Consumer Liability Determined by Reg E or Visa?

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Question:

If a financial institution supplies Visa debit cards to customers and uses the Visa network, according to Visa the card holder has no liability for a fraudulent transaction unless it is PIN based, so would consumer liability be determined by Reg E or Visa? If Reg E overrules Visa guidelines in determining consumer liability how can Visa advertise zero consumer liability?

Answer:

Don't think of Regulation E and the Visa rules as overruling one another. Instead, treat Regulation E as the baseline of consumer protection for these transactions. Visa rules (or MasterCard rules for cards in that network) can supplement consumer protections found in Regulation E, but cannot take them away. That means that you have to take each aspect of the rules and determine which is more protective of the consumer. Regulation E might require that a consumer's liability for an unauthorized signature-based purchase transaction be capped at $50 (because of when the consumer notified the bank of his lost or stolen card). The Visa rule supplements provide protection by requiring that the consumer not be liable at all. If the transaction were an ATM withdrawal or PIN-authorized purchase, however, the Visa zero-liability rule would not apply because it's not covered.

First published on BankersOnline.com 2/25/08