In recent years, the debit card fraud rate has significantly increased. Debit card fraud is theft of a debit card number and personal information about the cardholder in order to gain access to funds in the cardholder's account. Fortunately, existing laws limit the amount of an identity theft victim's financial responsibility.
Debit Card Fraud Regulation
Multiple government agencies regulate and manage debit card fraud issues. The Treasury Department, Federal Trade Commission (FTC), Federal Deposit Insurance Corporation (FDIC) and the Board of Governors of the Federal Reserve oversee different aspects of debit card fraud. Within the Treasury Department, the Financial Crimes Enforcement Network (FinCEN) links financial institutions, law enforcement and government agencies involved with handling fraudulent debit card use. Each quarter the FinCEN releases the number of Suspicious Activity Reports (SAR) filed by banks and individuals for debit card fraud within that period. The FinCEN establishes the debit card fraud rate based on the number of SARs.
Current laws on identify theft state that a victim of debit card fraud is only liable for $50.00 worth of purchases, but only if that debit card is affiliated with a major bank like Visa or MasterCard. The liability for a victim of fraudulent use of a debit card not associated with a credit-lending institution depends on how quickly the victim reports the fraud. Immediately reporting fraud before use prevents the bank from holding the card holder liable for any amount of money; reporting fraud within two days makes the card holder liable for $50.00, and not reporting fraud for more than two days subjects the holder to up to $500.00 in liability. Not reporting the fraud for more than 60 days after receipt of a bank-produced account statement can make a debit card holder for all losses sustained.
In cases involving limited card holder liability, stolen funds exceeding $50.00 must be returned to the customer within 10 business days. While this law entitles victims to recover their money, it also may leave them with no money in their bank account for two weeks or more.
Debit Card Fraud Rate Statistics
In June of 2010, FinCEN reported 5,397 SARs for debit card fraud. This was a slight increase over the 2008 SAR filings, reported at 5,242. This number, however, only refers to the fraud rate for debit cards not affiliated with a major bank. FinCEN labels debit cards affiliated with a bank as credit cards, therefore, fraudulent use of debit cards is reported separately. The June 2010 FinCen report shows 41,548 SARs filed for credit card fraud. This also was a slight increase from the 2008 report, reported at 39,711.
The FinCen report, however, only includes SARs filed with law enforcement authorities. Federal agencies involved in financial fraud management, draw information about unreported debit card fraud from the Javelin Strategy and Research 2010 Identity Fraud Survey Report. The Javelin Report stated that, in 2009, 11.1 million people were victims of identity theft, and that women were 26% more likely than men to be victims.
Debit Card Fraud Protection
The Federal Bureau of Investigation (FBI) provides consumers with advice about reducing the chances of becoming a victim of identity theft. The FBI advises consumers never to provide their social security number, driver license number, date of birth or debit card number over the phone.
A majority of the FBI's advice focuses on the online use of debit cards. To protect themselves against theft of a debit card number while shopping online, the FBI encourages consumers to check thoroughly the seller or company's review rates and evaluations. Additionally, the agency advises consumers to ensure that the sale is secured by encryption software and never provide debit card information in response to an unsolicited email.
Debit Card Fraud and You
If you have been a victim of debit card fraud contact your bank and local law enforcement agency immediately. If you don't file a report, the authorities cannot investigate your claim. Fortunately, the law is on the consumers' side, and your financial obligation is likely limited.
However, prior to accepting the terms to a debit card agreement read the information provided to you pertaining to how fraudulent use will be managed. If possible, request that your debit card be affiliated with a major bank so that you are protected under the applicable credit card rules.