US Senators Introduce New Legislation to Reduce Debit Card Liability Cap

Debit Card Liability Cap

Two US senators Mark Warner and Mark Kirk introduced a bill this week. The bill is called Consumer Debit Card Protection Act of 2014 and aims at minimizing the limit of accountability of shoppers with debit cards if they are convicted for deception. Senator Warner is a member of Democratic Party and from Virginia. Senator Kirk represents Republican Party from Illinois.

If the federal law is studied, a clear difference in personal liability limits between credit and debit cards could be found. The law mandates the limit of personal liability for fraudulent charges on credit cards to be $50. But under the same law, consumers found guilty of fraudulent activities involving their debit cards would be liable for $500 penalty. The new legislation would lower this cap to $50, same as credit cards.

Many believe the legislation was the need of the hour as debit card loss may result in unauthorized charges against the owner of the card while he is totally clean-handed. As per the Federal Electronic Fund Transfer Act, if the owner of the card reports the loss immediately and if the card has not been previously used, liability amount would be $0.

If he informs the bank about the loss within two working days from the date of loss, the liability amount would be $50. In case the cardholder fails to notify the bank within two business days and does so within 60 business days, the liability amount would be $500. Thus, there’s a sizable gap between the liability charges which should be reduced.

The credit card loss rate has reached to historical lows in the third quarter of 2012. But the same doesn’t apply to debit cards. Use of debit cards has increased in recent time and with that, the likelihood of the card being stolen. Senator Warner said, “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.”

As credit cards have better consumer protection, it is used extensively for international purchases. However, people find it more convenient to use their debit cards for purchasing from local stores. Use of credit cards also offers reward point facilities and improved credit standing. Thus, a legislation was needed to make people interested in using debit cards.

Senator Warner said, “Debit card use has just exploded in recent years, especially among young people, and consumer protections must keep pace…”

Hopefully, consumers will be relieved as the liability cap is reduced and use their debit cards more than before.