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Can Your Bank Refuse To Refund Fraud Charges?


Can Your Bank Refuse To Refund Fraud Charges?

It is so stressful when you become the victim of fraud. Luckily, there are usually a lot of safety measures in place. These help you restore both your finances and your credit. They don’t always work, but they do often help. However, what if you contact your bank about fraud and they don’t do anything to help you? Can your bank refuse to refund fraud charges?

Fraud Charges: Debit Cards vs. Credit Cards

You can unfortunately experience fraudulent charges on both debit cards and credit cards. With credit cards, you’re charged for things that you didn’t purchase. Then you have to work with the company to reverse those charges. It’s a little bit different with debit cards, since the cash is immediately removed from your account.

When there are fraudulent charges on your debit card:

  • The money is gone from your account. Therefore, at least for the time being, you do not have access to that money anymore.
  • You might incur fees if this results in overdrafting the account or dropping below your account’s required no-fee minimum. These are usually, but not always, refundable.
  • If you auto-pay any bills with your checking account/ debit card, then those payments might be rejected if the fraud has removed all of your available funds. This can result in additional fees.
  • Banks are required to refund fraud charges to you if you follow specific rules outlined for your account.
  • It’s important to take action quickly to resolve the issue.

With a credit card, you can dispute the charge without paying it. With a debit card, the money is already gone, and all you can ask to do is have that money restored.

Know Your Rights and Responsibilities

Can your bank refuse to refund fraud charges? Typically, no. However, you are responsible for taking action to make sure that they have to refund you.

Laws do protect you from bank fraud. The most important thing is that you must report the fraud to your bank very quickly. According to Sapling, your fraud liability is only $50 if you report the fraud within two days. In other words, no matter how much money was removed from your account, your bank must refund all but $50 of that to you. However, if you wait longer than two days, your liability increases. 

If you report the fraud after two days but before 60 days, then your liability is $500. Therefore, your bank will refund what was stolen except for the first $500. If only $500 was stolen from your account, then you won’t get any refund. If someone stole $800 from your account, you would be entitled to receive $300 back.

Note that if you do not report the fraud within the first 60 days after it occurs, the bank can refuse to refund fraud charges. They are not required to pay you anything if you report it at that point.

Some banks have more flexible rules. You can check your bank’s fine print to find out what they offer in terms of protections. However, the law is this 2 day/ 60 day rule in terms of your liability.

When Will My Bank Return My Money After Fraud?

Legally, the bank has up to two weeks after your report to return the funds to your bank account (minus the amount that you’re liable for, as indicated above.) Many banks, thankfully, return the money as soon as you’ve made the report. However, some banks opt to do an investigation first. They are allowed to take up to two weeks to do so.

As a result, you want to make sure that take action to protect yourself from further problems. First of all:

  • Confirm that your bank received the report and will stop allowing further purchases from your debit card.
  • Ask your bank to send you a new debit card.
  • Use your emergency funds to put additional money into your account. This will cover auto-pay charges, etc., so that you don’t overdraft the account.
  • Alternatively, or additionally, stop/ pause your auto-pay payments that are debited from this account.
  • Mark the calendar for the two week date and check with your bank if they have not refunded the money by that time.

CreditCards.com further explains that banks typically have to investigate the issue within ten days of reporting. And once they determine that there has been fraud, they have one day to return the money. Two weeks is just the max in most cases.

When Can Your Bank Refuse To Refund Fraud Charges?

So, now you know what you’re responsible for and when the bank should return your money. But are there times when a bank can refuse to refund fraud charges even if you reported them in a timely manner? It’s fortunately rare, but it can happen. 

A bank can do an investigation into the fraud charges. If their investigation determines that there were no fraudulent charges, then they can deny the claim. If they do, you can request documentation as to why they’ve denied the claim. Some banks have a built-in appeal process.

Usually, your bank acknowledges the fraud and you don’t have this issue. However, sometimes, the bank doesn’t believe that fraud took place. After all, there are instances where a person reporting fraud is actually being fraudulent. So the banks do have the legal right to make that determination providing that they’ve done a legitimate investigation and can provide you with supporting documentation for their decision.

CreditCards.com notes that it is more common for banks to reject fraud claims for business checking / debit accounts than for personal accounts. That’s something to make note of if you’re a small business owner.

What To Do If Your Bank Refuses to Refund Fraud Charges

First, find out what fraud protection you already have on the account. (And, for the future, you should sign up for what’s available.) See if you have any recourse as a result of that.

Second, try to work with your bank. Ask a manager if there’s anything you can do to prove the fraud to them.

If they won’t work with you, then unfortunately your only recourse might be to sue the bank. Many attorneys refuse to take these cases because they are often hard to win. Depending on the amount stolen from you, it may not be worth it to add attorney’s fees to your loss. This is something to talk to a lawyer about as a last resort.

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