Who’s Liable if Junior Goes on a Spending Spree With Your Debit Card?

Kids these days. You hand them your three-and-a quarter-inch debit card and they take a mile. But, who is liable for Junior’s spending binge if it’s piled on top of authorized use of the card?

To understand liability with this issue, look at this example:

Mom Member gives her son, Sonny, her debit card and a list of items to pick up at the grocery store. He purchases everything on the list, but then takes a sharp turn off the path of being a good son and also decides to get some cash at the ATM, fills up his gas tank, buys pizza and soda for 20 of his closest friends, and purchases a new gaming system.

Sonny dutifully returns the card to Mom. Mom checks her account online a few days later and discovers Sonny’s shopping spree. She calls her credit union to report the “unauthorized” transactions. Is Mom entitled to get her money back? Under Regulation E, which regulates electronic funds transfers, probably not.

Reg. E says, “If the consumer grants authority to make transfers to a person (such as a family member or co-worker) who exceeds the authority given, the consumer is fully liable for the transfers unless the consumer has notified the financial institution that transfers by that person are no longer authorized.”

If Mom Member had notified the credit union that transactions no longer were authorized while Sonny was still using the card, she wouldn’t be liable for any additional debit card transactions after providing the notice. And, the credit union could have canceled or suspended the card to prevent any further misuse.

Alas, if Mom Member discovers Sonny’s misuse after the fact, it’s too late.

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One Response

  1. Learn the benefits of credit unions! http://www.youtube.com/watch?v=RWN0PAsJFAs&feature=youtu.be

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