How will new chip-and-PIN technology for credit/debit cards affect who is liable for a fraudulent transaction?

June 24, 2015 20:22 by Consumer Ed

Dear Consumer Ed:

I heard that the magnetic strip on debit and credit cards is going to be replaced with chip-and-PIN technology. How will that affect who is liable (consumer or merchant) in the case that a fraudulent transaction occurs?

Consumer Ed says: 

The financial responsibility for fraudulent credit card transactions currently lies with either the merchant or the issuer (the bank or the credit card company), depending upon the card’s terms and conditions.  However, this will change after October 15, 2015, which is the deadline for card issuers and merchants alike (with the exception of gasoline retailers, which have until October, 2017) to switch from magnetic strips to chip-and-PIN technology, also referred to as EMV (Europay, MasterCard and Visa). 

EMV is a joint effort conceived by Europay, MasterCard and Visa to ensure better security of card payments for those companies’ users.  Adoption of EMV cards and EMV-compliant terminals will purportedly result in a reduction of fraud stemming from counterfeit, lost and stolen cards. EMV cards, which have an embedded microprocessor chip that stores data and information, will rely on the embedded chips and compatible terminals to complete transactions, rather than swipe-and-sign methods currently used. 

Further, unlike magnetic-stripe cards, every time an EMV card is used, the card’s chip will create a unique transaction code that cannot be used again.  After the October 15, 2015 deadline, liability for fraudulent credit or debit card transactions that still use magnetic stripes will be shifted to the party that has not switched to EMV technology; note that this shift in liability won’t fall on the consumer, but is between the card-issuer and the merchant. 

The change in technology is unlikely to have much of an effect on consumers’ liability for fraudulent debit and credit card transactions.  This is because under the Federal Fair Credit Billing Act, your liability for unauthorized credit card charges is capped at $50. However, once the suspected sham transaction is reported, consumers aren’t held responsible for any further amounts fraudulently charged to their cards.  It’s a bit different for debit cards:  if an ATM or debit card is reported missing before someone uses it, the holder isn’t responsible for any unauthorized transactions; but, if someone uses the ATM or debit card before it’s reported lost or stolen, the amount the holder is liable for depends on how quickly the loss is reported. 

Debit card losses fall along the following scale:  Consumers aren’t responsible for any amounts if the missing card is reported before any unauthorized charges are made; for missing cards reported within two business days after the holder learns of the loss or theft, the amount is capped at $50; for unauthorized charges reported 2 business days after the holder learns of the loss/theft, but less than 60 calendar days after the bank sends its statement to the cardholder, amounts are capped at $500; and for unauthorized charges reported after 60 calendar days, the cardholder is responsible for all charges.

To limit any liability you may have for purchases you didn’t make, or for transactions that may get charged to a card that has been lost or stolen, make sure you report the suspect purchases (or the loss or theft of the card) as soon as possible to the card’s issuer.  Follow up with a letter to your issuer to further document the report, and make sure you update your records to keep track of the issuer’s actions taken to nullify the transaction.  You can learn more about how to protect yourself by visiting the Office of Consumer Protection’s website at http://consumer.georgia.gov/consumer-topics/identity-theft-what-to-do-if-it-happens-to-you.

If you enjoyed this post, make sure you subscribe to my RSS feed!

Rate This


Will my debit card be rejected if there are insufficient funds in my account?

April 30, 2015 20:20 by Consumer Ed

Dear Consumer Ed:

Are banks obliged to reject attempts to use a debit card when there are insufficient funds in the account?

Consumer Ed says: 

When you use your debit card to make a purchase or other electronic payment for an amount greater than the balance in your checking account (thus creating an overdraft), the bank can choose to make the payment, or not.  In 2010, the Federal Reserve issued new rules regarding fees banks charge for overdrafting debit card and ATM transactions.  Under the old rules, banks were permitted to automatically enroll their customers in their standard overdraft practices.  These overdraft practices typically involved charging customers a fee to provide the additional funds.  However, under the new rules, the bank must obtain the customer’s permission to apply its overdraft practices to the account before charging a fee, which the customer typically provides by agreeing to a notice sent by the bank. 

If you don’t opt in to overdraft procedures and you attempt to make a purchase or withdrawal which would overdraft your account, the transaction will typically be declined, but you won’t be charged an overdraft fee.  However, if you’ve opted in to overdraft protection, your account can be overdrafted, and the bank can then charge you the fees set under the terms in your opt-in agreement.  Be aware that these fees can mount up quickly, so make sure you know what you’re agreeing to.

