BY LESLIE CALLAWAY, CRCM, CAMS, CAFP, MARK KRUHM, CRCM, CAFP
AND RHONDA CASTANEDA, CRCM
FROM THE
HOTLINE
Scams and Reg E
QOne of our customers received an email she thought was from her friend. The email stated
the friend was in jail and requested that funds
be sent for bail. Pursuant to the directions in
the email, the cardholder went to a MoneyGram
location, swiped her debit card, and entered her
PIN. After sending the funds, the cardholder was
able to get in touch with her friend and realized
that this was a scam. She is now asserting that
this was an unauthorized transaction under
Regulation E because it was a scam. Do we have
to refund her money?
ANo. The consumer—not the bank—is responsi- ble. Even though there was fraud, the consumer
knowingly authorized the MoneyGram transaction,
using her card and PIN.
Generally, under Section 1005.6 of Regulation E,
consumers are liable for authorized electronic fund
transfers, including debit card transactions (
assuming required disclosures have been made and any access devices
is an “accepted” access device). The transaction is authorized
if the person consents to make the transaction—even if the
person ultimately receiving payment is a criminal defrauding
the consumer. In this case, the consumer willingly provided the
card and PIN to pay MoneyGram to send money. Your customer can be directed to MoneyGram to see if it can do anything,
but your bank has no liability.
This general rule applies to any authorized payment transaction. Payment system rules are generally designed to assign
responsibility for a loss to the person in the best position
to judge the situation and avoid the loss. In cases where the
consumer has the contact and relationship with the person
receiving the money and knowledge of the circumstances, the
consumer, not the bank, is in the best position to know about
possible fraud. The bank is not in a position to judge the circumstances to avoid the loss.
A notable exception is if the consumer is held up at gunpoint and is in physical danger and forced to use an ATM to
withdraw funds. In that situation, the customer would be protected. (Response Provided 10/2017.)
Mortgage Servicing Rules
QUnder the new Mortgage Servicing rules, do we have to display late fees incurred over the life of the loan
on the periodic statement, or just late fees that were
incurred during the billing cycle? Also, for the past-payment
breakdown, are we to provide a total amount for the fees
charged for the entire calendar year?
AThe total of fees or charges disclosed in the Explanation of Amount Due section should be limited to any fees or
charges imposed during the current statement cycle. That line
item should include late fees as well as any other fees or charges that were imposed since the last statement. Any fees that
were assessed to the borrower’s mortgage loan account during
a prior billing cycle but remain unpaid, should then be encompassed in the line item that shows “any payment amount
past due.” There does not appear to be any requirement to
disclose the total of fees charged for the calendar year on each
periodic statement. In the Past Payment Breakdown section
of the statement, you do have to provide a breakdown of all
payments received since the last statement, showing how those
payments were applied to principal, interest, escrow, fees, and
any partial payment or suspense account (if applicable).
The Past Payment Breakdown section must disclose this in-
formation for payments received since the last statement as well
as since the beginning of the calendar year. So, if any portion of
the borrower’s payments during the last billing cycle or during
the calendar year were applied to, then the amount applied to
fees would have to be included in the breakdown. Each month,
the statement must also show any fees that were assessed to the
borrower’s account in the Transaction Activity section of the
statement. However, there is no requirement to list a lump sum
amount of fees. To the extent you want to include that informa-
tion somewhere on the statement, the law does provide some
flexibility to include additional information, subject to any close
proximity requirements that may exist for different sections of
the statement. (Response Provided 10/2017.) S H U T T
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