Which of the following laws covers false claims regarding unauthorized use of credit cards?

Credit card fraud causes substantial losses for both merchants and consumers. The types of schemes affecting consumers range from the theft of individual credit cards to the theft of thousands or millions of consumers’ personal financial information. In either case, the person or people perpetrating the fraud may use the information to make purchases for themselves, or they may sell the information to others for that purpose. This results in consumers getting billed for products or services they did not buy, as well as inaccurate credit reporting. Federal law limits the liability of consumers whose information is compromised, provided they act quickly to report lost or stolen cards and to dispute fraudulent charges.

Types of Credit Card Fraud

Fraudulent credit card schemes include the very low-tech theft of one or more credit cards, which may then be used to make purchases or sold for an identity theft scheme. Stealing an actual card from someone’s purse or wallet may be the oldest form of credit card fraud, but newer technologies may allow fraudsters to accomplish the same objective without the need for purse-snatching.

One type of scheme, known as “skimming,” involves people who regularly process credit card payments and who keep their own records of people’s credit card numbers. They may do this with a “skimmer” device, which attaches to card-swipe machines and other devices and reads the card’s magnetic strip. ATMs and other devices may also have skimmers disguised as part of the machine.

Some hackers claim to be able to obtain credit card numbers from cards equipped with radio frequency identification (RFID) technology without needing physical contact with the card. Scanning equipment can read RFID-equipped cards while they are still in someone’s wallet or purse, as long as the equipment is within range. Several major credit card companies have phased out magnetic-strip cards in favor of chip and PIN cards that use encryption keys and personal identification numbers (PINs) to prevent fraud.

The theft of consumer financial information from merchants’ computer systems is perhaps the best-known type of credit card fraud because of several well-publicized and massive incidents. Hackers stole the credit card numbers of millions of customers of the retail chain Target, using malware installed on the company’s computers. These types of incidents may also result in the theft of other types of personal information, which fraudsters may use to apply for new credit card accounts in someone else’s name. Application fraud, as it is known, may result in a consumer defaulting on debts that he or she did not even know existed.

Federal Credit Card Fraud Law

The Fair Credit Billing Act (FCBA) protects consumers against inaccurate or fraudulent credit card charges and other billing errors. A consumer who receives a statement with a billing error must dispute the charge in writing by sending a notice to the address for “billing inquiries” identified on the statement. The credit card company must receive the notice within 60 days of the statement date, so time is of the essence for the consumer. Notice may be sent electronically, but only if the credit card company specifically provides a means to do so.

The credit card company has 90 days from the date it receives the dispute to act on it, either by correcting the charge or explaining to the consumer in writing why it believes the charge was not in error. The FCBA limits a consumer’s liability for unauthorized use of his or her credit card to $50.

Fraud involving an ATM or debit card is covered by the Electronic Fund Transfer Act (EFTA). A consumer is not responsible for any charges made on an ATM or debit card if he or she reports it lost or stolen before it is used. If the consumer reports the loss or theft after someone used it, his or her maximum liability depends on when he or she reports it. If the report is within two days of learning of the loss or theft, the consumer’s maximum liability is $50. After two days, but within 60 days of the date of the next bank statement, the maximum amount is $500. Beyond that time period, the consumer is liable for all losses.

The Federal Trade Commission provides additional guidance for consumers regarding lost or stolen cards, billing errors, and other issues.

Last reviewed October 2021

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.

Table of Contents

• Laws That Cover Stolen and Lost Cards
• Reporting a Credit Card as Stolen or Lost
• Reporting a Debit Card or ATM Card as Stolen or Lost
• Voluntary Caps on Liability for Debit Card Charges
• How to Protect Your Cards and Information
• Tips for Using and Protecting Your Credit Card
• Tips for Using and Protecting Your Debit and ATM Cards

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.

Laws That Cover Stolen and Lost Cards

The two primary federal laws covering procedures after card theft or loss are the Fair Credit Billing Act and the Electronic Fund Transfer Act.

Reporting a Credit Card as Stolen or Lost

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.

• If the thief personally presents your card to make the purchase, the card issuer can't hold you liable for more than $50 in fraudulent charges. (12 C.F.R. § 1026.12). Many card issuers waive this $50.
• You have no liability if the thief stole the number, but not the card.

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'ssample 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 might be able to file your dispute online.

After you report your card as stolen or lost, the issuer will suspend the card and send you a new one. This is different from canceling or closing your credit cards, 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.

Reporting a Debit Card or ATM Card as Stolen or Lost

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:

• $0 if you report the loss or theft of the card immediately and before any unauthorized charges are made.
• up to $50 if you notify the bank within two business days after you realize the card is missing
• up to $500 if you fail to notify the bank within two business days after you realize the card is missing, but do notify the bank within 60 days after your bank statement is mailed to you listing the unauthorized withdrawals, or
• unlimited if you fail to notify the bank within 60 days after your bank statement is mailed to you listing the unauthorized withdrawals. (15 U.S. Code § 1693g).

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.

Voluntary Caps on Liability for Debit Card Charges

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.

How to Protect Your Cards and Information

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.

Tips for Using and Protecting Your Credit Card

• Exercise caution in giving out your credit card account number over the phone. Don't give out the card number unless you initiate the call.
• Don't leave blanks on charge slips; draw a line across any blanks.
• Always take your receipts, and keep them until you reconcile your bill.
• Cut up or shred your old cards.
• Carry only the cards you think you'll need.
• Make and keep a record of your card information, listing the issuer's customer service number, and keep this in a safe place.
• Ignore anyone contacting you to "verify" your account information by phone or email. The call or message could be a phishing scam designed to steal your account information.

Tips for Using and Protecting Your Debit and ATM Cards

• Always take your receipts; don't throw them away in a trash can near the ATM.
• Protect your PIN. Never leave this information out in the open or written down in an easy-to-spot location. Don't keep a copy of your PIN with you or the card.
• Don't base PINs on common personal information, like your address, family birth dates, or pets' names—those are easy for a thief to figure out.
• Cut up or shred your old cards.
• Record your transactions, and reconcile your monthly statement promptly.
• You should also periodically check your account activity, especially if you use online banking. Compare the transactions to those you've recorded and report any discrepancies to your bank right away.

Learn More

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).

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