When setting up new accounts, pay careful attention to the documents you sign.  If you prefer your card to be declined and your account not to be overdrafted, don’t sign the opt-in form that will enroll you in the bank’s overdraft protection plan.  If you’d like the overdraft protection, then sign the form.  If you’ve previously enrolled in the overdraft program but no longer wish to be, you can contact your bank and opt-out of their overdraft policy.

Again, these rules apply to debit card and everyday transactions; they don’t cover checks and automatic bill payments.  Banks can still automatically enroll their customers in standard overdraft procedures for payments made using those methods.

In sum, to avoid overdraft charges, remember:

  1. Do not sign an agreement with the bank authorizing overdraft charges.
  2. Keep track of the money in your account by keeping your check register up to date.
  3. Make sure to record your electronic transactions as well.
  4. Make sure to take into account automatic bill payments.
  5. Review your account statements each month.
  6. If you do overdraft your account, deposit money into the account to cover the overdraft and any fees in order to avoid any additional charges.
  7. You can link your account to a savings account. You may be charged a transfer fee when overdrafting your checking.
  8. You can link your account to a credit card you have with the bank.  You may be charged a cash advance fee when overdrafting your checking.

 
If you have a complaint about the fees charged by your bank, you can try to resolve the problem directly with your bank.  If you make no headway on your own, you may want to file a complaint with a federal or state agency that enforces consumer banking law.  If your complaint involves a Georgia state-chartered bank or credit union, you can file a complaint with the Georgia Department of Banking and Finance (http://dbf.georgia.gov); otherwise, you can contact the Consumer Financial Protection Bureau to file your complaint (http://www.consumerfinance.gov/complaint).

If you enjoyed this post, make sure you subscribe to my RSS feed!

Rate This


Can a car dealer or creditor tell my employer I am late on a lease payment?

April 16, 2015 14:12 by Consumer Ed

Dear Consumer Ed: 

I have been leasing a new car for the past seven months.  I was late on a payment for the first time, and someone called my office and told two of my managers that I owe them money. That is absolutely none of my managers’ business.  Not only was that bad business, but was it also illegal?

Consumer Ed says: 

While calling your employer and divulging your private financial information is certainly a distasteful tactic, it may not actually be illegal.  To answer that question, a little more information is needed.  First, it is important to find out who actually called your office.  If it was a third-party debt collector and not your actual creditor, you are likely protected by the Fair Debt Collections Practices Act (“FDCPA”), which prohibits certain kinds of contact, including calls to your employer or other third parties for any reason except to verify your employment and/or your location.  In that case, you should notify the debt collector in writing that you do not wish for the collector to continue contacting you or your employer without your express permission.  If the communications continue, go to www.consumer.ftc.gov and file a complaint with the Federal Trade Commission.

If, however, the phone call came from your actual creditor, and not a third-party debt collector, then you probably would not be protected under the FDCPA.  However, there may be other protections available. For example, if your actual creditor is a bank or other financial institution, there may be other federal protections that would prohibit it from disclosing this information, provided there’s no language in your sales contract permitting it to do so. You should take a look at your loan documents to determine what the agreement says about the creditor’s ability to disclose information, and whether there is any kind of grace period before your account gets sent to collections.  There could be statements allowing or restricting communication to third parties; most such agreements will also specify whether you’re entitled to written notice before your account goes into collections.  If the language of the document permits it, or if your employers are listed on the agreement as either credit references or as sources to provide confirmation about your current employee status, the creditor may have some leeway to call them to inquire about you.


On the other hand, if there was language in the sales agreement that set a specified grace period and the creditor ignored it, and/or if there was nothing in the agreement that implicitly permitted contact with your employer, then the actions could still be considered a violation of Georgia’s Fair Business Practices Act.  To file a complaint, you can contact the Georgia Department of Law’s Consumer Protection Unit at 404-651-8600, or visit our website at www.consumer.ga.gov.

You can also report his behavior to the Better Business Bureau.  Go to www.bbb.org to find your local Better Business Bureau chapter, and follow the prompts if you decide to file a complaint. This will inform other potential customers of these bad business practices and hopefully help end any abusive behavior.

If you enjoyed this post, make sure you subscribe to my RSS feed!

Rate This


Credit/Debt
nav_cap