Court Opinion

ID: 1045593
Source: CourtListenerOpinion
Date Created: 2013-10-08 02:28:07.196103+00
Date Added: 2024-06-11T08:54:51.985828
License: Public Domain

IN THE COURT OF APPEALS OF TENNESSEE
                           AT KNOXVILLE
                              December 10, 2012 Session

 STEPHEN S. PATTERSON, II. V. SUNTRUST BANK, EAST TENNESSEE

                   Appeal from the Circuit Court for Blount County
                    No. L15908 Hon. David Reed Duggan, Judge

             No. E2012-01371-COA-R3-CV-FILED-JANUARY 11, 2013

This case was filed pursuant to the Electronic Funds Transfer Act. Customer sought
reimbursement from Bank for unauthorized transactions made using a debit card linked to
his account. Bank limited reimbursement to the transactions that occurred prior to and within
60 days of the transmittal of the bank statement that revealed the first unauthorized
transaction. Customer filed suit. The trial court upheld Bank’s denial of recovery, finding
that Customer’s failure to review his bank statements resulted in losses beyond the 60-day
time period. Customer appeals. We affirm the decision of the trial court.

  Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Affirmed;
                                  Case Remanded

J OHN W. M CC LARTY, J., delivered the opinion of the court, in which C HARLES D. S USANO,
J R., P.J., and D. M ICHAEL S WINEY, J., joined.

Gerald C. Russell, Rockford, Tennessee, for the appellant, Stephen S. Patterson, II.

Christopher W. Martin, Knoxville, Tennessee, for the appellee, Suntrust Bank, East
Tennessee.

                                        OPINION

                                   I. BACKGROUND

      Stephen S. Patterson, II (“Customer”) opened a combination personal and business
checking account with Suntrust Bank, East Tennessee (“Bank”) in Alcoa, Tennessee on
December 20, 1999. On that day, Customer was told that he would receive a debit card in
the mail. When Customer received his debit card, he validated it and then used it to make
purchases.

        In July 2005, Customer and Juanita Wehrman entered into a romantic relationship.
At some point during Customer’s relationship with Ms. Wehrman, Bank mailed Customer
another debit card. Ms. Wehrman stole the debit card and made her first unauthorized
purchase with the card on August 22, 2005. While Customer continued to use his card, Ms.
Wehrman used the replacement card for approximately 16 months, well beyond the longevity
of their intermittent romantic relationship.

       On December 4, 2006, Customer was depositing money into his account at Bank when
an employee jokingly chided him for his extravagant shopping trip in Indiana that weekend.
Knowing that he had not visited Indiana, Customer entered the bank to speak with an
employee. While speaking with the employee, Customer’s card was used to make another
purchase in Indiana. The employee closed Customer’s account to prevent any further
unauthorized transactions. Customer discovered that Ms. Wehrman had used his replacement
debit card to make unauthorized purchases in excess of $30,000.

       Customer sought reimbursement from Bank. Relying on 15 United States Code
Annotated section 1693g, Bank limited its reimbursement to $677.46. Bank insisted that it
was only required to reimburse Customer for the amount of unauthorized transactions that
occurred prior to and within 60 days of the transmittal of the bank statement that revealed the
first unauthorized transaction. Customer also received $500 in restitution from Ms.
Wehrman. Customer filed suit against Bank in an effort to recoup the remainder of his loss
from Ms. Wehrman’s fraudulent use of his account.

        A bench trial was held at which Customer and Stephanie Hardiman, a bank employee
testified. Customer testified that the employee who opened his checking account told him
that he would not be held “liable or responsible” for unauthorized transactions. He admitted
that other than the employee’s assurance regarding his liability, he could not recall exactly
what the employee told him when he opened the account. He related that the employee
instructed him to sign certain documents, including a signature card. The signature card
provided, in pertinent part,

       It is agreed that all transactions between the Bank and the entity listed in the
       above Account Title (“Depositor”) shall be governed by the rules and
       regulations for this account and the above signed as the authorized agent(s) of
       the Depositor hereby acknowledge(s) receipt of such rules and regulations and
       the funds availability policy. The Depositor also acknowledges the funds
       availability policy has been explained.

