Consumer complaint received 2018-11-23
Product: Checking or savings account — Checking account
Issue: Managing an account — Problem using a debit or ATM card
Company: UNITED SERVICES AUTOMOBILE ASSOCIATION (TX)

On XX/XX/2018, XXXX and XXXX XXXX car was broken into at XXXX. It was parked in the driveway which has floodlights illuminating it. A debit card and a credit card were in the vehicle. No PIN was in the wallet that was taken with the cards. The home security camera captured the act. It looks like it was a teenager who broke in. 

The theft was discovered at about XXXX the next day. Upon discovering the theft, the stolen card was cancelled online. XXXX XXXX ( joint accountholder ), whose card was stolen was told by USAA to wait until all the charges were processed to file a claim and only the transfers showing on XX/XX/XXXX, were noted by XXXX. 

This theft itself was immediately reported to the XXXX Police Department and to USAA. {$700.00} in charges were placed on the debit card at several local XXXX overnight. 

USAA called approximately a week later to allow all the charges to process and asked questions of XXXX on a 5-minute phone call. They asked if the PIN was written on the card or was it in the wallet and asked, if needed could a police report be provided? The investigator was told the PIN was not present and a police report was made and would be sent when made available by the police, but the investigator said, Im just making sure if I need it that you can provide it. She asked if the car was parked in the driveway or out front and asked, how do you even know it was stolen? That is when she was advised of the home security system and we offered video. 

While we understand the presence of the PIN would have made transactions easier for the thief, that fact can not be used in determining liability under Reg E, Commentary 6 ( b ) 2. Regardless, the PIN was not there but this was a key ( 33 % of the factors ) in the decision to deny the claim, thereby increasing liability to the consumer, ironically because it was not present. Had it been written on the card USAA could not have used no failed PIN attempts as a reason to deny the claim, so this security measure is used against the consumer. See bullet 2 below. 

XXXX video shows a teenager, possibly the same from our home camera, with who could be his mom, using the card. These videos, stills, and the police report were provided USAA even though they were not requested by them. The USAA investigators we spoke with when we called them seemed oblivious to the fact that we had sent them electronically. We do not believe these were reviewed. ( More on that below. ) USAA paid the claim provisionally but later rescinded that credit and denied the claim. Upon receiving written notification that the credit would be rescinded XXXX called USAA and discussed the facts of the case. He understood the investigator to say they would try to recall the provisional credit debit and extend the investigation, but that did not happen. USAA proceeded on its course. 

On a 3-way call between USAA, XXXX XXXX ( XXXX XXXX, who is on the account ) had the claim elevated for a higher review. USAA did not reopen the claim according to them but reviewed it at the highest level, they said. On another 3-way call we ascertained from the investigator/reviewer why the claim was denied. It seems they use a checklist reminiscent of OCC Advisory Letter 2001-9 ( now rescinded ) and noted three factors in this denial : 1. The card has a history of use at XXXX. 
2. There were no failed PIN attempts.

3. There were no attempts to use the card after it was reported stolen. 

Had USAA asked questions of us during this investigation these points may have been discussed and better understood, but as noted USAAs conversation with us were sparse and short. They did not appear interested in these facts : 1 - XXXX is the worlds largest retailer, and XXXX works for XXXX. It would be expected to see the card used by thieves there due to its size and practices of customer satisfaction. That also explains the pattern of usage, although XXXX does not regularly shop at one of the stores the thieves used. 
2 - PIN requirements vary by store as some are diligent about requiring a PIN while others are not. This is based on discussions with a few store managers. No one we spoke with knew who set this policy or if it rotated or was based on chargebacks/losses, the card, etc. XXXX said his XXXX store rarely requires a PIN, although his store was not one in question. An employee of the XXXX XXXX store where thefts did happen said sometimes PINs are required on a {$4.00} purchase but not on a {$100.00} purchase. It is required sporadically and the criteria is unknown as to when it is required. 
3 The thieves depleted all available funds on their last transaction. There was no more money available and they may have been aware of this or simply knew they have a limited time period to use a stolen card and may have moved on.

