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Press Release |
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Jean Ann Fox Ed Mierzwinski |
Washington, DC -- Three national consumer groups today alerted consumers to the risks of carrying a new "unsecure" bank card and urged consumers to check their wallets to see if they were unwittingly carrying one. Consumers Union, U.S. PIRG, and Consumer Federation of America urged Congress to protect consumers against the unwarranted financial risks the new cards pose.
This new type of debit card, often marketed under the guise of a replacement ATM card, automatically withdraws (or "debits") funds against a consumer's bank account without first verifying that the person holding the card is the authorized user. Without the security of a personal identification number, or PIN, these cards expose consumers to an unreasonable risk of fraud, according to the consumer groups.
If victimized by fraud, consumers can find their entire bank account drained, possibly even their overdraft line of credit. They could also face uncertain prospects when trying to recover their money because the federal rules protecting consumers from debit card fraud losses are riddled with loopholes. Even if stolen funds are eventually recovered, consumers could find themselves without the money they need to meet their daily expenses for days or weeks.
"These cards are as risky as walking around with your entire bank account balance in your pocket. If the card or the card number gets into the hands of a crook, your entire account and even your overdraft line of credit can be drained." said Michelle Meier, CU's counsel for government affairs.
"Consumers should avoid the risks of unsecure debit cards," said Jean Ann Fox, director of consumer protection for CFA. "Until Congress enacts protections to eliminate those risks, consumers should use other payment methods that keep their bank account balances safe and secure."
The consumer groups also raised concerns about the confusing and aggressive manner in which banks have been marketing these cards. Some banks are mailing these cards to their customers as if they are simply replacement ATM cards. Since the new cards can be used either with or without the security of a PIN identifier, depending on how the person holding the card decides to use it, many consumers may believe they are simply carrying a traditional PIN-based card. This aggressive marketing strategy, rather than informed consumer demand, accounts for the recent growth in the product, the groups suggested.
"Banks are sneaking these high risk cards into their customers' wallets," said Ed Mierzwinski, U.S. PIRG Consumer Program Director..
While commending recent steps taken by Mastercard to reduce the financial exposure of consumers who carry these cards, the groups said these steps are simply not enough to make the cards reasonably safe. They urged Congress to create more comprehensive and reliable protections against the significant risks the new "unsecure" cards present. Specifically, the groups recommend new laws in the following areas:
"Banks should not presume that consumers are willing to bear the risk these cards pose by mailing them out as replacement ATM cards. These debit cards are far riskier than the debit cards consumers have grown to trust," Meier said.
Bills recently introduced in Congress (H.R. 2319 and H.R. 2234) would accomplish one or more of these reforms.
Banks are motivated to issue these new unsecure debit cards because they can earn far more in merchant fees with these cards than with the more traditional and more secure debit card.
A "Fact Sheet on the Unsecure Debit Card" and "Tips for Consumers" are available on request. A U.S. PIRG fact sheet can be obtained by sending e-mail to the address "watchdog@pirg.org" with the subject "debit."