                                              -2-
Customer could not recall reading the signature card and insisted that he never received the
rules and regulations or the funds availability policy mentioned in the document.

       Customer testified that he was not given any documentation when he opened his
account. He also never received any disclosures in the mail regarding his potential liability
for unauthorized transactions. He said that after opening the account, he received a box of
checks and a debit card in the mail. He stated that the debit card was attached to a document
similar to one he offered into evidence, which provided, in pertinent part,

       You are protected if your card is ever lost or stolen. You are not responsible
       for unauthorized purchases.

The document also provided,

       Use of this card is subject to the terms and conditions of your current
       Customer Agreement.

He related that the debit card also provided that he was not liable or responsible for any
unauthorized purchases. He introduced two additional documents, bearing the same
limitation of liability. The first document also advised that use of the card was subject to his
user agreement, while the second document did not mention the terms and conditions
governing the debit card. However, a debit card, which was left attached to the second
document, provided, in pertinent part,

       The cardholder and any other authorized users by signing this agrees to all
       [Bank] terms and conditions agreement(s) governing this card.

       Relative to the theft of his replacement card, Customer testified that he dated Ms.
Wehrman “on and off,” starting in July 2005. He admitted that she “occasionally” stayed
overnight in his home and had access to his mail and home office. He insisted that Ms.
Wehrman did not take the debit card that he regularly used. He surmised that she must have
stolen a replacement card from the mailbox while he was not home. He asserted that he
never consented to Ms. Wehrman’s use of his replacement card.

       Customer used his checking account for personal and business purposes. He admitted
that he received monthly statements documenting his account activity. He stated that he
opened the statements, glanced at them, and then filed them for later use. He never used the
statements to balance his account. He related that he gave the statements to his accountant,
who filed his income tax return each year. He acknowledged that the number of Ms.
Wehrman’s transactions steadily increased throughout her unauthorized use of the

                                              -3-
replacement card and that as a result of her increased purchases, his monthly bank statements
spanned several pages. He admitted that the statements reflected the location of each
purchase and that some of the unauthorized transactions occurred in North Carolina and
Indiana. He conceded that he would have noticed that someone else was using his account
if he had simply reviewed his statements.

       Ms. Hardiman, a vice president of corporate security at Bank, testified that she had
been employed at Bank for 17 years. She related that she investigated claims of fraud,
forgery, and external or internal misappropriation of funds. She was responsible for
monitoring a large geographic area, including Blount County. As a result of her training and
position, she was familiar with the basic way in which Bank opened and maintained checking
accounts. She was also familiar with the way in which Bank maintained its records.
Following voir dire, she was qualified as a custodian of records for purposes of this case.

       Ms. Hardiman testified that generally, customers are required to provide a social
security number and sign a signature card in order to open a checking account. She stated
that customers are either given a copy of Bank’s rules and regulations at the time the account
is opened or they receive the pertinent documents in the mail after the account is opened.
She asserted that if a customer elects to receive a debit card, a card is sent in the mail, along
with the rules and regulations relating to the use of the actual card. She stated that each time
a replacement or renewal card is sent, the customer receives another copy of the rules and
regulations relating to the card. She related that debit cards are replaced every three years.
She admitted that the department that oversees the creation of the rules and regulations is
located in Atlanta, Georgia and that the company that mails the debit cards is located in a
different state. She asserted that the Atlanta Department is responsible for ensuring that the
pertinent documents are included with the debit cards when the cards are mailed. The 2002,
2004, 2005, and 2006 rules and regulations were introduced into evidence as a collective
exhibit. The documents provided, in pertinent part,

       If you do NOT tell us within two (2) business days after learning of the loss or
       theft of the electronic terminal access card or code, or preauthorized Telephone
       Funds Transfer code, and we can prove that we could have prevented someone
       from using the card or code without your permission had we been notified, you
       could lose as much as $500.

       If your statement shows transfers you did not make, tell us at once. If you do
       not tell us within sixty (60) days after the statement was mailed, you may lose
       all of the money transferred after the sixty (60) days if we can prove that we
       could have prevented the loss had you told us in time.

