(Washington, DC) - U.S. Rep. Gary Ackerman (D-Queens/L.I.), senior member of the House Financial Services Committee, today announced legislation that provides the same protections to debit card transactions as those afforded to credit card transactions.

Although debit card usage exceeded credit card use in the United States by almost 2 billion transactions in 2006 (according to ATM&Debit News), debit card users do not have the same legal safeguards to dispute and correct fraudulent or incorrect charges. Under current law, credit card consumers have the right to dispute charges and receive a provisional credit for the amount in question while the credit card company investigates the matter.

Many debit card users are unaware that these protections afforded to credit card purchases are not extended to debit card transactions. Even if a bank agrees to investigate a fraudulent or incorrect charge on a debit card, the bank will often freeze the bank account connected to the debit card for days until the problem is sorted out.

Under Ackerman’s legislation, the Electronic Funds Transfer Consumer Equal Protection Act, once a debit card user alerts their bank to a fraudulent or incorrect charge, the bank would be required to provisionally re-credit the consumer’s account for the amount alleged to be wrong within one business day, while simultaneously undertaking an investigation – which would last no more than 60 days – to determine whether or not the charge in question is fraudulent or incorrect. At the conclusion of the investigation, the burden would be placed on the bank to determine whether or not the charge in question was authorized by the customer. If the bank finds the charge to be fraudulent or incorrect, Ackerman’s legislation requires that the bank make the provisional credit permanent. These are the same protections currently afforded to credit card transactions.

Ackerman’s legislation also mandates that if a bank requires the debit card user to fill out a form to dispute a charge, the bank must send the customer the required form within 15 business days. The customer would then have 30 days from the postmark, e-mail or fax date to send the completed, signed form back. If the consumer does not receive the form within 15 days, the bank would be mandated to move forward with an investigation and provisionally re-credit the charge in question.

“It is time for banks and financial institutions to loosen the noose they have around the millions of Americans who use debit cards,” said Ackerman. “Credit and debit cards look and act the same, but, unbeknown to many consumers, they are being entrapped by their check card. There is no reason why credit cards and debit cards should not be entitled to the same kinds of vital protections.” 

Debit cards, also known as check or bank cards, have become increasingly popular among Americans due to their ease and convenience, particularly as an alternative to carrying cash or paying by check. When used, a debit card automatically deducts funds from the bank account to which it is connected.

The legislation, which was introduced last night, follows a measure Ackerman introduced in February that prohibits credit card companies from charging customers a fee to pay their bills online or by phone.

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