Consumer Debit Card Protection Act

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Consumer Debit Card Protection 
Act''.

SEC. 2. CONGRESSIONAL FINDINGS.

    The Congress finds the following:
            (1) There has been a recent trend toward issuing debit 
        cards which can be used like credit cards, largely as 
        replacements for debit cards which could be used only with a 
        personal identification number at automated teller machines and 
        a limited number of retail establishments.
            (2) According to industry analysts, as many as 1,300,000 
        new debit cards which can be used like credit cards are issued 
        each month.
            (3) If current trends continue, debit cards that can be 
        used like credit cards will soon rival the popularity of credit 
        cards and some banking experts predict that more than \2/3\ of 
        the households in the United States will have such a card by 
        the year 2000.
            (4) Many times, debit cards that can be used like credit 
        cards have been issued without providing adequate disclosure 
        that--
                    (A) the card may be used to initiate an electronic 
                fund transfer without the use of a personal 
                identification number or similar code or means of 
                access; and
                    (B) even though the card may carry a logo 
                associated with credit cards, the card is not a credit 
                card and the consumer may bear a significantly larger 
                liability for an unauthorized transaction involving 
                such debit card than would be the case for a similar 
                unauthorized transaction involving a credit card.
            (5) Thus, millions of Americans are--
                    (A) receiving cards in a form they didn't request; 
                and
                    (B) are carrying such cards around with them--
                            (i) without realizing that the cards have 
                        an expanded capability without the protections 
                        against unauthorized transfers which are 
                        typical of cards issued to make cash 
                        withdrawals from automated teller machines; and
                            (ii) without fully appreciating the risks 
                        associated with such cards.
            (6) Economic stimulation would be enhanced and competition 
        among the various financial institutions and other companies 
        which issue debit cards would be strengthened by the informed 
        use of debit cards by consumers.

SEC. 3. DEFINITIONS.

    Section 903 of the Electronic Fund Transfer Act (15 U.S.C. 1693a) 
is amended--
            (1) by striking ``and'' at the end of paragraph (10);
            (2) by striking the period at the end of paragraph (11) and 
        inserting a semicolon; and
            (3) by adding at the end the following new paragraphs:
            ``(12) ATM card.--The term `ATM card' means any card issued 
        by a financial institution for use in initiating electronic 
        fund transfers at automated teller machines and other 
        electronic terminals which requires a code or other unique form 
        of identification (other than a signature) in order to access 
        the account of the consumer; and
            ``(13) Check card.--The term `check card' means any card 
        issued by a financial institution for use in initiating 
        electronic fund transfers from the account of a consumer which 
        does not require the protection of a code or other means of 
        access that uniquely identifies the consumer (and for purposes 
        of this paragraph, a signature shall not be treated as a means 
        of access which uniquely identifies the consumer).''.

SEC. 4. CHECK CARD REQUIREMENT.

    Section 911 of the Electronic Fund Transfer Act (15 U.S.C. 1693i) 
is amended by adding at the end the following new subsection:
    ``(e) Check Card Requirement.--Any check card issued by any 
financial institution to any consumer shall bear the legend `Check 
Card' in a prominent typeface and in a conspicuous place on the face of 
the check card.''.

SEC. 5. DUAL-USE DEBIT CARD.

