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FTC Highlights Fraud Liability For Credit & Debit Cards

16 April 2012 by

FTC Highlights Fraud Liability For Credit & Debit Cards

For many consumers, the recent security breach reported on at Global Payments has been something of a wake up call. It is so easy for us all to get complacent about the safety of our financial information.

It is important to remember that there is never a 100 percent guarantee that your information is safe, even the most secure systems can be vulnerable to hackers.

The type of criminals who are capable of hacking into major security systems are not bumbling thieves. They are often highly intelligent and crafty. Even if financial institutions construct the most sophisticated of security systems, they are not infallible.

The more difficult is it breach, the more hackers see it as a challenge to be overcome. That is not to say that you should go through life afraid that your credit card is going to be stolen. In the case of the Global Payments incident, the hackers obtained credit card and debit card numbers allowing them to create clones of the cards. However, cardholders were contacted quickly and issued with replacements.

When large firms such as Global Payments come under attack, it prompts consumers to think more seriously about security. A recent report was published to help consumers review exactly how much protection they actually have in the event that their credit or debit card account number is obtained and used for fraudulent transactions.

One of the main points highlighted by financial expert Beverly Blair Harzog was the huge differences between the protection extended to credit card users and debit card users. The Federal Trade Commission (FTC) have issued details on how to prevent various types of fraud.

When it comes to credit card accounts, consumers can only face a maximum liability of $50. If the consumer reports that their credit card has been stolen before it is used fraudulently, then the consumer is not liable at all for any charges. In the majority of cases the $50 fee is waived any way as a gesture of goodwill. Visa even operate an official zero liability fraud protection policy.

In cases where fraudulent transactions come about because the credit card number has been stolen, rather than the physical card itself, the consumer has no liability whatsoever. This means that for the best possible fraud protection, consumers are best to make use of their credit cards.

In addition to the measures already in place to protect consumers, credit card issuers are rolling out smart cards which are already standard issue across Europe. These cards are embedded with chip and pin technology which makes it almost impossible for card to be cloned and even makes stealing and using a card difficult without the pin number. These new cards will do a lot to reduce the amount of expense and indeed hassle which comes hand in hand with a security breach.

Unlike credit cards, the rules which apply to debit cards can vary greatly depending on the circumstances of the fraudulent activity. If a consumers lose their debit card or if it is stolen, then they must report it within the first 48 hours if they wish to limit their liability to $50.

If the loss or theft remains unreported any longer than 2 days then consumers become liable for up to $500 of the charges. Unauthorized charges which appear on your statement in cases where the card was not lost or stolen – usually because the card was cloned – must be reported within 60 days. If a consumer fails to report fraudulent charges until after this 60 day period, then the losses are unlimited and the card issuer will hold the account holder responsible for all charges.

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