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Wisconsin Changes Law Regarding Liability of Cardholders Following Unauthorized Use

For the past forty years, Wisconsin banking regulations have limited the amount for which a holder of a "plastic card" or "access device" can be liable for to the card issuer in the event of an unauthorized use of the card, to a maximum liability of $50. This Wisconsin rule limiting an account holder’s liability following an unauthorized use was more protective to consumers than federal law was, specifically Regulation E under the Electronic Funds Transfer Act. Regulation E permits a consumer’s liability for unauthorized use of an access device to go as high as $500 depending upon the circumstances and how long the cardholder waited to inform the issuer after the loss of the card or the unauthorized use.

As a result of a new law recently signed by Governor Walker (2013 Wisconsin Act 136), Wisconsin regulations now mirror federal law and Regulation E on the liability of a consumer following the unauthorized use of an access device. The new rules are effective immediately.

It is important for banks which want to avail themselves of this higher liability limit to review their deposit account rules and other account agreements or disclosures to determine if these will have to be changed in order to hold the consumer liable for an amount greater than $50 following an unauthorized use. Many banks’ deposit rules expressly limit the maximum liability for a cardholder following unauthorized use to $50, reflecting the previous limitations that existed in Wisconsin.

The new law also added a provision that limits the amount a cardholder may be held liable for to the maximum amount stated in the contract, deposit rules or agreement covering the relationship between the two parties. Banks considering making this change to mirror Regulation E should review their contracts and deposit rules to see what, if any, changes need to be made to these agreements to hold cardholders liable for morethan $50 for unauthorized use of their access device, in appropriate situations as permitted by the new rule.

If you are considering changing your bank’s deposit rules and increasing the maximum liability as permitted by the new law, note that Regulation E requires a 21 day advance written notice of this change. "A financial institution shall mail or deliver a written notice to the consumer, at least 21 days before the effective date, of any change in a term or condition… if the change would result in … (ii) increased liability for the consumer." (12 CFR §1005.8(a)(1).)

The new Wisconsin rules governing liability for unauthorized use of a plastic card or other access device are found generally at DFI-Bkg §14.07(2)(a)(3-8).

In addition, the new law changes the requirement that a "written document" has to be provided to the customer at the time of any "transfer of funds" through a "customer bank communications terminal" (ATM), by only requiring a written document to be made available for transfers of funds ofmore than $15.00. Therefore, should you desire you could avoid giving a receipt at your ATM for a cash withdrawal or transfer from savings to checking of $10, for example. (See DFI-Bkg. §14.08(4).)

Copyright © 2020 Godfrey & Kahn S.C.National Law Review, Volume IV, Number 79


About this Author

The firm's Labor, Employment & Immigration Law Practice Group has a long history of successfully representing businesses in labor and employment disputes. In addition to its strong background in providing labor and employment counseling, the practice group has the depth and breadth of resources to appropriately staff labor and employment litigation matters ranging from straightforward unemployment compensation hearings and grievance-arbitration matters to the defense of complex discrimination claims and multiparty employment litigation.