On a brisk January day, Mary A. Richman opened her mailbox and was confronted with the sobering sight of thick envelopes from Visa, American Express and MasterCard each containing a month’s worth of extravagant Christmas purchases. Although she expected the bills to be large, she didn’t expect them to be this large. When she carefully reviewed the charges, the weather wasn’t the only thing giving Richman the chills. She quickly noticed entries for businesses with which she was unfamiliar, including a $1,200 Visa charge on December 25th for a bar in Chihuahua, Mexico called Tequila Mockingbird. Richman lost her Visa card on December 21st, but never reported it. Is Richman liable for the unauthorized charges?
The Fair Credit Billing Act and the Electronic Fund Transfer Act limit a customer’s liability for unauthorized charges. With credit cards, liability depends on whether the unauthorized charges were made either in person or over the phone or internet. If a thief uses a customer’s credit card number over the phone or internet, the customer will have no liability. Similarly, if the credit card is reported stolen before the thief makes the purchase, the customer will have no liability. As Richman failed to notify the bank that her credit card was stolen before the card was used by the thief, her maximum liability will be $50.
If an ATM or debit card is at issue, the rules are slightly different. If the customer reports the card as stolen or lost before any unauthorized charges, then there is no liability. If the customer reports the card as stolen or lost within 2 business days after they learn of the loss or theft, liability is capped at $50. If the customer fails to report the card as stolen or lost within two business days after they learn of the loss or theft, but does notify the bank of the unauthorized withdrawals within 60 days after their statement was sent to them, liability is capped at $500. If the customer fails to notify the bank of the unauthorized charges within 60 days after their statement was sent to them, the customer will be liable for all money taken from their ATM/debit card account and possibly more (e.g. accounts linked to the debit account).
Tilting the Scales in Your Favor
Copy the front and back of your credit/debit cards so that you have access to the account numbers and toll-free reporting numbers. Always (1) report the loss or theft immediately by telephone followed by a certified letter and (2) check your credit card/bank statements carefully and in a timely manner. Timelines for giving notice may be extended if there are extenuating circumstances such as vacation or illness. In addition to contacting the card issuer, contacting TransUnion, Equifax or Experian (you only need to contact one) will put a fraud alert on your cards and prevent a thief from opening additional lines of credit.