Compliance Question of the Week

If our member gave someone his credit card number to make an online purchase and that person takes the number and purchases several other times against the Visa, what is the credit unions liability? Would we have to refund the member for the purchases that were made with the Visa, or would the member need to take action against the person who made the transactions against their account?

Under Reg Z 12 CFR 1026.12, the member has the limited liability of $50 for unauthorized use.

However, in the commentary on 1026.12(b)(1)(ii) we have the following: “3. Implied or apparent authority. If a cardholder furnishes a credit card and grants authority to make credit transactions to a person (such as a family member or coworker) who exceeds the authority given, the cardholder is liable for the transaction(s) unless the cardholder has notified the creditor that use of the credit card by that person is no longer authorized.”

Because the member provided apparent authority to his friend to make that first purchase, he is liable for everything.

Related Links

12 CFR 1026.12(b)(1)(ii)
Official Commentary

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Questions? Contact the Compliance Hotline: 1.800.546.4465, compliance@nwcua.org.

Posted in Around the NW, Compliance.