The theft or loss of a credit card, debit card, or ATM card can happen to anyone—and you need to be prepared to take action, protect your rights, and stop thieves in their tracks.
If your ATM, debit, or credit card is lost or stolen, don't panic. Federal laws and bank policies limit your liability for unauthorized charges. But it's important to notify the bank or card issuer of the loss or theft as soon as you discover it.
The two primary federal laws covering procedures after card theft or loss are the Fair Credit Billing Act and the Electronic Fund Transfer Act.
Under the Fair Credit Billing Act, your liability for unauthorized charges depends on whether the thief personally presented your card to make the purchase or just stole the number.
However, in either of the above situations, it's important to notify the card issuer as soon as you know of the theft.
To dispute unauthorized charges, send a letter to the credit card company at the address given for this purpose, not the address for sending your payments. Include your name, address, account number, and a description of the billing error. You may use the Federal Trade Commission's sample letter. Send your letter so that it reaches the creditor within 60 days after the first bill showing the unauthorized charge. (12 C.F.R. § 1026.13).
Or you can file your dispute online or through a mobile banking app. (But you generally get more legal protections with a letter, so it's best to follow up with a written notification.)
After you report your card as stolen or lost, the issuer will suspend the card and send you a new one. This closing of the account is different from canceling or permanently closing a credit card, which can cause problems with your credit reports. The issuer will also credit back any fraudulent charges made to your account, although you can expect them to conduct a fraud investigation.
With ATM or debit cards, you must act quickly to avoid full liability for unauthorized charges when your card is lost or stolen. Under the federal Electronic Fund Transfer Act, your liability is:
If you can convince the bank that your notification failure was due to extenuating circumstances, it must extend the notification timeline for a "reasonable period."
Note that if the theft involved only your ATM or debit card number—and not the card—you're not liable for unauthorized transactions if you report them within 60 days after your statement is sent to you. It's important to review your statements. So, open your monthly statements promptly and compare them to your receipts.
In response to consumer complaints about the possibility of unlimited liability, some card issuers cap the liability on debit cards at $50. And some banks don't charge anything if unauthorized withdrawals appear on your statement.
Also, some states have capped the liability for unauthorized withdrawals on an ATM or debit card at $50.
Know where your credit, debit, and ATM cards are, and make sure they're secure. Here are some more tips for using and protecting your cards.
The Federal Trade Commission website is a useful resource for information on consumer protection laws and issues related to credit, debit, and ATM cards and their use. If you have an issue with your credit card issuer or bank, you may submit a complaint to the Consumer Financial Protection Bureau (CFPB). The CFPB will forward your complaint to the company and work to get you a response.
For more information on finances, debts, and how to regain financial health, get Solve Your Money Troubles: Debt, Credit & Bankruptcy, by Amy Loftsgordon and Cara O'Neill (Nolo).