📋 Overview

Your payment app or P2P platform has received a demand letter or claim from a customer seeking reimbursement for funds lost to scammers or allegedly unauthorized transfers. These claims are increasingly common as scam tactics evolve. This guide helps platforms defend against such claims while ensuring regulatory compliance.

🛡 User Authorization

Evidence that the user initiated and authorized the transfer is your primary defense against fraud loss claims.

📄 Fraud Warnings

Documentation of scam warnings displayed and acknowledged by users before completing transactions strengthens your position.

⚖ Regulation E Compliance

Proper error resolution procedures and timely investigation demonstrate good faith and compliance.

Common Claim Types

Claim Type Allegation Defense Strength
Account Takeover Hacker accessed account and sent funds Medium - depends on security
Scam-Induced Transfer User sent money to scammer Strong - user authorized
Impersonation Scam Scammer posed as friend/family/business Strong with warnings shown
Romance Scam User sent money to fake romantic interest Strong - user authorized
Unauthorized Access Device stolen, PIN compromised Medium - check reporting

⚠ Authorized vs. Unauthorized Distinction

The critical legal distinction is between truly unauthorized transactions (platform may be liable under Reg E) and authorized-but-induced transactions where users were scammed into sending money (generally user bears loss). Your investigation should focus on establishing which category applies.

🛡 Defense Strategies

Build your defense around these key legal arguments and factual foundations.

User Authorization Evidence

Transaction logs showing the user authenticated with credentials only they should have (password, PIN, biometrics, device authentication), initiated the transfer, entered recipient details, and confirmed the transaction. Multi-factor authentication adds strength.

Key evidence: Login credentials used, device recognized, IP address consistent, no failed login attempts suggesting compromise.

Fraud Warning Documentation

Screenshots and logs showing fraud warnings displayed during the transaction flow. Especially important: scam-specific warnings (e.g., "If someone you haven't met asks for money, this may be a scam") and user acknowledgments.

Best practice: Timestamped records of warnings displayed and user clicks confirming they want to proceed.

Terms of Service Provisions

User agreement provisions establishing user responsibility for account security, prompt reporting of unauthorized access, acknowledgment of P2P transfer finality, and limitations on platform liability for user-authorized transactions.

Key provisions: Account security responsibility, final transfer acknowledgment, authorized transaction exclusions.

Regulation E Compliance

Documentation of proper error resolution procedures: timely investigation, provisional credit decisions (if applicable), written determination, and explanation of denial reasons. Proper compliance limits regulatory exposure even when denying claims.

Timeline: 10 business days to investigate (45 for new accounts), written notice of determination required.

User Negligence Defense

Evidence that the user failed to safeguard credentials, ignored obvious red flags, or delayed reporting. Under Reg E, user liability increases for delayed reporting of unauthorized access.

Evidence: Shared credentials, ignored warnings, reporting delay beyond 2 business days (limited liability) or 60 days (full liability).

💡 Emerging Regulatory Landscape

Regulators including CFPB are increasingly scrutinizing payment app fraud practices. While authorized-push-payment scams traditionally leave consumers bearing loss, platforms should document robust fraud prevention measures and consider voluntary reimbursement policies for certain scam types to reduce regulatory risk.

📄 Key Documentation

Preserve and organize these documents to support your defense.

Transaction Evidence

  • Authentication logs: Login method, credentials used, biometric data
  • Device information: Device ID, whether device was recognized/trusted
  • IP and location data: IP addresses, geolocation if available
  • Transaction flow: Complete record of steps user took to complete transfer
  • Warning screens: Screenshots of fraud warnings displayed
  • User confirmations: Records of user clicking through warnings/confirmations

Account and User Records

  • User agreement acceptance records with timestamps
  • Account security settings history
  • Prior fraud reports from the user
  • User's transaction history and patterns
  • Customer support communications
  • Error resolution investigation records

Regulation E Compliance Records

  • Date error/claim was reported
  • Investigation timeline and steps taken
  • Provisional credit decision (if applicable)
  • Written determination notice
  • Documents supporting determination

📝 Sample Response Letter

Platform Response to Payment App Fraud Claim
Re: Response to Demand Regarding Transaction Dispute - Account [ACCOUNT ID] Dear [CLAIMANT NAME/COUNSEL]: We have received your demand letter dated [DATE] regarding the transaction(s) on [DATE(S)] totaling $[AMOUNT]. After thorough investigation in accordance with Regulation E, we must respectfully deny reimbursement. Our findings are as follows: INVESTIGATION FINDINGS Our investigation confirms that the disputed transaction(s) were authorized by your client: 1. Authentication: The transaction was initiated using your client's registered device, authenticated with [PASSWORD/PIN/BIOMETRIC], from an IP address consistent with their prior account activity. 2. User-Initiated: Our records show your client manually entered the recipient's information, specified the transfer amount, and completed the transaction flow. 3. Fraud Warnings Acknowledged: Before completing the transfer, your client was shown and acknowledged our fraud warning screen, which specifically advised [WARNING TEXT]. 4. No Unauthorized Access: Our security logs show no failed login attempts, password changes, or other indicators of account compromise. LEGAL FRAMEWORK Under Regulation E (12 CFR 1005), an electronic fund transfer is "unauthorized" only if initiated by someone other than the consumer without authority and from which the consumer receives no benefit. Where, as here, the consumer initiates the transfer - even if induced by a third-party scam - the transfer is authorized and the platform has no liability. Your client's User Agreement, accepted on [DATE], confirms: - Section [X]: User is responsible for all transactions initiated through their account with valid credentials - Section [X]: P2P transfers are final and cannot be reversed once sent - Section [X]: User acknowledges reading and understanding fraud warnings CONCLUSION While we sympathize with your client's situation, our investigation confirms this was an authorized transaction to which Regulation E protections do not apply. We encourage your client to report the scam to local law enforcement and the FTC at reportfraud.ftc.gov. We reserve all rights and defenses. Investigation records are available upon request. Sincerely, [PLATFORM NAME] Fraud Investigations Team

🔗 Related: Customer Demand Letters

Understanding what customers are advised to include in their demand letters can help you prepare a stronger defense.

View Payment Processor Demand Letter Guide →

💰 Pricing

Professional legal assistance for responding to payment app fraud claims.

Legal Services

  • 📄 Demand letter: Flat fee $450
  • ⏳ Extended negotiation: $240/hr
  • 📊 Contingency: 33-40% for strong claims

Initial response letters include review of your transaction records, user agreements, and fraud prevention documentation, plus a customized response letter. Extended negotiation and regulatory defense billed hourly.

🚀 Next Steps

Day 1: Preserve

Pull and preserve all transaction logs, authentication records, and fraud warning documentation.

Day 1-10: Investigate

Complete Regulation E investigation within required timeframe, document findings thoroughly.

Day 10: Determine

Issue written determination with explanation of findings and denial rationale.

If Escalated: Defend

If claimant pursues legal action, prepare comprehensive defense with authorization evidence.

Protect Your Platform

Get professional help defending against payment app fraud claims.

Schedule Consultation - $450

Resources

  • CFPB: Regulation E guidance and enforcement priorities
  • FTC: Consumer fraud reporting and scam data
  • State regulators: Money transmission compliance requirements
  • Industry guidance: EWS, TCH, and network fraud prevention standards