A debit card, a Cash App account, and a stolen phone

Answered by:

Melissa Blaser | CRCM, CAMS, CPA, CFSA, CFIRS

Question:

We have a customer who gave her grandson (who is not on her account) permission to put her debit card on the grandson's Cash App account. There have been transfers from our customer's account by debit card, to the Cash App account that is in the grandson's name. They claim the grandson's phone was stolen and that the transfers were made by the person who stole the phone, not the grandson who was given authority to use the card. Where would the liability fall since the transfers went to an account in the name of a person who was given authority to use the debit card, but that person claims it was theft?

Answer:

by Melissa Blaser:

Interesting scenario. The consumer would be liable for all transactions conducted by the grandson since he was authorized to use the card until the consumer notified you, but the robber who stole the phone was unauthorized. In this scenario, it would appear to be an unauthorized transaction, because it was not the person the customer provided the card to, but I'm interested in what others may have to say on this scenario.

“Unauthorized electronic fund transfer” means an electronic fund transfer from a consumer's account initiated by a person other than the consumer without actual authority to initiate the transfer and from which the consumer receives no benefit. The term does not include an electronic fund transfer initiated:

(1) By a person who was furnished the access device to the consumer's account by the consumer, unless the consumer has notified the financial institution that transfers by that person are no longer authorized;

(2) With fraudulent intent by the consumer or any person acting in concert with the consumer; or

(3) By the financial institution or its employee.

Answer:

by John Burnett:

If, in fact, the grandson's phone was stolen and the transactions in question were not made by the grandson, they would not be authorized transactions, and the consumer should be reimbursed.

Determining whether or not the grandson made the transfers may be a challenge. Is there any documentation or evidence that the phone was stolen?