Thursday, September 25, 2003

Federal Laws Protecting You Against Fraud

The Fair Credit Reporting Act (FCRA) establishes procedures for correcting mistakes in your credit record, including unauthorized accounts. You have the right to receive a copy of your credit report for free if you suspect you are the victim of fraud. Your credit record may only be provided to people with a permissible need for the information (for example, a landlord or creditor) who must keep the details confidential.

The Truth in Lending Act (TILA) limits your liability if your credit card is lost or stolen. If someone uses your credit card without authorization, the most you are liable for is $50 in charges. (Financial institutions sometimes do not even ask for that much). If you dispute a charge on your card, the creditor has 90 days to resolve the matter, and you may withhold payment of the disputed amount during the investigation. For certain loans secured by your home, the TILA gives you three business days to cancel a contract without penalty-a big protection against a "predatory" home loan. The Fair Credit Billing Act (FCBA), part of the TILA, provides other consumer protections if you withhold payment while disputing a credit card charge.

The Electronic Fund Transfer Act (EFTA) limits your liability for the unauthorized use of your ATM card, debit card or other device (not including credit cards) used in handling an electronic deposit, payment or withdrawal. If your ATM or debit card is lost or stolen, your liability under the EFTA is limited to $50 if you notify your financial institution within two business days of discovering the loss or theft. If you wait more than two business days to report a lost or stolen card but you notify the card issuer about an unauthorized transaction within 60 days of the date the bank mails the statement containing the error, you could lose as much as $500. If you wait longer than that, you may be liable for $500 plus the amount of any unauthorized transactions after the 60-day period. However, to promote the worry-free use of debit cards and ATMs, many financial institutions are voluntarily treating the fraudulent use of those cards as if they were credit cards-that is, a maximum liability of $50 per card, and sometimes less.

Note: No federal law limits your losses from check fraud, but you do have protections under state law. For example, most state laws hold the bank responsible for losses from a forged check, but they also require the bank customer to take reasonable care of his or her account, including monitoring account statements and promptly reporting an unauthorized transaction to avoid being liable for losses.