As of October 17, 2014 both VISA and MasterCard will be changing their zero liability policies. Although they have the same effective date, there are a few key differences to the policy changes:
- Zero liability policy will be expanded to include PIN-based POS and ATM transactions (currently these transactions do not qualify for zero liability coverage)
- MasterCard has also issued to requirements for cardholders who wish to take advantage of zero liability in the event of unauthorized transactions posted to their accounts:
- Cardholders must exercise reasonable care in safeguarding the card from risk of loss or theft (this is not a new requirement, it has simply been maintained)
- Upon becoming aware of loss or theft, cardholders must promptly report it to the issuer (this is a new requirement)
- MasterCard has removed the following requirements from its policy. Effective October 17th, cardholders will no longer have to meet the following criteria:
- Cardholders only qualify if they have not reported two or more incidents of unauthorized use to the issuer in the last 12 months
- The account to which the unauthorized transactions were posted is in good standing
- Zero liability policy will be expanded to include ATM transactions (currently PIN-based transactions are covered under zero liability but ATM transactions are not)
As you can see, MasterCard has made significantly more changes to its policy and requires issuers to notify cardholders of the changes if they promote zero liability. Per Re g E, issuers must notify their MasterCard cardholders a minimum of 21 days before the effective date of the change. Credit unions should also ensure their cardholder agreements are updated to include the new zero liability rules. Since VISA is not making any changes to the notification process for unauthorized transactions that would adversely affect the member, no change-in-terms notice is required to be sent to members.
Several questions have arisen from credit unions regarding this issue – VISA’s announcement was not as highly publicized as MasterCard’s so there has been some confusion as to what the changes are. A common question we have received is if there is sample verbiage to notify members. Unfortunately there is not – under Reg E the notice must either be on a statement or a revised disclosure form, and the changes must be highlighted in some manner. Other than that the verbiage is up to the discretion of the credit union. If you are a MasterCard issuer, I would make sure that you are sending that notification out ASAP if you haven’t already, as the effective date is less than a month away.
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