From a fraud protection standpoint, debit cards are considered inferior to credit cards. The security-provided credit cards can sway debt-averse consumers to use them, even when they’d rather swipe their debit cards. A newly proposed bill, called the Consumer Debit Card Protection Act of 2014 (CDCPA) by U.S. Sens. Mark Warner (D-VA) and Mark Kirk (R-IL), will make it so that debit card protections are similar to credit cards.
“Debit card use has just exploded in recent years, especially among young people, and consumer protections must keep pace,” said Sen. Warner, in a press statement. “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.”
With credit cards, consumers are legally liable for up to $50 in unauthorized purchases. A credit card user is not liable for any amount if the card was reported lost before the unauthorized purchases occurred, or if the card number was stolen but not the card itself.
However, the major card payment companies — Visa, MasterCard, American Express and Discover — have zero-liability policies that do not hold cardmembers responsible for any fraudulent charges on credit cards.
Compared to credit cards, debit cards are much less consumer-friendly when it comes to fraud liability.
Debit card fraud liability will change depending on when the consumer reports the loss of the debit card:
|Report period||You could lose:|
|Before unauthorized purchases are made||$0|
|Within 2 business days of theft||$50|
|More than 2 business days of theft to 60 calendar days after your statement is sent||$500|
|More than 60 calendar days after your statement was sent||Entire amount of unauthorized purchases|
In addition to the greater liability, consumers face another inconvenience when their debit cards are subject to fraud. During the period of time that a bank takes to review the case and credit a defrauded customer, the customer doesn’t have access to the money to pay bills. With credit cards, there is no such upfront loss of liquidity.
The proposed bill will require new protections, and the CDCPA aims to change the cap on consumer liability for fraudulent purchases. Additionally, it will shorten the time requirement to re-credit consumer accounts from 10 business days to 7 business days.
The specific protections and proposed liability changes as part of the bill were not disclosed.
“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.
Target, Neiman Marcus and Sally Beauty are among the big U.S. retailers that have suffered data breaches that compromised consumer payment-card information.
The protections provided by the CDCPA could help to lessen the fear of American consumers to use plastic for shopping.