California

Please be sure you have read State-Law Rules the Affect Electronic Funds Transfers before proceeding. The introduction describes the limitations of the following summary.

The provisions we describe below [Ann. Cal. Civil Code Sections 1748.30 and 1748.31] apply to “debit cards.” A debit card, for purposes of these rules, is what you normally think of as a debit card, that is, a card allowing the holder to access his/her account to initiate electronic funds transfers. These rules, however, apply only to debit cards that may be used without unique identifying information such as a personal identification number to initiate access to the debit card holder’s account.

California law says a holder of such a debit card is liable in the event of unauthorized use of the card only if all of the following are true:
  • The card is “accepted,” which means, generally, that the card holder has agreed in one way or another to possession and use of the card.
  • The liability does not exceed $50 (with an exception, noted below).
  • The card issuer gave adequate notice to the card holder of the potential liability.
  • The card issuer gave the card holder a description of how to notify the card issuer of loss or theft of the card.
  • The unauthorized use occurs before the card holder notifies the card issuer that the unauthorized use has occurred or may occur because of loss, theft, or otherwise.
  • The debit card issuer has provided a means to identify the debit card holder to whom the debit card was issued.

The exception to the $50 liability cap applies when the card holder fails to notify the card issuer within 60 days of transmittal of a periodic statement that shows an unauthorized use. In such a case, the card holder is liable for any unauthorized use occurring after the close of the 60-day period and before the card holder gives notice, but only if the card issuer can show that an unauthorized transfer would not have occurred if the card holder had notified the issuer within the 60-day period. The 60-day period is lengthened under certain extenuating circumstances.

Finally, the statute defines “unauthorized use” as:

the use of a debit card by a person, other than the debit cardholder, to initiate an electronic funds transfer from the debit cardholder’s account without actual authority to initiate the transfer and from which the debit cardholder receives no benefit. The term does not include an electronic funds transfer initiated in any of the following manners:
  1. By a person who was furnished the debit card to the debit cardholder’s account by the debit cardholder, unless the debit cardholder has notified the debit card issuer that transfers by that person are no longer authorized.
  2. With fraudulent intent by the debit cardholder or any person acting in concert with the debit cardholder.
  3. By the debit card issuer or its employee.