                                               -4-
       We will extend the time periods for a good reason, such as a long trip or
       hospital stay, which might keep you from notifying us.

       In accordance with Visa guidelines, SunTrust Check Card holders are not
       liable for unauthorized Visa merchant transactions performed with their
       SunTrust Check Cards if the card is reported lost or stolen within two days (48
       hours) of discovery. After two days, there is a maximum liability of $50.

She admitted that she did not know whether the rules and regulations were sent with
Customer’s debit card or with any of his replacement or renewal cards. She also
acknowledged that she was not present when Customer opened his account and could not
state whether he received a copy of the rules and regulations at that time.

       Ms. Hardiman explained that customers who elect to receive a debit card also receive
a personal identification number (“PIN”) that is to be used with the card. She related that a
card can be used in one of two ways, either the customer enters the PIN each time he or she
makes a purchase or the customer simply signs his or her name at the time of the purchase.
She stated that the PIN remains the same even when customers receive replacement or
renewal cards. She admitted that a customer could request a new PIN.

       Ms. Hardiman testified that if a customer were to report unauthorized transactions
within 60 days of the first transaction reflected in the monthly statement, Bank would have
closed the checking account, blocked the cards associated with the account from future use,
and reimbursed the customer in full. She acknowledged that she would not have been
involved with Customer’s case if he had notified Bank of the unauthorized transactions in
a timely manner. She explained that she learned of Customer’s case because of the time
frame of the unauthorized activity and the amount of money that was stolen.

        Following the presentation of the above evidence, the trial court dismissed Customer’s
complaint. The court found Ms. Hardiman’s testimony credible and noted that the
disclosures provided by Bank were compliant with federal regulations. The court also found
that Customer was negligent for failing to review his monthly statements, that he “put [Ms.
Wehrman] in the position of having access to his debit card, or at least to intercept a
replacement card,” and that he offered “no proof” regarding the claim that the card used by
Ms. Wehrman was not validated. The court acknowledged the general limitation of a
customer’s liability found in the applicable law, the disclosure statements, and on the
documents provided by Bank. However, the court stated that the applicable law and
disclosures provided “an exception to that limitation of liability where an account holder is
not diligent in monitoring his periodic bank statements, and where the account holder fails
to report to the bank what are very clearly unauthorized charges.” The court concluded,

                                             -5-
      [Customer] was negligent in failing to review his monthly account statements,
      and it was as a result of that negligence that he has suffered this loss. [Bank]
      simply cannot be held liable for unauthorized transactions which were clearly
      disclosed on the face of his bank statements. It may be true that [Customer]
      did not become aware of these unauthorized transactions until [December 4,
      2006], when he went through the drive-through window at [Bank]. He should
      have known of these charges to his account, however, as soon as these charges,
      being made in locations where [Customer] had never been, showed up on his
      bank account statements. The [c]ourt will charge him with knowledge of what
      a reasonable, diligent person should have known.

      The [c]ourt also concludes, based upon all of the facts it has found and the law
      cited herein, that [Bank] established that these unauthorized transactions would
      not have occurred had [Customer] notified [Bank] within the applicable 60-day
      period; [Bank] has established that it could have prevented the loss had
      [Customer] told [Bank] in time.

      Finally, to the extent, if at all, [Customer] intends to argue that the 60-day
      period should have been extended due to extenuating circumstances, he has
      offered no proof of any such circumstances.

This timely appeal followed.

                                       II. ISSUES

      We consolidate and restate the issues raised on appeal as follows:

      A. Whether Customer may be held liable for Ms. Wehrman’s unauthorized
      transactions.

      B. Whether the trial court erred in upholding Bank’s limitation of Customer’s
      recovery because he failed to notify Bank of the unauthorized activity within
      the applicable time period.