    (a) Consumer Liability.--
            (1) In general.--Section 909 of the Electronic Fund 
        Transfer Act (15 U.S.C. 1693g) is amended--
                    (A) by redesignating subsections (b) through (e) as 
                subsections (d) through (g), respectively;
                    (B) in subsection (a)--
                            (i) by redesignating paragraphs (1) and (2) 
                        as subparagraphs (A) and (B), respectively, and 
                        indenting appropriately;
                            (ii) by inserting ``Cards Necessitating 
                        Unique Identifier.--
            ``(1) In general.--'' after ``(a)'';
                            (iii) by striking ``other means of access 
                        can be identified as the person authorized to 
                        use it, such as by signature, photograph,'' and 
                        inserting ``other means of access can be 
                        identified as the person authorized to use it 
                        by a unique identifier, such as a photograph, 
                        retina scan,''; and
                            (iv) by striking ``Notwithstanding the 
                        foregoing,'' and inserting the following:
            ``(2) Notification.--Notwithstanding paragraph (1),''; and
                    (C) by inserting before subsection (d), as so 
                designated by this section, the following new 
                subsections:
    ``(b) Cards Not Necessitating Unique Identifier.--A consumer shall 
be liable for an unauthorized electronic fund transfer only if--
            ``(1) the liability is not in excess of $50;
            ``(2) the unauthorized electronic fund transfer is 
        initiated by the use of a card that has been properly issued to 
        a consumer other than the person making the unauthorized 
        transfer as a means of access to the account of that consumer 
        for the purpose of initiating an electronic fund transfer;
            ``(3) the unauthorized electronic fund transfer occurs 
        before the card issuer has been notified that an unauthorized 
        use of the card has occurred or may occur as the result of 
        loss, theft, or otherwise; and
            ``(4) such unauthorized electronic fund transfer did not 
        require the use of a code or other unique identifier (other 
        than a signature), such as a photograph, fingerprint, or retina 
        scan.
    ``(c) Notice of Liability and Responsibility To Report Loss of 
Card, Code, or Other Means of Access.--No consumer shall be liable 
under this title for any unauthorized electronic fund transfer unless 
the consumer has received in a timely manner the notice required under 
section 905(a)(1), and any subsequent notice required under section 
905(b) with regard to any change in the information which is the 
subject of the notice required under section 905(a)(1).''.
            (2) Conforming amendment.--Section 905(a)(1) of the 
        Electronic Fund Transfer Act (15 U.S.C. 1693c(a)(1)) is amended 
        to read as follows:
            ``(1) the liability of the consumer for any unauthorized 
        electronic fund transfer and the requirement for promptly 
        reporting any loss, theft, or unauthorized use of a card, code, 
        or other means of access in order to limit the liability of the 
        consumer for any such unauthorized transfer;''.
    (b) Validation Requirement for Dual-Use Debit Cards.--
            (1) In general.--Section 911 of the Electronic Fund 
        Transfer Act (15 U.S.C. 1693i) is amended--
                    (A) by redesignating subsection (c) as subsection 
                (d); and
                    (B) by inserting after subsection (b) the following 
                new subsection:
    ``(c) Validation Requirement.--No person may issue a card described 
in subsection (a), the use of which to initiate an electronic fund 
transfer does not require the use of a code or other unique identifier 
other than a signature (such as a fingerprint or retina scan), unless--
            ``(1) the requirements of paragraphs (1) through (4) of 
        subsection (b) are met; and
            ``(2) the issuer has provided to the consumer a clear and 
        conspicuous disclosure that use of the card may not require the 
        use of such code or other unique identifier.''.
            (2) Technical and conforming amendment.--Section 911(d) of 
        the Electronic Fund Transfer Act (15 U.S.C. 1993i(d)) (as 
        redesignated by subsection (a)(1) of this section) is amended 
        by striking ``For the purpose of subsection (b)'' and inserting 
        ``For purposes of subsections (b) and (c)''.

SEC. 6. MANAGEMENT PRACTICES RELATING TO THE ISSUANCE OF CHECK CARDS.

    Section 911 of the Electronic Fund Transfer Act (15 U.S.C. 1693i) 
is amended by inserting after subsection (e) (as added by section 4 of 
this Act) the following new subsection:
    ``(f) Preference of Consumer.--
            ``(1) In general.--If--
                    ``(A) in response to a request or application by a 
                consumer for an ATM card, a financial institution 
                issues a check card; and
                    ``(B) the consumer refuses to accept a check card,
        the issuer shall promptly issue such consumer an ATM card.
            ``(2) Definitions.--For purposes of paragraph (1), the 
        following definitions shall apply:

SEC. 7. TOLL-FREE TELEPHONE NUMBER FOR REPORTING LOST OR STOLEN CHECK 
              CARDS OR UNAUTHORIZED WITHDRAWALS.

