I

107TH CONGRESS

1ST SESSION H. R. 1825

To amend the Electronic Fund Transfer Act to safeguard consumers in

connection with the utilization of certain debit cards.

IN THE HOUSE OF REPRESENTATIVES

MAY 14, 2001

Mr. BARRETT of Wisconsin introduced the following bill; which was referred

to the Committee on Financial Services

A BILL

To amend the Electronic Fund Transfer Act to safeguard

consumers in connection with the utilization of certain

debit cards.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Consumer Debit Card

5 Protection Act’’.

6 SEC. 2. CONGRESSIONAL FINDINGS.

7 The Congress finds the following:

8 (1) There has been a recent trend toward

9 issuing debit cards which can be used like credit

10 cards, largely as replacements for debit cards which
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1 could be used only with a personal identification

2 number at automated teller machines and a limited

3 number of retail establishments.

4 (2) Many times, debit cards that can be used

5 like credit cards have been issued without providing

6 adequate disclosure that—

7 (A) the card may be used to initiate an

8 electronic fund transfer without the use of a

9 personal identification number or similar code

10 or means of access; and

11 (B) even though the card may carry a logo

12 associated with credit cards, the card is not a

13 credit card and the consumer may bear a sig14 nificantly larger liability for an unauthorized

15 transaction involving such debit card than

16 would be the case for a similar unauthorized

17 transaction involving a credit card.

18 (3) Thus, millions of Americans are—

19 (A) receiving cards in a form they didn’t

20 request; and

21 (B) are carrying such cards around with

22 them—

23 (i) without realizing that the cards

24 have an expanded capability without the

25 protections against unauthorized transfers
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1 which are typical of cards issued to make

2 cash withdrawals from automated teller

3 machines; and

4 (ii) without fully appreciating the

5 risks associated with such cards.

6 (4) Economic stimulation would be enhanced

7 and competition among the various financial institu8 tions and other companies which issue debit cards

9 would be strengthened by the informed use of debit

10 cards by consumers.

11 SEC. 3. DEFINITIONS.

12 Section 903 of the Electronic Fund Transfer Act (15

13 U.S.C. 1693a) is amended—

14 (1) by striking ‘‘and’’ at the end of paragraph

15 (10);

16 (2) by striking the period at the end of para17 graph (11) and inserting a semicolon; and

18 (3) by adding at the end the following new

19 paragraphs:

20 ‘‘(12) ATM CARD.—The term ‘ATM card’

21 means any card issued by a financial institution for

22 use in initiating electronic fund transfers at auto23 mated teller machines and other electronic terminals

24 which requires a code or other unique form of identi-
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1 fication (other than a signature) in order to access

2 the account of the consumer; and

3 ‘‘(13) CHECK CARD.—The term ‘check card’

4 means any card issued by a financial institution for

5 use in initiating electronic fund transfers from the

6 account of a consumer which does not require the

7 protection of a code or other means of access that

8 uniquely identifies the consumer (and for purposes

9 of this paragraph, a signature shall not be treated

10 as a means of access which uniquely identifies the

11 consumer).’’.

12 SEC. 4. CHECK CARD REQUIREMENT.

13 Section 911 of the Electronic Fund Transfer Act (15

14 U.S.C. 1693i) is amended by adding at the end the fol15 lowing new subsection:

16 ‘‘(e) CHECK CARD REQUIREMENT.—Any check card

17 issued by any financial institution to any consumer shall

18 bear the legend ‘Check Card’ in a prominent typeface and

19 in a conspicuous place on the face of the check card.’’.

