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We have heard that Visa is changing its Zero Liability policy to reflect a different standard of care for zero liability protection for unauthorized transactions. Previously, a cardholder had zero liability for unauthorized transactions unless they were “grossly negligent.” Under the new policy, the cardholder will have zero liability for unauthorized transactions unless they were “negligent.” Does this change trigger a change in terms notice under Regulation E?

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Yes, we believe that this change to Visa’s Zero Liability policy triggers a change in terms notice under Regulation E.

A Regulation E change in terms notice is required at least 21 days before the effective date of any change that will result in increased liability for the customer. In this case, Visa has changed its terms to limit its zero liability protections when cardholders have been merely negligent, rather than grossly negligent. Since gross negligence requires more culpable conduct, an ordinary negligence standard will apply to a broader scope of customer conduct. In other words, Visa has increased cardholders’ liability for unauthorized transactions. As a result, we recommend providing a change in terms in notice 21 days before Visa’s change becomes effective.

For resources related to our guidance, please see:

  • Regulation E, 12 CFR 1005.7(b)(1) (“A financial institution shall provide the following disclosures, as applicable: A summary of the consumer's liability, under § 1005.6 or under state or other applicable law or agreement, for unauthorized electronic fund transfers. . . .”)

  • Regulation E, 12 CFR 1005.8(a)(1)(ii) (“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 required to be disclosed under § 1005.7(b) of this part if the change would result in: . . . (ii) Increased liability for the consumer . . . .”)

  • Visa Zero Liability Website (“If the unauthorized transaction involves your debit card or account, Visa's Zero Liability Policy requires issuers to replace any funds taken from your account as the result of an unauthorized debit transaction within 5 business days of notification. . .In the event you experience unauthorized transactions: Replacement funds are provided on a provisional basis and may be withheld, delayed, limited, or rescinded by your issuer based on the following: Gross negligence or fraud . . . .”)

  • F.D.I.C. v. Giannoulias, 918 F. Supp. 2d 768, 772 (N.D. Ill. 2013) “[G]ross negligence is commonly understood to encompass ‘very great negligence, * * * But it is something less than the willful, wanton and reckless conduct’ [the appellee] claims it to be.’ . . . We conclude that ‘very great negligence’ is the correct standard.”)