    (a) In General.--Section 906 of the Electronic Fund Transfer Act 
(15 U.S.C. 1693d) is amended by adding at the end the following new 
subsection:
    ``(g) 24-Hour, Toll-Free, Notification System.--A financial 
institution which issues a check card to any consumer shall establish 
and maintain a 24-hour notification system, including a toll-free 
telephone number at which personnel are continuously accessible, which 
permits the consumer to immediately report the loss or theft of the 
check card or any unauthorized use or suspected unauthorized use of the 
card.''.
    (b) Technical and Conforming Amendment.--Section 906(c)(4) of the 
Electronic Fund Transfer Act (15 U.S.C. 1693d(c)(4)) is amended by 
inserting after the period at the end the following new sentence: ``In 
the case of a periodic statement for an account from which withdrawals 
may be initiated by a check card (as defined in subsection (g)(2)), the 
notice required under this paragraph shall appear in a conspicuous and 
prominent location on the periodic statement under a heading indicating 
that the telephone number is a 24-hour, toll-free telephone number and 
the notice shall inform the consumer of the importance of promptly 
reporting any loss or theft of such card or any unauthorized use or 
suspected unauthorized use of the card.''.

SEC. 8. PROHIBITION ON FEES FOR INSUFFICIENT FUNDS IN CASE OF CERTAIN 
              UNAUTHORIZED TRANSFERS.

    Section 909 of the Electronic Fund Transfer Act (15 U.S.C. 1693g) 
is amended by adding at the end the following new subsection:
    ``(h) Prohibition on Certain Fees.--
            ``(1) In general.--A consumer shall not be liable for any 
        fee imposed by a financial institution for insufficient funds 
        in the account of the consumer if the lack of sufficient funds 
        in such account is due to an unauthorized electronic fund 
        transfer (from such account) initiated by the use of a card 
        without the protection of a code or other means of access which 
        uniquely identifies the consumer.
            ``(2) Prompt recredit of prior fees.--Upon receiving notice 
        from a consumer of an alleged unauthorized transaction, a 
        financial institution shall promptly credit the account of a 
        consumer for any fee described in paragraph (1) which was 
        imposed before such notice was received.''.

SEC. 9. PROVISIONAL RECREDIT OF UNAUTHORIZED TRANSFERS AFTER 5 BUSINESS 
              DAYS.

    Section 908(c) of the Electronic Fund Transfer Act (15 U.S.C. 
1693f(c)) is amended by striking ``ten business days'' and inserting 
``5 business days''.

SEC. 10. EFFECTIVE DATE.

    The amendments made by this Act shall apply after the end of the 1-
year period beginning on the date of the enactment of this Act.

Summary: Consumer Debit Card Protection Act - Amends the Electronic Fund Transfer Act to mandate that any check card issued by a financial institution to a consumer shall bear the legend Check Card in prominent typeface and in a conspicuous place on the face of such card. Prescribes guidelines governing consumer liability for unauthorized electronic fund transfers where the relevant cards do not necessitate a unique identifier. Conditions such liability upon timely notification to the consumer of liability for such transfers and of the advisability of prompt reporting of any loss, theft, or unauthorized use of a card code or other means of access. Permits distribution to consumers of electronic fund transfer cards without unique identifiers only if certain validation requirements are met. Mandates that any financial institution which issues consumer check cards maintain a 24-hour notification system which includes a toll-free telephone number at which personnel are continuously accessible to accept reports of theft, loss, or unauthorized use. Precludes consumer liability for fees for insufficient funds due to an unauthorized electronic fund transfer executed by the use of a card lacking a protective device to serve as a unique identifier of the rightful consumer. Requires prompt re-crediting of the consumer's account for any fee imposed before receipt of the consumer's notice of an unauthorized electronic fund transfer.