With the rise fraud to both credit and debit cards, a new bill proposal can help reduce fraud liability on debit card transactions.
When looking at fraud standpoint, debit cards are inferior to credit cards. The majority of credit cards have a $50 liability cap for consumers. Debit cards on the other hand do not have any liability cap associated to them. Credit card transactions also enjoy the luxury of being voided or cancelled given the card was reported stolen prior to the transaction or if the card number was stolen leaving the physical card in the hands of the cardholder. Debit cardholders technically need to cut their losses if given a similar situation occurred. These situations are treated on a case by case basis by the banks card companies.
It is because of these reasons a new bill, called the Consumer Debit Card Protection Act of 2014 (CDCPA) by U.S. Sens. Mark Warner (D-VA) and Mark Kirk (R-IL) was purposed. The bill proposes that debit card protection should be identical to that of a credit card’s.
“Debit card use has just exploded in recent years, especially among young people, and consumer protections must keep pace. Debit cards are used in much the same way as credit cards, so it makes no sense for credit card fraud liability to be capped at $50 while debit cardholders can find themselves on the hook for $500 or more,” said Sen. Warner, in a press statement.
When looking at the big 4 card companies, MasterCard, Visa, America-Express, and Discover, they have a zero liability policy on fraudulent charges and do not hold cardholders responsible for fraudulent charges on credit cards. Debit cards from these companies on the other hand, show a different story.
The liability on a debit card can change given when the cardholder reports the card lost, stolen or compromised.
Another issue associated with debit card fraud results from the direct link to the cardholder’s bank account. As a fraud case is being examined, the bank will freeze any available funds until the matter is resolved.
The proposed bill will require new protection rules to be instilled, and the CDCPA aims to change the cap cardholder liability for fraudulent orders. In addition it proposes to shorten the required time to re-credit a cardholder’s account from 10 business days to 7 business days. No details on the specifics on how this will be achieved have been made public just yet.
“In light of the millions of consumers who have had their financial information stolen during one of the recent data breaches, Sen. Warner and I will continue to take data security and the importance of consumer protections very seriously,” said Sen. Kirk.
Given the Target data breach which resulted in additional retailers also being breached, the newly proposed bill could help with reducing the fears Americans can have when using their debit cards, both online and off.
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