Does a Bank Have to Refund Stolen Money?

“Stolen money” in banking refers to funds lost due to unauthorized transactions or fraud. A bank’s obligation to refund depends on the transaction type, fraud circumstances, and the consumer’s reporting actions. Different regulations and laws govern liability for various financial products, establishing frameworks for consumer protection and financial institution responsibilities.

Electronic Fund Transfers

Electronic Fund Transfers (EFTs) include debit card purchases, online banking transfers, mobile payment apps, and ATM withdrawals. Regulation E primarily outlines consumer protections for unauthorized EFTs. It defines an unauthorized EFT as a transfer from a consumer’s account initiated without their authority, from which they receive no benefit.

Consumer liability for unauthorized EFTs depends on how quickly the financial institution is notified. If a consumer reports the loss or theft of an access device, like a debit card or PIN, within two business days of discovery, liability is limited to $50. If reported after two business days but within 60 days of the statement showing the transfer, liability can increase to $500. For unauthorized transfers on a periodic statement, consumers must report them within 60 days of the statement’s transmittal to avoid unlimited liability for subsequent transfers.

Financial institutions must investigate reported errors within 10 business days, or 20 for new accounts. If the investigation takes longer, the bank typically issues a temporary credit up to $50. If an error is confirmed, the bank must correct it within one business day and report results to the consumer within three business days, including any credited interest or refunded fees.

Credit Card Fraud

Unauthorized credit card charges have consumer protections generally more favorable than those for debit cards and EFTs. The Fair Credit Billing Act (FCBA) is the primary federal law protecting consumers from billing errors on credit cards and certain open-end credit accounts. This act allows cardholders to dispute unauthorized charges, incorrect amounts, or charges for undelivered goods.

Under the FCBA, maximum consumer liability for unauthorized credit card charges is $50. Many credit card issuers offer “zero liability” policies, reducing this responsibility to $0. Consumers must notify their credit card company in writing of any billing error within 60 days of receiving the statement.

Upon receiving a written dispute, the creditor must acknowledge it within 30 days and investigate within two billing cycles, or 90 days. During this period, the creditor cannot collect the disputed amount or report it as late to credit bureaus. If the dispute is valid, the error must be corrected, and any associated finance charges or fees refunded.

Check and Other Unauthorized Transactions

Unauthorized check transactions, like forged signatures or altered checks, are primarily governed by the Uniform Commercial Code (UCC) as adopted by states. If a check has a forged signature, the drawee bank is generally liable, as it should know its customer’s signature. However, this liability can shift if the customer’s negligence contributed to the forgery.

Banks should not honor altered checks where the payee’s name or amount has changed. A bank can only charge items against an account if they are “properly payable,” meaning fully authorized by the check writer. If a customer fails to report check fraud within one year of the statement showing fraudulent items, their claim against the bank may be barred under the UCC. If a bank shows the customer failed to exercise ordinary care, like not reviewing statements promptly, and this contributed to the alteration or forgery, the customer may be precluded from reimbursement.

Other unauthorized transactions, such as wire transfers, may have different rules. If a fraudulent wire transfer occurs, consumers should contact their bank immediately to report the fraud and inquire about reversal. Wire transfers are often difficult to reverse once completed.

Your Role in Protecting Funds and Reporting

Consumers play a role in protecting funds and recovering stolen money by taking prompt action. Immediately contact your bank upon discovering any unauthorized transaction. Gather all pertinent information and documents related to the fraudulent activity, such as transaction details, dates, amounts, and communication records.

Filing a police report may be necessary, especially if fraud involves identity theft or if your bank requires it for claims like lost or stolen cards. Regularly monitoring bank and credit card statements is an important preventative measure. This allows for early detection of suspicious activity and prompt dispute of unauthorized charges or errors.

Safeguarding personal financial information is a preventative step. This includes using strong, unique passwords, being wary of phishing attempts, and practicing secure online habits. If a bank denies a claim, consumers can escalate the issue by contacting regulatory bodies like the Consumer Financial Protection Bureau (CFPB) or the Office of the Comptroller of the Currency (OCC). The CFPB accepts complaints about financial products and services, forwarding them to companies for a response, often within 15 days.