Identity Theft: Dispute Resolution October 22, 2015 Dustin DeVore, Esq. Hazel C. Wong, Esq. Kaufman & Canoles, P.C. Kaufman & Canoles, P.C. 4801 Courthouse Street Two James Center Suite 300 1021 E. Cary Street, Suite 1400 Williamsburg, VA 23188 Richmond, VA 23219 dhdevore@kaufcan.com hcwong@kaufcan.com kaufCAN.com
Dustin H. DeVore, Esq. Kaufman & Canoles, P.C. 4801 Courthouse Street, Suite 300 Williamsburg, VA 23188 (757) 259.3808 dhdevore@kaufcan.com Hazel C. Wong, Esq. Kaufman & Canoles, P.C. Two James Center 1021 East Cary Street, Suite 1400 Richmond, VA 23219 (804) 771-5782 hcwong@kaufcan.com 2 kaufCAN.com
Identity Theft: Dispute Resolution Strategies • Liability for Unauthorized Transfers • Error Notification and Dispute Resolution • How to recognize • How to avoid • Checklist and guidance • Best Practices 3 kaufCAN.com
Is your credit union ready to address identity theft? Yes No 4 kaufCAN.com
Identity Theft: Dispute Resolution Strategies • Regulation E limits a member’s liability • “Zero liability” provisions in contracts with credit cards • Result: credit union bears liability 5 kaufCAN.com
Regulation E • Implements the Electronic Fund Transfer Act • Protects members engaging in electronic fund transfers – Automated teller machines (ATMs) – Automated clearing house (ACH) transactions such as electronic payment of a bill from the member’s account • Procedures for investigating and resolving errors • Limitations on member liability 6 kaufCAN.com
Dispute Notices & Error Resolution Errors include: • An unauthorized EFT; • An incorrect EFT to or from a member’s account; • An omission of an EFT from a member’s periodic statement; • A computational or bookkeeping error by the institution for an EFT; 7 kaufCAN.com
Dispute Notices & Error Resolution • A member’s receipt of an incorrect amount of money from an electronic terminal; • The members request for additional information or clarification concerning an electronic fund transfer, including a request the member makes to determine whether one of the errors listed above actually exists. 8 kaufCAN.com
Dispute Notices & Error Resolution Not included: • Routine inquiries about a member’s account balance, • Requests for information for tax or other record-keeping purposes, or • Requests for duplicate copies of documentation 9 kaufCAN.com
Does your credit union have a detailed Dispute Resolution Policy? Yes No 10 kaufCAN.com
Notice of Error Requirements • Must act on any error notification from a member • received within 60 days after transmitting the periodic statement on which the error is first reflected enables the credit union to identify the member’s name and account number; • indicates why the member believes an error exists; and • includes, to the extent possible, the type, date, and amount of the error. • Can require that the member submit a notification in writing within 10 business days after oral notice 11 kaufCAN.com
Response Timeframe • Must complete investigation within 10 business days of receiving the error notice • May extend to 45 calendar days if: o Unable to complete investigation within 10 business days o Provisionally credit the member’s account o Inform member of the amount and date of the provisional crediting within two business days of the crediting; and o Allow member full use of the provisional funds during the investigation 12 kaufCAN.com
Response Timeframe • Requiring written notice will not extend the 10 business day period, but if not received within 10 business days of the oral notice, can extend to 45 calendar days without provisionally crediting the member’s account 13 kaufCAN.com
Results of Investigation After completing the investigation, you must: • Correct an error within one business day after determining that an error has occurred; and • Report the results of investigation to the member within three business days of completing investigation • Report must be in writing if you conclude there was no error 14 kaufCAN.com
Unauthorized Transfer Defined • Initiated by a person other than the member • Without actual authority • Member receives no benefit 15 kaufCAN.com
Unauthorized Transfer Defined Does not include an EFT initiated: • By a person furnished the access device to the member’s account by the member, unless the member has notified the credit union that the authorization has been revoked • With fraudulent intent by the member or any person acting with the member; or • By the credit union 16 kaufCAN.com
