Question of the Week

Posted: Jun 16, 2022 | Author: Cornerstone Compliance Team
CFPB  compliance  Reg E 

Question: Under Reg E, if a member is persuaded to initiate a transaction (on his/her own) that the member later learns to be fraudulent, is that considered and unauthorized transaction we would have to credit the member for?

Answer: No. Regulation E and recent interpretations from the CFPB reaffirm that if a member initiates a transaction using that member’s own credentials, the transaction is not considered unauthorized. It may still be fraudulent, but the credit union is not responsible for the loss.

Unauthorized transactions are defined in Reg E as “an EFT 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. Unauthorized EFTs include transfers initiated by a person who obtained a consumer’s access device through fraud or robbery and consumer transfers at an ATM that were induced by force”

It would be unauthorized if that member was misled into providing those credentials to another person who then used those credentials to initiate a transaction. You can read more about those details here:

A good point of member education is to let them know of any recent scams or schemes that the credit union is aware of and to continue to warn members not to share their private-access information with persons involved in these sorts of operations. This practice helps the member and protects credit unions from unnecessary loss.


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