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FDIC Consumer News - Fall 1997
|Know Your (Liability) Limits
The Electronic Fund Transfer Act and the Fair Credit Billing Act are among the federal laws protecting consumers from liability if they've been victimized by credit card or banking fraud. In many cases your liability is limited to the first $50 of loss, but that depends on the type of account and how quickly you report the problem. Here's a brief overview of what you should know about your potential liability.
Automated Teller Machine (ATM) Cards: If a thief withdraws money from a cash machine using your ATM card, your maximum liability is $50 if you report your card lost or stolen within two business days of discovering the loss (not within two days of the transaction). If you report the loss within 60 days, your maximum exposure is $500. Wait more than 60 days and you could be liable for all the money the thief obtained using your ATM card, plus other charges, such as fees for bounced checks.
Checks: State laws govern whether you'd be held responsible if a lost or stolen check were used in a forgery. In most cases you probably won't be held liable for losses. However, bank customers generally are responsible for paying "reasonable" attention to their accounts and for protecting them against misuse. "A bank may refuse to reimburse you for a forged check if it believes you were negligent," says FDIC attorney Mark Mellon. "Negligence may include failing to safeguard your checks, filling them out in a way that would be easy to alter, or not notifying the bank about a loss in a timely manner." Among the ways to protect yourself: Look at your bank statement within a month of receiving it and immediately notify the bank of any suspicious or unauthorized transactions.
Credit Cards: Under federal law, the most you'd owe for unauthorized charges to your credit card is $50 per card. You owe nothing if you report the problem before charges are made.
Debit Cards: These cards can be used to pay for purchases out of your checking account but without writing a check. There are two types of debit cards - an "on-line" card that requires a personal identification number (PIN), and an "off-line" card where no PIN is needed as an ID. Many consumers think of a debit card (and its liability) as being comparable to a credit card because both can be used at cash registers or to order products over the phone. Until recently, however, consumer liability for a lost or stolen debit card was comparable to an ATM card (see left), which may be far higher than that of a credit card ($50 maximum loss). Consumer groups and members of Congress complained about off-line cards in particular because, without requiring a PIN, these cards are more susceptible to fraud. VISA and MasterCard recently announced voluntary changes that currently put your maximum loss from a missing debit card at $50, the same as for credit cards. Contact your card issuer for more details. Legislation also is before Congress that would impose this same $50 limit by law, to ensure the continuation of this protection.
Stored-Value Cards: These cards are loaded with a set dollar value and can be used to pay for small-dollar purchases. A stored-value card essentially is electronic cash. Accordingly, your loss is equal to the amount of money on the card.FDIC Consumer News Fall 1997 Contents
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