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Tuesday July 06, 05:56
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Business Debit Cards Not Protected Against Fraud
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Businesses lack the protection against fraudulent debit card use that consumers have under current federal regulations, since fraud liability limits are not extended to business debit cards. Sovereign Bank recently declined to reimburse a Rhode Island businesswoman for fraudulent purchases of USD 3,000 that were made on her business debit card, on the grounds that the funds could not be recovered from the vendor and so were not refundable. If a consumer had held the debit card, conversely, Sovereign would have offered some assistance in disputing the fraudulent transactions with the respective vendors involved.
Most US banks follow a similar policy to Sovereign, while advising new debit card applicants, both business and consumer, to read the accompanying ‘fine print’ to determine their rights if any fraud results. As a separate precaution following the security breach at BJ’s Wholesale Clubs in March, Sovereign had reissued about 83,000 debit cards to customers whose cards were deemed to be at risk. Just recently, the bank advised of problems with the replacement cards, which could not be used as signature-based credit cards due to faulty coding on the magnetic-stripe of the cards.
Sovereign stated that the replacement debit cards, which it chose to reissue after finding that 700 of its cards had been fraudulently used, would be reissued as soon as possible. During the initial reissue, Sovereign had emphasized that the 700 fraudulently used cards were not compromised at one account, or at any one location, given the extent of its footprint. In total, the bank had spent about USD 550,000 on reissuing the first batch of debit cards, which affected about 10 per cent of its customer base, as a safeguard against exposing its cardholders to the risk of identity theft.
(NBC News)
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