The primary objective of the Electronic Fund Transfer Act and Reg E is the protection of individual consumers engaging in electronic fund transfers. Section 909 ( b ) of the EFTA establishes that the burden of proof is on the financial institution to show that the transaction was authorized. We maintain Reg E requires the bank to prove the consumer completed the transaction, authorized it or benefited from it. The degree of proof is not stated, but we feel USAA has not reached any reasonable burden of proof. 

An " unauthorized EFT '' clearly includes instances when the access devise was obtained by fraud or robbery. From the commentary : " Access device obtained through robbery or fraud. An unauthorized EFT includes a transfer initiated by a person who obtained the access device from the consumer through fraud or robbery. '' An access device clearly includes a debit card. From the commentary : " The term access device includes debit cards, personal identification numbers ( PINs ), telephone transfer and telephone bill payment codes, and other means that may be used by a consumer to initiate an electronic fund transfer ( EFT ) to or from a consumer account. '' An " unauthorized EFT '' is clearly included in the definition of an " error '' that must be investigated under 1005.11 : " ( a ) Definition of error. ( 1 ) Types of transfers or inquiries covered. The term error means : ( i ) An unauthorized electronic fund transfer '' 1005.11 ( c ) requires an " error '' to be corrected within one business day after determining that an error occurred : " The institution shall correct the error within one business day after determining that an error occurred. '' The only thing in Regulation E that is not clear is how the bank is to conduct their investigation and make a determination. That said, the camera evidence seems to provide 100 % proof that this is an " error, '' because it is an " unauthorized EFT '' because the access devise was obtained through " robbery or fraud. '' Reg E extends protections to the consumer. USAA must comply with the Reg E requirements when any oral or written notice of error from the consumer : Is received no later than 60 days after the periodic statement is sent or provides the passbook documentation on which the alleged error is first reflected ; Enables the bank to identify the consumer 's name and account number ; and Indicates why the consumer believes an error exists and includes to the extent possible the type, date, and amount of the error. 

Certainly we went above and beyond this providing video, still images and a police report. USAA may have surmised that we were attempting to defraud them with a false claim. {$700.00} is not worth the risk of being charged with a criminal penalty for filing a false police report. XXXX has banked and had various financial services there for approximately 8 years and XXXX 42 years. There should be no mis-trust in this relationship. 

As is our right under Reg E we requested copies of the information used in our investigation on XXXX XXXX. On our last call with USAA they assured us we would have it electronically by XXXX XXXX. As of today, XXXX XXXX this has not been delivered. Ten business days should be adequate time for such a delivery as no creation of documents was required. We have no idea if they included our submissions in their investigation. 

On both calls in which XXXX XXXX was included, USAA was made aware of the EFTA and Reg E requirements by him. They seemed uninterested. On the last call XXXX asked to speak to a higher level person as this investigation was not, in his opinion, compliant with the intent or requirements of Reg E. We were told no, this was as high as we could go. We asked to be transferred to the Compliance Department and were again told no. ( XXXX has been in banking and compliance for 38 years and intended to speak with someone more knowledgeable about Reg E. ) The investigator was advised we would officially complain to the OCC and the Bureau. 

We believe such a recipe for claims determinations will have damaged many other consumers and, in that USAA serves the military in great numbers, it has not met the spirit and intent of the Servicemembers Civil Relief Act if they have defrauded servicemembers by taking away their rights under the SCRA and EFTA and created financial hardships for them. We also believe USAAs procedure violates Unfair, Deceptive Acts and Practices rules. 

Related to the denied claim is a snowball effect that causes financial hardships for consumers. In this case XXXX and XXXX house payment was returned as nonsufficient funds. We immediately covered that. Then the mortgage lender, after already receiving the XXXX XXXX payment, auto-charged the account a week later and said " oops, you are prepaid we can send you a check in two weeks. '' This second debit was also covered by us but caused additional overdraft fees. The mortgage lender said they would not refund the overdraft fees and a claim would have to be made to USAA for those. This is the holiday season and it is not a time many can afford to make multiple house payments and cover overdraft fees so we placed another EFT claim for the unauthorized house payment. For a young family of four living paycheck to paycheck this could be devastating and while it started with the theft, USAA made it worse disregarding Reg E and consumer protection laws and regulations. 

It is worth mentioning that the credit card which had fraudulent charges had those charges immediately reversed.