                                            -6-
                             III. STANDARD OF REVIEW

       On appeal, the factual findings of the trial court are accorded a presumption of
correctness and will not be overturned unless the evidence preponderates against them. See
Tenn. R. App. P. 13(d). The trial court’s conclusions of law are subject to a de novo review
with no presumption of correctness. Blackburn v. Blackburn, 270 S.W.3d 42, 47 (Tenn.
2008); Union Carbide Corp. v. Huddleston, 854 S.W.2d 87, 91 (Tenn. 1993). Mixed
questions of law and fact are reviewed de novo with no presumption of correctness; however,
appellate courts have “great latitude to determine whether findings as to mixed questions of
fact and law made by the trial court are sustained by probative evidence on appeal.” Aaron
v. Aaron, 909 S.W.2d 408, 410 (Tenn. 1995).

                                     IV. DISCUSSION

                                              A.

        The Electronic Funds Transfer Act (“the EFTA”), as represented in the United States
Code (“the USC”) and the Code of Federal Regulations (“the CFR”), delineates the rights,
responsibilities, and liabilities of participants in the banking industry. 15 U.S.C. § 1693(b);
15 C.F.R. § 205.1(b). Pursuant to the EFTA, a consumer may only be held liable for
unauthorized transactions involving his or her account if the financial institution provided
the pertinent disclosures of liability, if the account was accessed using an accepted device,
and if the issuer of the accepted device provided a means whereby the user can be identified
as the person authorized to use the device. 15 U.S.C. § 1693g(a); 12 CFR § 205.6(a).

                                              I.

       Customer asserts that he never received the disclosures of liability. He contends that
the disclosure documents and Ms. Hardiman’s testimony regarding Bank’s policies and
procedures for providing the documents were inadmissible. Bank responds that the
documents and the testimony were admissible.

        When Customer opened his account, he signed a document in which he acknowledged
receipt of Bank’s rules and regulations, namely the disclosure documents. Additionally, any
issues relating to the admission of the disclosure documents are waived because he did not
object when the documents were admitted into evidence. Tenn. R. App. P. 36(a) (providing
that failure to contemporaneously object to the admission of inadmissible hearsay testimony
results in waiver of the issue on appeal). Lastly, his arguments relating to Ms. Hardiman’s
testimony are misplaced.

                                              -7-
        Customer contends that Ms. Hardiman was not properly qualified as a custodian of
records, thereby invalidating her testimony relating to Bank’s policies and procedures
because her statements were inadmissible hearsay. Hearsay is defined as “a statement, other
than one made by the declarant while testifying at the trial or hearing, offered in evidence to
prove the truth of the matter asserted.” Tenn. R. Evid. 801(c). Hearsay is inadmissible in
trial court proceedings unless it falls within one of the recognized exceptions to the hearsay
rule. Tenn. R. Evid. 802; Mitchell v. Archibald, 971 S.W.2d 25, 28 (Tenn. Ct. App. 1998).

       Generally, a custodian of records must be presented to introduce

       [a] memorandum, report, record, or data compilation, in any form, of acts,
       events, conditions, opinions, or diagnoses made at or near the time by or from
       information transmitted by a person with knowledge and a business duty to
       record or transmit if kept in the course of a regularly conducted business
       activity and if it was the regular practice of that business activity to make the
       memorandum, report, record or data compilation[.]

Tenn. R. Evid. 803(6) (emphasis added). Documents are admissible pursuant to this rule
when the following criteria are met:

       1. The document must be made at or near the time of the event recorded;

       2. The person providing the information in the document must have firsthand
       knowledge of the recorded events or facts;

       3. The person providing the information in the document must be under a
       business duty to record or transmit the information;

       4. The business involved must have a regular practice of making such
       documents; and

       5. The manner in which the information was provided or the document was
       prepared must not indicate that the document lacks trustworthiness.

Alexander v. Inman, 903 S.W.2d 686, 700 (Tenn. Ct. App. 1995).

       In this case, the documents were not records of events that had occurred in the course
of regularly conducted business activity. The documents were prepared to inform customers
of Bank’s policies and procedures in accordance with policy changes and applicable laws.
The documents were offered to establish Customer’s knowledge and understanding of

                                              -8-
Bank’s operating procedures, namely Bank’s limitation of liability for unauthorized
transactions if Customer failed to review his bank statements. The documents were also
offered to establish Bank’s compliance with federal regulations. Accordingly, Ms.
Hardiman’s qualification as a custodian of records was unnecessary for the purpose of
admitting the disclosure documents and allowing her to testify about the documents.

