Bank responsibility for Online Banking Fraud

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Question:

What is the bank's responsibility when it comes to online banking fraud? We have a customer, his niece got ahold of his account number, signed him up for online banking, sent out P2P payments to herself and others, and now he's negative in his account. He did file a police report against her. Does this fall on the customer or the bank?

Answer:

The customer did not request an access device, but the bank provided one in response to a fraudulent application. Regulation E defines this as an unauthorized electronic funds transfer error and the bank is responsible for reimbursing the customer according to the liability schedule in 1005.6(b)(3) if its investigation concludes that the customer did not authorize the charges. Since the access device used was not an "accepted access device" since your customer did not request online banking access, the $50 and $500 liability tiers of 1005.6(b)(1) and (2) do not apply.