Jeff Gelles Column About How a Bank May Have Misrepesented Debit Card Law

by Jeff Sovern

Here's the column, and follow up posts can be found here and here.  Basically, someone made unauthorized charges of $5,208 to a couple's bank account in December, as reflected in the bank's statement which came in January.  The couple didn't open the bank statement until March, when they reported the loss to the bank.  The bank told the couple that they had to bear the loss because they didn't notify the bank until 63 days after the bank statement went out.  The problem is that that's not what Regulation E provides. Reg E, § 205.6(b)(3) does provide that the consumer is liable for unauthorized withdrawals that take place more than 60 days after the statement goes out, but here the withdrawals were all well before that date.  The Reg imposes a $50 cap for consumer liability if the consumer reports the loss within two days of learning of it.  I can't tell whether the couple reported the loss within two days of opening the statement or not, but if they failed to do so, under § 205.6(b)(2), their exposure should be limited to $500.  So the bank was wrong.  Even more troubling is Gelles's experience trying to get federal agencies to comment.  Here's a quote, from one of the blog posts:

It took me several days to sort through the misinformation – partly, I have to suspect, because of the lack of a strong, focused consumer-protection agency for financial services. The Federal Reserve's Washington press office did not return at least two phone messages requesting help – not a good sign for an agency that seems to want to preserve its role in consumer protection and has resisted proposals for an independent Consumer Financial Protection Agency.

A spokesman for the Office of the Comptroller of the Currency, which oversees the bank in question, wasn't familiar enough with the rules to comment initially, and tried to refer questions back to the Fed, anyway. "They write the rules. It's their job to interpret them."  It's a common response from the OCC, and one that reflects our fractured system of bank oversight.

This time, the spokesman was helpful after I reminded him that it's the OCC's job to enforce the rules when it comes to national banks. Enforcing them requires understanding them, doesn't it?

Late Friday, I finally got a response from the OCC – not about the Mannings' case specifically, but at least about the pattern of facts.

Is it me, or do all roads lead to the need for a single federal consumer financial protection agency?

Comments

[Jason Kilborn]

Sorry--March. They learned about the loss in March. But same answer. Their exposure is $50 max, not $500, unless more fraud was paid out AFTER they discovered the loss AND failed to report it for 2 days (or 60 days elapsed after the mailing of that January statement).

[Jason Kilborn]

Why do all of these sources suggest that the liability is $500??? If they learned of the loss/fraud in January, and no other fraud was paid out AFTER they LEARNED (NOT should have learned) of the loss/fraud, their total exposure under EFTA and Reg E is only $50. It doesn't matter if they reported the fraud within two days or not--it matters when the fraud occurred. Their liability only rises beyond $50 and up to $500 if the fraud was on-going in January (which I don't understand it to have been here), then their liability might be greater, but what am I missing here? Why has no one explained that their total exposure is only $50?