Originally created 08/14/97

Visa limits fraud liability on debit cards

NEW YORK (AP) - Visa USA, responding to consumer complaints, said today it would not make debit card holders responsible for fraudulent transactions as long as they promptly notify issuers when a card is lost or stolen.

In announcing the change, which will take effect in November, Visa went farther in protecting consumers for loss or theft than MasterCard International, which last month capped consumer liability for fraudulent use of debit cards at $50, the same as for credit cards.

Visa and its member banks, which have more than 80 percent of market share of debit cards in the United States, also agreed not to issue unsolicited debit cards through the mail that can be used without requiring consumers to call an activation number and verify their identity. That change will take place in the summer of 1998.

Visa said it would produce a brochure about debit cards with the National Consumers League, which had been sharply critical of Visa and MasterCard about their debit card policies.

"What we've tried to do is get out in front of all the issues that have been discussed, and make sure we are making this as consumer friendly as possible," said Visa USA President Carl Pascarella.

In a debit card transaction, the merchant deducts the price of the transaction immediately from a cardholder's account, as opposed to credit cards, in which transactions are billed to cardholders and paid for later.

Visa has 47 million debit cards in circulation in the United States, accounting for $63 billion worth of transactions in the 12 months ended March 31.

Most debit cards are mailed unsolicited to bank customers as a replacement for their ATM cards. Consumer groups have charged that issuers were sending out debit cards without fully explaining how they differ from credit cards, and telling consumers they were potentially liable for an unlimited amount if their card or card number was lost or stolen.

Legislation is pending in Congress that would cap consumer liability for lost debit cards at $50, the same as for credit cards.


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