PAYMENT WITH A DEBIT-CARD Merchant swipes debit card Debit rather than credit transaction like credit card

USING THE DEBIT-CARD ACCOUNT EFTA  ' 903(6) 1.Defines electronic funds transfer to “debit of account” 2.What constitutes an Account? EFTA ' 903(2 ) Terminal reads magnetic strip 1.Directs bank to transfer funds To merchant’s account 2.Use of electronic impulse to obtain funds makes this an Electronic Funds Transfer 3.Covered by Electronic Funds Transfer Act

DEBIT-CARD RELATIONSHIP EFTA 1.May bank send unsolicited debit cards? 2.May such card be sent unsolicited under any circumstances? Not Validated Complete disclosure How to dispose if not wanted Validated only on request EFTA ' 911(b) Unsolicited Debit Card Sent Under EFTA ' 911

TRANSFERING FUNDS WITH DEBIT-CARD ACCOUNT Merchant Must Establish A Relationship With Either 1.The Bank Issuing the Debit Card; or 2.Network processing Debit-Card Transactions for Issuing Bank Issuing Bank PIN-Based or PIN-Less Regional Or Nat Network

TRANSFERING FUNDS WITH DEBIT-CARD ACCOUNT Two basic uses of debit cards 1.Depositing & withdrawing funds 2.Point-of-Sale transactions, As substitute for check 3.After swiping card, customer may have to input its PIN. If PIN Less Debit card, no number needed Sends encrypted message to payor Bank including description of Requested transfer, where payor bank examines Payor sends encrypted message Approving transaction, payment Is final, although payment to merchant’s account made in single payment daily

COLLECTING BY THE PAYEE PIN-BASED DEBIT CARDS Usually associated with regional or national networks of financial institutions established solely for facilitating debit-card transactions. Payor Bank Encrypted electronic Message Via telephone to Payor Bank Tagged with PIN If PIN Matches And Customer has Sufficient funds second Encrypted message decision Honor payment Payment To Payee At Payor or wire Transfer to Payee

COLLECTING BY THE PAYEE PIN-LESS DEBIT CARDS Visa and MasterCard Introduced PIN-less debit cards. Unlike the PIN-Based cards, there is not immediate settlement, but an authorization leading to hold on customer’s account for amount of transaction Payor Bank Encrypted electronic Message Via telephone to Payor Bank For authorization If card Matches Encrypted message authorizing Transaction Payment To Payee Received few days Later same way as Credit card transaction

FRADULENT TRANSACTION FEATURES MINIMIZING LOSS 1.Rules Preventing unsolicited mailings of debit-cards. 2.Mailing Card and PIN saperately 3.Encryption messaging 4.PIN Pad Protections

FRADULENT TRANSACTION DEBIT-CARD SYSTEM MUST RESOLVE TWO QUESTIONS 1.Who bears the loss as between merchant and Payor Bank. 2.Who bears the loss as between the bank and customer

FRADULENT TRANSACTION BETWEEN MERCHANT AN PAYOR BANK 1.Risk on Bank because in better position to mitigate loss. 2.Bank has ability to design cards to limit possibility of counterfeiting and incorrect identifications

FALSE AUTHORIZATION OF TRANSACTION BETWEEN PAYOR BANK & CUSTOMER 1.EFTA  909(a) no liability without minimal security. 2.Limitation of Liability a.$50 Limit b.$500 Limit c.Bank Statement