Date Dispute Investigation Beings – Debit Card Fraud

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    We use a third party to monitor fraudulent debit card transactions. If fraud is flagged, they will then contact our customer to confirm. Only transactions that were flagged are reviewed with the customer. Once the customer confirms fraud, they turn off the card, & ask the customer to contact the bank to file a dispute. The third party will also email the bank if fraud is confirmed. The customer doesn’t always call the bank to file a dispute & the bank has to reach out. Our question is, does the date of investigation begin the date that the customer confirms fraud with our third party provier or when the customer contacts the bank to file the dispute or when the bank contacts the customer? Also, we are concerned from a UDAAP perspective that the customer may be unclear they aren’t speaking to the bank when talking with our third party provider & may assume they are doing their part of the process. Is this a valid concern from a UDAAP perspective since it may be unclear to the customer?


    Hi amberb!
    We’ve sent your question to Terri Sands who presented the debit card fraud program for us this week. She will be getting back to you very soon.


    Answer from Terri Sands:
    This question can be answered best by referring directly to Regulation E. Regulation E states that: (iii) Written notice is considered given at the time the consumer mails the notice or delivers it for transmission to the institution by any other usual means. Notice may be considered constructively given when the institution becomes aware of circumstances leading to the reasonable belief that an unauthorized transfer to or from the consumer’s account has been or may be made.
    With that said, I do know of situations where the consumer made a claim to the consumer bureau because of the confusion with who they were making the claim to and dropped it after contacting the third party. The best business practice to have here is education. From a compliance perspective you want to be very transparent with the customer regarding who to contact with the dispute. With that said, as part of your dispute resolution notification information to the consumer, make certain they know to contact the financial institution. Also ensure that your terms and conditions agreement are specific regarding who to contact and make certain it doesn’t allow them to contact the third-party for a disputed transaction.

    Anything is a valid concern with USAAP as this is a significant regulation and something of great reputational value. As provided above, it is important to be transparent with the customer in all financial institution documentation to ensure they understand (1) to contact the financial institution if there is an unauthorized entry and (2) provide education on contacting a third-party for fraud vs. contacting the financial institution for an unauthorized transaction.

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