How 'New' is MasterCard's Fraud Policy?Issuers: Zero-Liability Extension Reflects Current Practices
MasterCard is officially extending its zero-liability policy to U.S. consumers victimized by fraud perpetrated through PIN-based debit and ATM transactions. But some card issuers say this is merely formalizing protections that banking institutions already offer. As a result, they say issuers will continue to pick up expenses associated with fraud losses and recovery.
MasterCard spokeswoman Beth Kitchener says the move to officially extend the zero-liability policy beyond signature-based debit and credit transactions was agreed upon by the banks and credit unions that issue MasterCard-branded cards.
"MasterCard wanted to change our rules and offer broader protections to our cardholders," Kitchener says. "We spoke with our issuers and they agreed with the change. We worked together to make it happen."
ID Theft Resolution
The program will offer customers help in canceling lost or stolen cards and alerting credit reporting agencies, as well as targeting searches to detect if stolen personal and confidential data appears online, MasterCard says.
The identity theft resolution assistance will begin in July. The zero-liability coverage extension will take effect in October.
"The changes that we're making in cardholder protection, combined with our efforts to move the U.S. payments industry to EMV chip technology, will help deliver safer shopping experiences to consumers," says Chris McWilton, president of North American markets for MasterCard.
The expanded zero-liability policy and identity theft protections will be offered to consumers by the banking institutions that issue their cards, Kitchener acknowledges. "Banks and financial institutions issuing MasterCard-branded cards provide financial indemnity against fraud," she says.
"Not much is different for the issuers," she adds. "We recommend that financial institutions inform their customer-facing staff of the enhancements so that they can provide the best service to their consumers and small businesses. We also recommend that financial institutions update their marketing materials and benefit guides in their next update cycle."
Building Consumer Confidence?
Some card issuers tell Information Security Media Group that MasterCard's announcement is designed primarily to build consumer confidence in the payments system.
"I don't see this a being terribly meaningful to most consumers or most issuers," says one executive at a leading U.S. issuer serving the West Coast, who asked not to be identified. "From an issuer's point of view, I have seen the no-liability in practice on both channels [signature and PIN], it just was not advertised. The banks have already shouldered the liability. I anticipate this communication does nothing to change anything. It's more of a PR play."
Another executive with a smaller card-issuing institution says MasterCard's announcement is aimed at trying to get banks and credit unions to focus more attention on customer education. The executive, who asked to remain unnamed, also says Visa and other card brands are likely to follow suit.
"Education of consumers should be some of the focus from MasterCard, Visa, Discover and American Express," the executive says. "Retailers also should be educating their entire staff at the stores about how to spot fraud events."
Stan Orszula, who works in the corporate services practice at the law firm Quarles & Brady, says he suspects Visa and other card brands will soon make similar zero-liability announcements, even if the announcements reflect policies and practices already in place at the issuing level.
Regardless of the card brands' announcements, however, the financial burden for fraud remains with the card issuers, he adds.