       The testimony complained of, Ms. Hardiman’s assertion that Bank employees are
instructed to provide the disclosure documents when the account is opened and that updated
disclosure documents were sent with each new card, was derived from the manuals Ms.
Hardiman studied during her employment training and her experience as an officer in the
security division. Additionally, the testimony was not offered to prove the truth of the matter
asserted in the manuals, namely that Bank followed the appropriate procedure on the day that
Customer opened his account.1 Instead, Ms. Hardiman merely testified that Bank provided
policies and procedures that should have been followed on the day Customer opened his
account and each time Bank mailed Customer a replacement or renewal debit card. Such
testimony was not hearsay, was relevant, and was properly admitted. With all of the above
considerations in mind, we conclude that the preponderance of the evidence supports the trial
court’s conclusion that Customer received the applicable disclosures.

                                                       II.

       Customer argues that he cannot be held liable for the unauthorized transactions
because the debit card was not an accepted card or access device. An accepted card is
defined as

          a card, code, or other means of access to a consumer’s account for the purpose
          of initiating electronic fund transfers when the person to whom such card or
          other means of access was issued has requested and received or has signed or
          has used, or authorized another to use, such card or other means of access for
          the purpose of transferring money between accounts or obtaining money,
          property, labor, or services[.]

15 U.S.C. § 1693a(1). Likewise, the CFR provides, in pertinent part,

          (a)(1) Access device means a card, code, or other means of access to a
          consumer’s account, or any combination thereof, that may be used by the
          consumer to initiate electronic fund transfers.

1
    The manuals were also not entered into evidence.
                                                       -9-
       (2) An access device becomes an accepted access device when the consumer:

                                             ***

              (iii) Receives an access device in renewal of, or in substitution
              for, an accepted access device from either the financial
              institution that initially issued the device or a successor.

12 C.F.R. § 205.2(a).

        Customer admits that the debit card was a renewal or substitution card but asserts that
the card was not an accepted device because Ms. Wehrman intercepted the card from his
mailbox, thereby preventing him from actually receiving the card. The testimony presented
concerning the place and time in which the card was stolen was speculative, at best.
However, Customer admitted that he invited Ms. Wehrman into his home for overnight visits
and provided her with unlimited access to his home office and mailbox while he was not
present. Ms. Wehrman was not a random passerby that stole Customer’s card. She was
provided with unrestricted access to Customer’s home office and mailbox while Customer
was not present. With these considerations in mind, we conclude that Ms. Wehrman’s
receipt of the debit card, whether obtained from the home office or the mailbox, was
sufficient to establish Customer’s receipt of the debit card. Accordingly, the preponderance
of the evidence supports the trial court’s conclusion that the transactions were made with an
accepted access device or other means of access.

                                              III.

       Customer has seemed to limit his focus on the language that was on a document that
the debit card he received in the mail was attached to, this language as noted earlier provided:

              You are protected if your card is ever lost or stolen. You are not responsible
              for unauthorized purchases.

       He seems to overlook the additional language which provides:

              Use of this card is subject to the terms and conditions of your current
              Customer Agreement.

      However, even if our focus in this case was limited to that of Customer and the
language he has advanced, Customer still cannot recover because he has violated the implied

                                              -10-
condition of good faith and fair dealing in his contract with Bank. When Customer opened
his account with Bank, he entered into a contract. As previously explained by this court,

       Every contract imposes upon the parties a duty of good faith and fair dealing
       in the performance and interpretation of the contract. Wallace v. National
       Bank of Commerce, 938 S.W.2d 684, 686 (Tenn 1996); R ESTATEMENT
       S ECOND OF C ONTRACTS § 205 (1979); 2 J OSEPH M. P ERILLO & H ELEN
       H ADJIYAUUAKIS B ENDER, C ORBIN ON C ONTRACTS § 5.27, at 139 (rev. ed
       1995). This duty requires a contracting party to do nothing that will have the
       effect of impairing or destroying the rights of the other party to receive the
       benefits of the contract. Winfree v. Educators Credit Union, 900 S.W.2d 285,
       289 (Tenn. Ct. App. 1995).

