fact, 205.1 even states the purpose of the Act, The primary objective of the act and this part is the protection of individual consumers engaging in electronic fund transfers.
Under 205.11, you are required to investigate claims from consumers. If you do not have proof that an error has not occurred, you should be paying the claim. If it was as easy as not having cameras and not having evidence that supports the consumer's claim, no claims would have to be paid.
I believe the burden is on the bank. You may require an affadavit from the customer to specify the terms of the complaint. You may even request that they file a police report. Though your investigation should not depend on this. Is the consumer willing to make a false legal statement as to the claim?
Before you found yourself paying attorney's costs in court, you'd likely have your regulator asking why the claim wasn't paid.
In most cases, my recommendation is to cut your losses and move on. Impose whatever liability you can against the consumer, if you so desire, and revoke the access device.
The banks simply do not win in these situations. If you feel strongly enough, you may choose to refuse the claim. But remember that in addition to monetary risk, you have reputation risk. You don't want to be known as a bank that pays any claim whether it is substantiated or not, nor do you want to be known as a bank that "steals" from its customers.
Answer:
Answer by Mary Beth Guard:
When you perform your investigation, look for any facts that would tend to either support a conclusion that the claim is fraudulent, or that would indicate the claim is an honest one.
For example, what were the amounts of the withdrawals? Were they identical to amounts the customer has typically withdrawn? Where were the withdrawals made? Were they made at ATMs the customer has regularly used or ones located near where he lives or works?
What does the customer have to say in response to questions like, "Was your ATM card lost or stolen?" When? How? Did you report it? Was your PIN written on the card?
If the customer says the card was never out of his possession and the PIN wasn't written on it, then the authenticity of the claim is really in question in my mind. If the card was never lost, stolen, or otherwise out of the customer's possession, then the fraud could not have been committed unless there was a duplicate fraudulent card floating around out there and someone had ALSO managed to defeat the dual control system and obtain the correct PIN. Not likely.
Before you make a final decision, besides complying with the proper time frames for your investigation and notification, think in terms of how it's going to sound to a jury when you tell you your side of the story and how it's going to sound when the customer tells his side of the story. The natural sympathy and empathy will be with the customer -- not the bank. If you don't think it's a slam dunk in your favor, try working a compromise with the customer, or just pay the claim and tell the customer not to let the door hit his butt on the way out.
First published on BankersOnline.com 8/6/01
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