by Charles Miller

A subject that came up in not one but two conversations I had this week was something I mentioned at the end of an earlier column. What I wrote was “If you lose funds from your bank account that loss is often on you and not the bank.” Incredibly, both of the people to whom I spoke were firmly convinced that no matter how negligent they might be, they believed their bank would cover their losses were their accounts to be hacked by cybercrooks. I do hope those two people do not learn their error the hard way.

I can point to a firsthand experience I had last year at an ATM when a thief brazenly grabbed my debit card from my hand and took off running. It was some 20 minutes before I could phone the bank to report the theft, but it had only taken the thief 10 minutes to empty more than $1,000 USD from my account.

I knew that had my loss occurred online that the bank could legally refuse to reimburse me, but I also know the Electronic Fund Transfer Act, Regulation E, 15 U.S.C. § 1693 et seq., 12 C.F.R. § 205.6, 205.11 governing credit and debit cards required U.S. banks to be responsible for any fraudulent transactions reported within two days. What I did not know was that my bank was going to try to get away with ignoring that law. The automated email response I received said they had investigated my claim and determined there was no fraud because they claimed I had authorized the disputed transactions. Claim denied.

Over the next six months I made phone calls only to be told I could only dispute transactions online, and the online system always generated another automated email saying my claim had been investigated and was denied. And no, I could not speak to a supervisor. I followed up with frequent certified, return-receipt-requested letters and that might be what worked in my case.

Over the months I mailed copies of my letter that began with “This is the 5th certified letter you have received and to which you have not responded…” followed by the growing list of USPO certified mail receipt numbers. Then one day without apology or explanation the bank restored all the stolen funds to my account. I have concluded the bank’s policy is to stonewall victims hoping that they will give up. In my case, I suspect all those certified mail return receipts created a paper trail that prompted the bank’s legal department to decide it was better for them to obey the law this time.

It is infuriating, but it does appear that banks know it costs them nothing to stonewall because the only real alternative customers have is to sue. In the U.S. there are two federal cases frequently sited as precedent where customers lost very large amounts to online fraud. Patco Construction Company, Inc., v. People’s United Bank d/b/a Ocean Bank (case no. 2:09-cv-503-DBH) and Experi-Metal, Inc., v. Comerica Bank (docket number: 2:2009cv14890) both found, in part that the banks had not acted in good faith.

The common denominator in these cases and many others that followed is that the customers had to pay lawyers and to go to court. That alone is a good reason to practice online safety when banking.

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Charles Miller is a freelance computer consultant with decades of IT experience and a Texan with a lifetime love for Mexico. The opinions expressed are his own. He may be contacted at 415-101-8528 or email FAQ8 (at) SMAguru.com.

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