Category: Law

Protect Your Plastic

December 13, 2013

As new technologies change the way we pay for things, criminals are managing to keep pace as they devise ways to separate you from your money. Doing what you can to protect yourself is one part understanding the technology and at least equal portions of vigilance and common sense. Still, we can all benefit from some reminders.

“Phishing” refers to out-of-the-blue e-mails, text messages, or phone calls from superficially legitimate sources, often couched in urgent tones, asking for your credit card or debit card information. The thieves then set up counterfeit cards and run up charges on your accounts. Don’t take the bait. You might think that these appeals are too brazen to work, but obviously they work often enough to be a tool in the con artists’ toolbox. Follow this rule: Never give out your payment card information in response to an unsolicited communication, no matter its apparent source.

Be careful and attentive when using payment cards at ATMs, shops, and gas stations, and not just because of suspicious-looking characters. The bad guys sometimes steal account information by attaching their own devices over legitimate card readers. Beware of plastic sleeves inside the slot where you swipe a card. Another sign of potential trouble arises when the person you are paying swipes your card on two different devices. One of those swipes may be taking your account information for later fraudulent use.

Don’t stick your account statements in the pile of bills to be paid without scanning them closely for discrepancies or suspicious items, such as unauthorized withdrawals. Today you can usually do this online, or even on a mobile phone. Even small bogus transactions are worth reporting to your bank, as thieves sometimes hope to escape the consumer’s notice with many small transactions.

Recently, thieves allegedly racked up over $25 million in charges, all in small individual amounts, from hundreds of thousands of cardholders. Let your financial institution know right away if a statement or bill is unusually late. That can signify theft of your information that may be used to commit fraud.

Periodically review your credit reports from the three major credit bureaus. If an unfamiliar card or transaction shows up, you may already be a victim of identity theft. You get one free report from each of the credit bureaus in a year, so, to maximize your monitoring, get one free report from one of the bureaus every four months.

If, despite your best efforts, you fall prey to the thieves, all is not lost, but neither should you be complacent. As a rule, the federal Truth in Lending Act puts a $50 cap on the consumer’s liability for unauthorized charges on a credit card. However, for lost or stolen debit cards and ATM cards, or unauthorized transactions in your checking or savings accounts, the $50 cap is imposed by law (the federal Electronic Fund Transfer Act) only if you notify the institution within two business days. Wait longer than that, and the ceiling rises to $500, or even more in some cases. The policies of individual institutions may further limit losses beyond those imposed by statute, so it is a good idea to ask your card issuer about any such limits it uses.

Employees Are Responsible For Beneficiary Designations

September 25, 2013

The Federal Employees’ Group Life Insurance Act of 1954 (FEGLIA) establishes an $824 billion program providing low-cost life insurance for hundreds of thousands of federal employees. FEGLIA allows an employee to name a beneficiary of life insurance proceeds, and specifies an “order of precedence” providing that the employee’s death benefits accrue first to that beneficiary ahead of other potential recipients.

In 1996, when he was one of those federal employees who could participate in the FEGLIA program, Warren named Judy, his wife at the time, as the named beneficiary on his life insurance policy. In 1998, the couple divorced. In 2002, Warren married Jacqueline. Warren died suddenly in 2008, without ever having changed the named beneficiary from Judy to Jacqueline. As a result, the ex-wife Judy filed a claim for the $125,000 in life insurance proceeds, and was paid them.

Jacqueline sued Judy in a state court to recover the life insurance proceeds, and she had more to support her claim than just a supposition that Warren would have wanted it that way. In short, she claimed with some justification to have state law on her side.

A state statute revokes a beneficiary designation in any contract that provides a death benefit to a former spouse where there has been a change in the decedent’s marital status. In addition, in the event that this provision is pre-empted by federal law, a separate provision of the state law provides a cause of action making the former spouse liable for the principal amount of the proceeds to the party who would have received them if the first provision was not preempted.

The U.S. Supreme Court sided with Judy, the former wife, notwithstanding that there was a certain logic to the position that Warren most likely would have preferred that the proceeds go to his wife at the time of his death. The unassailable fact was that, though he had ten years after his divorce from Judy and six years after his remarriage to Jacqueline to do so, Warren never changed the named beneficiary on his policy.

Most importantly from a legal standpoint, his selection of a named beneficiary could not be overridden by operation of any state law. Such a result was foreclosed by the doctrine that federal law preempts state law where the two conflict. Thus, even the state statute that sought to foresee the possibility of federal preemption and accomplish an end-run around it could not do so.

Simply put, if a beneficiary, Judy in this case, is properly named for a FEGLIA policy, the insurance proceeds owed to that person cannot be allocated to another person, in this case Jacqueline, by operation of state law. Apart from the legal precedent it set, the case is an object lesson in the importance of keeping one’s estate plans, including beneficiary designations, current. Had Warren taken the simple step of filling out the form to change beneficiaries on his policy sometime before he died, assuming that was his wish, the protracted litigation that ensued after his death could have been avoided.