20 SEC. 5. DUAL-USE DEBIT CARD.

21 (a) CONSUMER LIABILITY.—

22 (1) IN GENERAL.—Section 909 of the Elec23 tronic Fund Transfer Act (15 U.S.C. 1693g) is

24 amended—
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1 (A) by redesignating subsections (b)

2 through (e) as subsections (d) through (g), re3 spectively;

4 (B) in subsection (a)—

5 (i) by redesignating paragraphs (1)

6 and (2) as subparagraphs (A) and (B), re7 spectively, and indenting appropriately;

8 (ii) by inserting ‘‘CARDS NECESSI9 TATING UNIQUE IDENTIFIER.—

10 ‘‘(1) IN GENERAL.—’’ after ‘‘(a)’’;

11 (iii) by striking ‘‘other means of ac12 cess can be identified as the person author13 ized to use it, such as by signature, photo14 graph,’’ and inserting ‘‘other means of ac15 cess can be identified as the person author16 ized to use it by a unique identifier, such

17 as a photograph, retina scan,’’; and

18 (iv) by striking ‘‘Notwithstanding the

19 foregoing,’’ and inserting the following:

20 ‘‘(2) NOTIFICATION.—Notwithstanding para21 graph (1),’’; and

22 (C) by inserting before subsection (d), as

23 so designated by this section, the following new

24 subsections:
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1 ‘‘(b) CARDS NOT NECESSITATING UNIQUE IDENTI2 FIER.—A consumer shall be liable for an unauthorized

3 electronic fund transfer only if—

4 ‘‘(1) the liability is not in excess of $50;

5 ‘‘(2) the unauthorized electronic fund transfer

6 is initiated by the use of a card that has been prop7 erly issued to a consumer other than the person

8 making the unauthorized transfer as a means of ac9 cess to the account of that consumer for the purpose

10 of initiating an electronic fund transfer;

11 ‘‘(3) the unauthorized electronic fund transfer

12 occurs before the card issuer has been notified that

13 an unauthorized use of the card has occurred or may

14 occur as the result of loss, theft, or otherwise; and

15 ‘‘(4) such unauthorized electronic fund transfer

16 did not require the use of a code or other unique

17 identifier (other than a signature), such as a photo18 graph, fingerprint, or retina scan.

19 ‘‘(c) NOTICE OF LIABILITY AND RESPONSIBILITY TO

20 REPORT LOSS OF CARD, CODE, OR OTHER MEANS OF AC21 CESS.—No consumer shall be liable under this title for any

22 unauthorized electronic fund transfer unless the consumer

23 has received in a timely manner the notice required under

24 section 905(a)(1), and any subsequent notice required

25 under section 905(b) with regard to any change in the
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1 information which is the subject of the notice required

2 under section 905(a)(1).’’.

3 (2) CONFORMING AMENDMENT.—Section

4 905(a)(1) of the Electronic Fund Transfer Act (15

5 U.S.C. 1693c(a)(1)) is amended to read as follows:

6 ‘‘(1) the liability of the consumer for any unau7 thorized electronic fund transfer and the require8 ment for promptly reporting any loss, theft, or unau9 thorized use of a card, code, or other means of ac10 cess in order to limit the liability of the consumer

11 for any such unauthorized transfer;’’.

12 (b) VALIDATION REQUIREMENT FOR DUAL-USE

13 DEBIT CARDS.—

14 (1) IN GENERAL.—Section 911 of the Elec15 tronic Fund Transfer Act (15 U.S.C. 1693i) is

16 amended—

17 (A) by redesignating subsection (c) as sub18 section (d); and

19 (B) by inserting after subsection (b) the

20 following new subsection:

21 ‘‘(c) VALIDATION REQUIREMENT.—No person may

22 issue a card described in subsection (a), the use of which

23 to initiate an electronic fund transfer does not require the

24 use of a code or other unique identifier other than a signa25 ture (such as a fingerprint or retina scan), unless—
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1 ‘‘(1) the requirements of paragraphs (1)

2 through (4) of subsection (b) are met; and

3 ‘‘(2) the issuer has provided to the consumer a

4 clear and conspicuous disclosure that use of the card

5 may not require the use of such code or other unique

6 identifier.’’.

7 (2) TECHNICAL AND CONFORMING AMEND8 MENT.—Section 911(d) of the Electronic Fund

9 Transfer Act (15 U.S.C. 1993i(d)) (as redesignated

10 by subsection (a)(1) of this section) is amended by

11 striking ‘‘For the purpose of subsection (b)’’ and in12 serting ‘‘For purposes of subsections (b) and (c)’’.