Elliott v. Elliott, 149 S.W.3d 77, 84-85 (Tenn. Ct. App. 2004). Customer admitted that he
failed to review his monthly bank statements for an extended period of time. He also
admitted that had he reviewed his monthly bank statements, he would have noticed the
unauthorized transactions. By failing to consistently review his bank statements, he impaired
Bank’s ability to ensure that only authorized transactions were honored and exposed Bank
to liability for fraudulent transactions. Accordingly, we conclude that Customer violated the
duty of good faith and fair dealing that was implicit in his contract with Bank.

                                              IV.

        Lastly, Customer contends that he may not be held liable for the unauthorized
transactions because Bank failed to provide a means whereby the user of the debit card could
have been identified as the person authorized to use the device. Ms. Hardiman testified that
the user of any debit card would have had to enter a PIN or provide a signature when using
the card to make a purchase. Accordingly, we reject Customer’s contention and conclude
that Bank provided the appropriate means to identify the authorized user of the card at issue.
Having concluded that Bank provided the pertinent disclosures of liability, that the account
was accessed using an accepted device, that Customer violated his implicit duty of good faith
and fair dealing, and that Bank provided a means whereby the user could have been
identified as the person authorized to use the device, we also conclude that the trial court did
not err by holding Customer liable for Ms. Wehrman’s unauthorized transactions.

                                              B.

        Having determined that Customer may be held liable for the unauthorized
transactions, we must review the court’s decision regarding the amount of Customer’s
liability for the unauthorized transactions. Several documents were introduced regarding

                                              -11-
Bank’s policy of limiting consumer liability for unauthorized transactions. Two of the three
documents also provided that use of the debit card was subject to the terms and conditions
of Bank’s rules and regulations in the customer agreement, which essentially followed the
provisions contained in the USC and CFR. The debit card attached to the third document
contained the same caveat. Customer argues that despite the pertinent rules and regulations
governing his account, Bank verbally advised him that he was not liable for unauthorized
purchases. However, Customer signed a signature card in which he acknowledged that he
was governed by Bank’s rules and regulations for his account.

       Relative to the EFTA, the CFR provides, in pertinent part,

       (b) Limitations on amount of liability. A consumer’s liability for an
       unauthorized electronic fund transfer or a series of related unauthorized
       transfers shall be determined as follows:

              (1) Timely notice given. If the consumer notifies the financial
              institution within two business days after learning of the loss or
              theft of the access device, the consumer’s liability shall not
              exceed the lesser of $50 or the amount of unauthorized transfers
              that occur before notice to the financial institution.

              (2) Timely notice not given. If the consumer fails to notify the
              financial institution within two business days after learning of
              the loss or theft of the access device, the consumer’s liability
              shall not exceed the lesser of $500 or the sum of:

                     (i) $50 or the amount of unauthorized transfers
                     that occur within the two business days,
                     whichever is less; and

                     (ii) The amount of unauthorized transfers that
                     occur after the close of two business days and
                     before notice to the institution, provided the
                     institution establishes that these transfers would
                     not have occurred had the consumer notified the
                     institution within that two-day period.

              (3) Periodic statement; timely notice not given. A consumer
              must report an unauthorized electronic fund transfer that
              appears on a periodic statement within 60 days of the financial

                                             -12-
             institution’s transmittal of the statement to avoid liability for
             subsequent transfers. If the consumer fails to do so, the
             consumer’s liability shall not exceed the amount of the
             unauthorized transfers that occur after the close of the 60 days
             and before notice to the institution, and that the institution
             establishes would not have occurred had the consumer notified
             the institution within the 60-day period. When an access device
             is involved in the unauthorized transfer, the consumer may be
             liable for other amounts set forth in paragraphs (b)(1) or (b)(2)
             of this section, as applicable.

