Debit and Credit: They Have The Same Protections, Really!
Every time there is a breach, I see the comment that your debit card is not protected and your credit card is.
Debit Cards and Credit Cards are both subject to the same Consumer Protection law - Regulation E. What might differ is whether the transaction used your signature or your PIN, but that difference is included in the Regulation. Think about it - why would our government take the time and brain power necessary to write new debit card legislation when credit card legislation already existed?
Don't believe me? Go read it - Reg E.
(a)(1) Access device means a card, code, or other means of access to a consumer's account, or any combination thereof, that may be used by the consumer to initiate electronic fund transfers.
It does not specify debit, credit, charge, cash, gift, ATM, or other type of card. It doesn't even limit the protection to 'cards'. It covers all electronic funds transfers. And this rule applies to any entity - bank, credit union or other - that may issue consumer financial accounts.
Consumers, in brief have the right to:
Liability of not greater than $50 if the Consumer notifies the Access Device Issuer (aka the bank) in not more than two business days from the day the Consumer learns of the loss; or
Liability of not greater than $500 if the Consumer notifies the Access Device Issuer in more than two business days, but not more than 60 business days from the day the Consumer learns of the loss; or
If the State governing the transaction has better liability coverage for the consumer, the State Law supersedes the Federal; and
Losses may be reported by phone, in writing, or in person; and
You will receive at least a Provisional Credit of your loss within 10 business days.
In other words, let's say you lost your card - debit or credit - on Monday, Jan 1, and $1,000 worth of fraud happened.
If you report the loss to your bank before close of business on Wednesday, Jan 3 (two business days), you will take a loss of no more than $50; or
You will take a loss of no more than $500 if you report the loss after Jan 3, but before Mar 26 (60 business days); or
You may take less of a loss in either case if you have additional protections through State Laws; and
The Financial Institution may require the initial report to be followed-up by a form or written statement, but your Rights start as of the day you reported the loss; and
You will be credited $950 (or $500) no later than Jan 17 (10 business days) or 10 business days from reporting date, if after Jan 3.
Now, the FI does have a few Rights here:
1) The bank must credit you in 10 business days, but they have 45 business days to research the dispute and determine if the transactions were authorized or not. If they can prove that the transactions were valid, they can retract the credit (note the word 'Provisional' above). They do have to notify you in writing if that happens.
[Valid means that you or someone you gave the card to signed the transaction and the signature matches the signature in the bank's files, or that there is evidence (usually photographic) of you or someone you gave the card to using the PIN. Everything else is considered Fraud.]
2) The bank can decide if they give you the Provisional Credit at the time you notify them, or before the close of business on the 10th day, or at any time in between. If they finish their research before 10 days and determine the transaction is valid, you will not get even a temporary credit.
3) You have no specific Rights for losses reported after 60 business days from the day the Consumer learns of the loss. Most FIs presume Consumers learned of the loss the day they received their monthly statement. So effectively, unless the State Law extends the time frame, all dispute rights end 60 business days from the date of the first statement after the fraudulent transaction(s).
Using the time frame in the example above:
1) The bank must finish researching the disputed transactions by Mar 4, or any Provisional Credit automatically becomes final.
2) The bank can credit you on Jan 3 or on Jan 17, or on any business day in between, if the bank determines that the transaction is fraud.
3) If you do not notify the bank before close of business on Apr 26, you will forfeit all rights, and the bank is not obligated to credit your loss.
No difference. These Rights apply to both Debit and Credit cards, and to both Banks and Credit Unions EQUALLY!
What does sometimes differ is the policies. Some financial institutions give you the full Provisional Credit immediately, some wait until the 10th day. And some get business and calendar days "confused"; presuming that Consumers won't know the difference.
That is it. Those are the only differences. Still don't believe me? Fine.
Go get the Consumer Disclosure notice provide by law from both your debit card issuer and your credit card issuer. Put them side-by-side. If they are not identical, send me a copy. I'll tell you which one should be reported to which Agency for violation of Reg E protection laws.
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