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(Handwritten note: File - Debit Card - Forbes Article)
From: Jones, Greg
Attached is a copy of the December 2, 1996 Forbes article that misleadingly condemns debit cards as a risky proposition. Despite the fact that Visa provided the reporter with good information on the debit market and the growth of Visa check card in particular, the reporter editorialized and produced a one-sided and inaccurate story that will serve to scaremonger rather than educate.
I have also attached Visa's response to the Forbes reporter. After speaking with Michael Beindorff today, we believe it is important to encourage all Visa account executives to speak to their debit issuing banks to urge them to write to Forbes to condemn their misleading reporting. If a number of banks weigh in heavily, we hope to make a strong point with Forbes and may be able to ask them to revisit the issue.
Visa U.S.A. Corporate Relations would be happy to assist interested members - or members may wish to take their lead from the Visa letter attached. Please don't hesitate to contact Susan Forman - 415/432-3510 - if you have questions.
Thanks for your help.
1: FORBES ARTICLE:
Banks are pushing new ATM cards that double as a Visa or a MasterCard. Avoid 'em.
Carte blanche for crooks
Highly Confidential, Subject to Protective Order
balance in your checking account," says the brochure sent out by one major bank. And therein lies the danger-it's a debit card. We don't like it for three reasons:It could give a thief carte blanche to your checking account. In case of fraudulent use of your debit card, you are the one who is instantly out-of-pocket, not the bank. You may have to fight the bank to recover your money, and you could lose it completely if you don't report the loss right away. Meanwhile, your bank balance and credit line could be depleted, and your checks could be bouncing all over town.
Roy Funderburk Jr. learned about this the hard way. The 53-year-old mail carrier from Alexandria, Va. was going over his bank statement when he noticed two debit-card charges in one day at an Exxon station he occasionally used in Washington, D.C. That sent him back to statements for previous months. What he found were $1,000 in bogus gas station charges made over a nine-month period. No charge was more than $20. He hadnt lost his Visa debit card, so was baffled about the misuse.
That is small potatoes compared with the estimated $3 billion in annual credit-card fraud losses (Forbes, Aug. 26). But, says John Wisniewski, a postal inspector in Pittsburgh: The bad guys are just starting to figure out how to misuse them."
2) VISA RESPONSE:
Ms. Alexandra Alger
Dear Ms. Alger.
I am writing in response to your December 2 article, "Carte blanche for crooks," which provides a predominantly one-sided and misleading view of check cards (also known as debit cards).
First and foremost, you perform a great disservice to your readers in not mentioning any of the following benefits check cards offer as a convenient alternative to cash and checks:
Second, you describe a check card as "a combination new ATM card and charge card...you can use it to charge purchases, without having to use your PIN." This statement is misleading because consumers do not "charge" purchases when they use a check card, as they would with a credit card. Instead, the check card provides a convenient alternative to cash and checks by allowing consumers to access their checking accounts to pay for goods and services at the point of sale. The amount is deducted within one-to-three days and is reflected on the cardholder's monthly checking account statement.
Third, you state that check cards "could give a thief carte blanche to your checking account." As with any bank-issued card, cardholders must take care to ensure proper and careful usage at all times. Part of the responsibility that comes with plastic bank cards, be they credit, ATM or debit cards, relates to responsible usage and accountability. While check cards can be susceptible to some of the frauds that occur with ATM or credit cards, cardholders can substantially reduce that risk if they are careful. By reporting the loss or theft of a debit card to the issuing financial institution in a timely manner, cardholder liability is minimal. In addition, if cardholders make certain to check their periodic bank statements against their check card receipts, errors can be detected and fraud will be deterred.
Fourth, you say that consumers "lose the credit float, of 30 days or so, that you get with a zero-balance credit card." Check cards are not meant to replace credit cards, but rather to supplement them by providing consumers with another payment option. Check cards provide a convenient alternative to purchases for which consumers would otherwise use cash or checks.
Fifth, you claim that with check cards, "you lose the option of withholding payments - Important leverage in case of disputed charges." In fact, while Regulation E - set by the Federal Government to govern debit card (or electronic funds transfer) transactions - does not require that financial Institutions resolve errors involving disputed transactions with a merchant, Visa provides a great deal of protection in this area through its problem resolution facility (Chargeback) found in its Operating Regulations. Visa works with and encourages its check card issuing members to take advantage of this facility, thereby giving consumers increased purchasing protection.
By way of background, Visa USA Operating Regulations outline procedures for financial institutions when returning a disputed or incorrect transaction to a merchant. These Regulations apply to both Visa credit card and Visa check card (debit) transactions. Visa Operating Regulations will support an issuing financial institution charging back transactions on behalf of its cardholders in situations where the dispute arises from the merchandise being defective or not as described. Most financial institutions take advantage of the flexibility of the Visa Operating Regulations in order to provide the best possible customer care. If a cardholder uses a check card to pay for merchandise that turns out to be defective, he or she must contact the merchant for a refund. The financial institution issuing the card may be of assistance, it is important to note that, if the consumer had paid with cash or by a check that had already cleared and could not be stopped, the consumer also would have to deal with the merchant
Sixth, you mention that "Some banks even charge customers $1 to $1.50 a month just to have the card." While some banks do charge a nominal fee, many consumers find it well worth it in view of all the benefits that check cards deliver to consumers. And, if a consumer prefers not to pay the fee, he or she has other payment options, such as cash and checks.
You conclude your article by advising consumers to "avoid the ATM-debit card...the risks of the combo far outweigh the potential rewards." But, how can your readers make an informed decision when you have provided no discussion of the "potential rewards" (such as time savings, easier travel, enhanced privacy) and only an exaggerated, misleading view of the "risks"?
Check cards provide a beneficial payment option for consumers: a convenient alternative to cash and checks. Since the key to a successful check card experience lies with consumer education, I urge you to provide your readers with a more balanced and accurate assessment of check cards and their features.
Please feel free to call me at 415/432-3510 if you have any questions or if I can provide additional information. Yours sincerely,