12 C.F.R. § 205.6(b) (emphasis added). Likewise, the USC provides, in pertinent part,

      In no event, however, shall a consumer’s liability for an unauthorized transfer
      exceed the lesser of--

             (1) $50; or

             (2) the amount of money or value of property or services
             obtained in such unauthorized electronic fund transfer prior to
             the time the financial institution is notified of, or otherwise
             becomes aware of, circumstances which lead to the reasonable
             belief that an unauthorized electronic fund transfer involving the
             consumer’s account has been or may be effected. Notice under
             this paragraph is sufficient when such steps have been taken as
             may be reasonably required in the ordinary course of business to
             provide the financial institution with the pertinent information,
             whether or not any particular officer, employee, or agent of the
             financial institution does in fact receive such information.

      Notwithstanding the foregoing, reimbursement need not be made to the
      consumer for losses the financial institution establishes would not have
      occurred but for the failure of the consumer to report within sixty days of
      transmittal of the statement (or in extenuating circumstances such as extended
      travel or hospitalization, within a reasonable time under the circumstances) any
      unauthorized electronic fund transfer or account error which appears on the
      periodic statement provided to the consumer under section 1693d of this title.
      In addition, reimbursement need not be made to the consumer for losses which
      the financial institution establishes would not have occurred but for the failure
      of the consumer to report any loss or theft of a card or other means of access

                                            -13-
       within two business days after the consumer learns of the loss or theft (or in
       extenuating circumstances such as extended travel or hospitalization, within
       a longer period which is reasonable under the circumstances), but the
       consumer’s liability under this subsection in any such case may not exceed a
       total of $500, or the amount of unauthorized electronic fund transfers which
       occur following the close of two business days (or such longer period) after the
       consumer learns of the loss or theft but prior to notice to the financial
       institution under this subsection, whichever is less.

15 U.S.C. § 1693(b) (emphasis added).

        Having reviewed the applicable code sections, we note that the USC and the CFR
provide three separate tiers of liability. Depending on the circumstances, a consumer may
be held liable for $50, $500, or an unlimited amount of the unauthorized transactions if he
or she failed to review the pertinent bank statements and timely notify the financial
institution. Additionally, more than one tier of liability may apply to the consumer because
a tier may be read in conjunction with other tiers. Indeed, the official staff interpretation of
the CFR provides, in pertinent part,

       The standard of unlimited liability applies if unauthorized transfers appear on
       a periodic statement, and may apply in conjunction with the first two tiers of
       liability. If a periodic statement shows an unauthorized transfer made with a
       lost or stolen debit card, the consumer must notify the financial institution
       within 60 calendar days after the periodic statement was sent; otherwise, the
       consumer faces unlimited liability for all unauthorized transfers made after the
       60-day period. The consumer’s liability for unauthorized transfers before the
       statement is sent, and up to 60 days following, is determined based on the first
       two tiers of liability: up to $50 if the consumer notifies the financial institution
       within two business days of learning of the loss or theft of the card and up to
       $500 if the consumer notifies the institution after two business days of learning
       of the loss or theft.

12 C.F.R. Pt. 205, Supp. I. (emphasis added).

       Ms. Hardiman testified that Bank would have closed the account when Customer
reported the unauthorized transactions. Customer acknowledged that he would have
recognized the unauthorized transactions if he had reviewed his bank statements. The first
periodic statement evidencing an unauthorized transaction was sent on August 31, 2005.
Customer did not notify Bank of the unauthorized activity within 60 days of August 31, 2005.
Instead, he notified Bank within two days of learning of the theft. Thus, he was liable for

                                              -14-
$50 of the transactions that occurred prior to the expiration of the 60-day time period and for
the entirety of the transactions that occurred after the expiration of the 60-day time period.
Having reviewed the record, we conclude that Bank should have credited Customer’s account
in the amount of $659.07, taking into account the $50 fee for the transactions that occurred
before the statement was sent and within the 60-day time period. Customer acknowledged
receipt of $677.46 from Bank. Accordingly, we affirm the trial court’s dismissal of the
complaint because he received a credit in excess of what he was entitled to receive.

                                    V. CONCLUSION

       The judgment of the trial court is affirmed, and the case is remanded for such further
proceedings as may be necessary. Costs of the appeal are taxed to the appellant, Stephen S.
Patterson, II.

                                           ______________________________________
                                           JOHN W. McCLARTY, JUDGE

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