Congress doesn't usually get high marks for thinking ahead. But in the case of fraud involving credit cards, debit cards and automated teller machine cards - including fraud of the type recently experienced by 40 million Target shoppers - Congress saw the problem coming a long time ago and acted to protect consumers. For credit cards, the applicable statute is the Truth In Lending Act, enacted in 1970. Under this statute, a cardholder's liability for unauthorized charges is limited to $50 . And to collect it, a card issuer must satisfy several requirements that make chasing the $50 more trouble than it's worth. So most card issuers don't bother. Instead, they boast in their marketing materials that they protect their cardholders from fraud, making no mention of the fact that this protection primarily came from Congress . For debit cards and ATM cards, the applicable statute is the Electronic Fund Transfer Act, enacted in 1978. Here, the rules are a bit more favorable to card issuers. Under the act, a lost or stolen card must be reported to the issuer within two business days following discovery that the card is gone to obtain the maximum protection against liability for unauthorized use: again, a $50 loss limitation. If that deadline is missed, the limit is $500 . If unauthorized use is not reported within 60 days after it first appears on a statement, the cardholder can be liable for all subsequent unauthorized use. Notwithstanding these statutory protections, a lost or stolen card should, of course, always be promptly reported to the card issuer, because having unauthorized charges removed from an account can be a hassle,requiring a deferral of all other life functions for a substantial time. A corollary lesson is that account statements should promptly be reviewed upon receipt. To be thorough on the subject of cardholder fraud protection, it's important to note the doctrine of apparent authority, which can leave a cardholder liable for charges made by someone who appeared to have the cardholder's OK to use the card for a particular purchase, but in fact did not. For credit cards, apparent authority exists when a cardholder does something that causes a merchant to reasonably believe the cardholder has authorized another person to use the card. So, for example, if you give a friend your card and your driver's license with instructions to buy a pizza and beer but, instead, your friend buys a diamond ring, your credit card issuer may take the position that the ring was purchased with apparent authority, and you are liable for the charge. For debit cards and ATM cards, all a card issuer has to do to establish apparent authority is to prove the cardholder gave the card and personal identification number to someone else. Then the cardholder will be liable for all transactions made on the card. Unlike with a credit card, there is no need to prove the reasonableness of the merchant's belief that the person possessing the card had authority to use it for a disputed purchase. The lesson here? Don't let someone else use your cards. - Jim Flynn is a private attorney with Flynn Wright & Fredman LLC in Colorado Springs . Email him at firstname.lastname@example.org .
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