Section 1005.2(m) defines an unauthorized electronic funds transfer as:
…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.
While this definition might seem straightforward, there is often a lot of confusion when it comes to whether a transaction was initiated by your customer or not. Again, to be “unauthorized” and subject to the protections of Regulation E the transaction must be …initiated by a person other than the consumer without authority to initiate the transfer….So what if your customer is somehow induced to initiate a fraudulent transfer? Unfortunately, if they enter their information and hit “send”, “pay”, etc., they have initiated that transfer and it would not be unauthorized. If the scammer retains their information and uses it later to initiate additional transactions, those would be unauthorized if they otherwise meet the definition.
Jerod explains more in the video.
Published
2024/03/13