Limiting Liability Disclose to members • A summary of the member’s liability for unauthorized transactions • The telephone number and address of the person or office to be notified of an unauthorized EFT • The credit union’s business days Must provide a means to identify the owner or authorized user of an access device (debit card) 17 kaufCAN.com
Liability for Unauthorized EFTs Involving an Access Device • 3 tiers of liability for unauthorized EFTs involving an access device o when the member learned of the loss or theft of an access device, o when the financial institution received notice, and o when the financial institution transmitted the periodic statement showing the first unauthorized transaction to the member. 18 kaufCAN.com
Liability for Unauthorized EFTs Involving an Access Device st Tier: Member notifies credit union within two 1 business days after learning that the access device was lost or stolen • member liable for lesser of (a) $50 or (b) the amount of unauthorized EFTs that occurred before the institution was notified 19 kaufCAN.com
Liability for Unauthorized EFTs Involving an Access Device 2 nd tier: Member notifies credit union within 60 days of the statement containing the error • member liable for lesser of: o $500 or o the sum of: (see next slide) 20 kaufCAN.com
the member’s first -tier liability; and the amount of unauthorized EFTs that occur after the end of the second business day after the member learns of the loss or theft and before notice to the credit union (provided the credit union establishes that the unauthorized EFTs would not have occurred had the member provided notice within two business days after learning of the loss or theft) 21 kaufCAN.com
Liability for Unauthorized EFTs Involving an Access Device rd tier: member fails to notify the financial institution of 3 the theft or loss within 60 days after the financial institution transmits to the member a periodic statemen • credit union may impose liability on the member up to the total amount of all unauthorized EFTs occurring more than 60 calendar days after transmitting the statement and before notice • must establish that the unauthorized EFTs would not have occurred had the member notified the credit union within the 60-day period 22 kaufCAN.com
Liability for Unauthorized EFTs Not Involving an Access Device Member may not be held liable for any portion of any unauthorized EFT not involving an access device that occurred on or before the 60th calendar day after the transmittal of the periodic statement showing the first unauthorized EFT 23 kaufCAN.com
Liability for Unauthorized EFTs Not Involving an Access Device Member liable for EFTs • unauthorized • not involving an access device • occurring more than 60 calendar days after transmittal of a periodic statement showing the first unauthorized EFT • occurring before the member gives notice to the credit union • the EFT would not have occurred had the member notified the credit union 24 kaufCAN.com
Prepaid Accounts • Upcoming Rule on Prepaid Products • Will establish new consumer protections • Limits on consumers’ losses when funds are stolen • Error investigation and correction • Free access to account information 25 kaufCAN.com
Does your credit union offer members resources to avoid identity theft? Yes No 26 kaufCAN.com
Risk Management • Don’t wait until your members notice or experience identity theft • Act early by having a holistic approach in place to help detect suspicious activity • Reputation risk is critical when it comes to identity theft • Employee awareness training • Cyber security and data protection policies and procedures • Due diligence of third party providers 27 kaufCAN.com
Strategies to Minimize: Member Notification • Requirement to notify members and NCUA when there has been a direct data breach of the credit union’s system maintained by it or its third-party service provider • Member notification in all data breach contexts may help to mitigation against the risk of fraudulent or unauthorized transaction 28 kaufCAN.com
NCUA GUIDANCE Guidance on Response Programs for Unauthorized Access to Member Information and Member Notice contained in Appendix B to Part 748 of NCUA Regulations 29 kaufCAN.com
Customer Regulation E Dispute Checklist 1. Disputes can only be for transactions no older than 60 days from the most recent statement. 2. Disputes must be returned to the bank no later than 10 days from when the error was identified. 3. Note that POS/ATM disputes may take up to 90 days until resolved. 4. Provisional credit may be revoked if not approved. 30 kaufCAN.com
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