13 SEC. 6. MANAGEMENT PRACTICES RELATING TO THE

14 ISSUANCE OF CHECK CARDS.

15 Section 911 of the Electronic Fund Transfer Act (15

16 U.S.C. 1693i) is amended by inserting after subsection (e)

17 (as added by section 4 of this Act) the following new sub18 section:

19 ‘‘(f) PREFERENCE OF CONSUMER.—

20 ‘‘(1) IN GENERAL.—If—

21 ‘‘(A) in response to a request or applica22 tion by a consumer for an ATM card, a finan23 cial institution issues a check card; and

24 ‘‘(B) the consumer refuses to accept a

25 check card,
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1 the issuer shall promptly issue such consumer an

2 ATM card.

3 ‘‘(2) DEFINITIONS.—For purposes of paragraph

4 (1), the following definitions shall apply:’’.

5 SEC. 7. TOLL-FREE TELEPHONE NUMBER FOR REPORTING

6 LOST OR STOLEN CHECK CARDS OR UNAU7 THORIZED WITHDRAWALS.

8 (a) IN GENERAL.—Section 906 of the Electronic

9 Fund Transfer Act (15 U.S.C. 1693d) is amended by add10 ing at the end the following new subsection:

11 ‘‘(g) 24-HOUR, TOLL-FREE, NOTIFICATION SYS12 TEM.—A financial institution which issues a check card

13 to any consumer shall establish and maintain a 24-hour

14 notification system, including a toll-free telephone number

15 at which personnel are continuously accessible, which per16 mits the consumer to immediately report the loss or theft

17 of the check card or any unauthorized use or suspected

18 unauthorized use of the card.’’.

19 (b) TECHNICAL AND CONFORMING AMENDMENT.—

20 Section 906(c)(4) of the Electronic Fund Transfer Act (15

21 U.S.C. 1693d(c)(4)) is amended by inserting after the pe22 riod at the end the following new sentence: ‘‘In the case

23 of a periodic statement for an account from which with24 drawals may be initiated by a check card (as defined in

25 subsection (g)(2)), the notice required under this para-
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1 graph shall appear in a conspicuous and prominent loca2 tion on the periodic statement under a heading indicating

3 that the telephone number is a 24-hour, toll-free telephone

4 number and the notice shall inform the consumer of the

5 importance of promptly reporting any loss or theft of such

6 card or any unauthorized use or suspected unauthorized

7 use of the card.’’.

8 SEC. 8. PROHIBITION ON FEES FOR INSUFFICIENT FUNDS

9 IN CASE OF CERTAIN UNAUTHORIZED TRANS10 FERS.

11 Section 909 of the Electronic Fund Transfer Act (15

12 U.S.C. 1693g) (as amended by section 5 of this Act) is

13 amended by adding at the end the following new sub14 section:

15 ‘‘(h) PROHIBITION ON CERTAIN FEES.—

16 ‘‘(1) IN GENERAL.—A consumer shall not be

17 liable for any fee imposed by a financial institution

18 for insufficient funds in the account of the consumer

19 if the lack of sufficient funds in such account is due

20 to an unauthorized electronic fund transfer (from

21 such account) initiated by the use of a card without

22 the protection of a code or other means of access

23 which uniquely identifies the consumer.

24 ‘‘(2) PROMPT RECREDIT OF PRIOR FEES.—

25 Upon receiving notice from a consumer of an alleged
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1 unauthorized transaction, a financial institution

2 shall promptly credit the account of a consumer for

3 any fee described in paragraph (1) which was im4 posed before such notice was received.’’.

5 SEC. 9. PROVISIONAL RECREDIT OF UNAUTHORIZED

6 TRANSFERS AFTER 5 BUSINESS DAYS.

7 Section 908(c) of the Electronic Fund Transfer Act

8 (15 U.S.C. 1693f(c)) is amended by striking ‘‘ten business

9 days’’ and inserting ‘‘5 business days’’.

10 SEC. 10. EFFECTIVE DATE.

11 The amendments made by this Act shall apply after

12 the end of the 1-year period beginning on the date of the

13 enactment of this Act.

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