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Indiana Department of Financial Institutions

WHAT IS ELECTRONIC

BANKING?

A mini-lesson for:

secondary school teachers

adult and community educators

students and consumers

This mini-lesson includes learning objectives background information discussion questions activities a



This mini lesson includes learning objectives background information discussion questions activities a



Types of Electronic Currency

Check Cards, the new name for debit cards, can be used instead of cash, personal checks or credit cards.

As stated, when you use a check card you transfer funds immediately from your account to the store'saccount. A growing number of consumers use check cards because they eliminate the hassle and risks of writing checks or carrying large amounts of cash. Important facts you need to know are:

• You have less bargaining power with a check card than with a credit card. With a credit card youhave the right to refuse to pay for the purchase if you are not satisfied. With a debit card you havealready paid for the product, so you have less bargaining power with the merchant.

• A thief with your check card and PIN number can take all the money in your account. The thief can

even make point-of-sale purchases without your PIN.

• Your liability is limited to $50 if you report the checkcard loss within two days, any longer and your liability can go to $500. After 60 days, you can be responsible for the entire amount.

Note: MasterCard and Visa have voluntarily capped the loss liability of checkcard holders at $50. "Aswelcome as these voluntary protections are, they are too important to be left to the kindness of bankmarketing departments," writes Consumer Reports. The consumer advocacy magazine advocates federallaw changes to make consumer liability caps mandatory.

• In an era of increasing bank fees, consumers can expect to pay for the service of using acheckcard.

• It is the consumer's responsibility to keep checkcard receipts and deduct the dollar amounts of thepurchase from your bank balance immediately, in order to avoid overdraft changes.

Smart Cards, sometimes called stored-value cards, have a specific amount of credit embeddedelectronically in the card. For example, a $100 smart card that you have purchased in advance can be usedto cover expenses such as pay phone charges, bridge or expressway tolls, parking fees or Internetpurchases. These cards make the transaction fast, easy and convenient.

Smart card technology is in a period of rapid change. Ultimately consumers should be able to customizetheir smart cards to suit their financial needs with access from their personal computer or cellular phone.



Digital checks allow consumers to use their personal computers to pay recurring bills. Consumers can usecomputer software provided by a bank, or they can use personal finance software packages such asQuicken or Microsoft Money and subscribe to an electronic bill-paying service.

The technology of paying bills electronically by home computers is advancing rapidly, but relatively fewbusinesses currently can accept payments made directly by computers. Digital checking is expensive. Feesgenerally run from $5 to $10 a month for 20 transactions. Privacy and security issues are major consumer concerns. Encryption technology may lessen privacy concerns in the future.

Consumer Protection -- Electronic Funds

Transfer Act

The 1978 Electronic Funds Transfer Act is the governing statute while the Federal Reserve Board'sRegulation "E" provides guidelines on electronic funds transfer card liability. The regulations require that:

• a valid EFT card can be sent only to a consumer who requests it.

• unsolicited cards can be issued only if the card cannot be used until validated.

• the financial institution must inform you of your rights and responsibilities under the law in a written

Disclosure Statement, including the procedure to correct errors in your periodic statements.

• the user is entitled to a written receipt when making deposits or withdrawals from an ATM or usinga point-of-sale terminal to make a purchase. The receipt must show the amount, date and type of transfer.

• periodic statements must confirm the amount of all transfers, the dates and types of transfers, typeof accounts to or from which funds were transferred, and the address and phone number to beused for inquiries regarding the statement.

Problems and Errors. You have 60 days from the date a problem or error appears on your written terminalreceipt or on your periodic statement to notify your financial institution. If you fail to notify the financialinstitution of the error within 60 days, you may have little recourse. Under federal law, the financialinstitution has no obligation to conduct an investigation if you have missed the 60-day deadline



Cyber Shoppinghttp://www.dfi.state.in.us/conscredit/Cybersh.html

Debit Cards vs. Credit Cardshttp://www.in.gov/dfi/education/debit_vs.htm

Electronic Banking

http://www.in.gov/dfi/education/ebk.htm

http://www.in.gov/dfi/education/CrATM.html

http://www.dfi.state.in.us/conscredit/Cybersh.html

http://www.in.gov/dfi/education/debit_vs.htm


http://www.dfi.state.in.us/conscredit/Cybersh.html

http://www.in.gov/dfi/education/debit_vs.htm




DISCUSSION TOPICS

1. List several examples of electronic funds transfers and discuss your experiences with EFTs.

2. Describe smart cards and give examples of what they can do.

3. Describe check cards and give examples of what they can do.

4. What consumer protections apply to lost or stolen EFT cards under the federal Electronic Funds Transfer

Act?

5. What information must be included in periodic EFT statements from your financial institution, and why is itimportant for consumers to check this information for accuracy as soon as possible after receipt?











ACTIVITY

1. Invite a resource person from a local bank or credit union to come to your classroom to explain their EFTservices. Ask about costs, consumer problems, consumer protections under the law, and the resourceperson's vision of new uses of electronic money in the future.

2. Survey several friends about their experiences with electronic money and their greatest concerns.

3. Using the EFT COMPARISON WORKSHEET (last page), evaluate the EFT services provided by localfinancial institutions, including costs, benefits and restrictions. Determine which services would suit your financial situation and provide the most convenience and benefits.

Give students our Brochures.

SOURCES OF ADDITIONAL INFORMATION

ArticlesBanking: There's No Place Like Home by Kathy Yakal. Kiplinger's Personal FinanceMagazine, pp. 61-66, (December 1997).

Check Cards: Should you replace your ATM card? Consumer Reports, pp. 68-69, (October 1997).

Electronic Commerce and The Future of Money; Technology and You , by Tariq K.

Muhammad, Black Enterprise, pp. 255-259, (June 1997).

How Will We Pay On The Internet? by James McAndrews, Consumers' Research, pp. 29-33,(April 1997)




























Chicago, IL 60690-0834Telephone: (312) 322-5111

Pamphlets

Available free from:Board of Governors of the Federal Reserve SystemPublications ServicesDivision of Support ServicesWashington, DC 20551

Alice in DebitlandConsumer Handbook to Credit Protection Laws

A Consumer's Guide to Direct PaymentElectronic Banking for Today's Consumer The Story of Checks and Electronic Payments

Available free from:MasterCard International1401 Eye Street, NWWashington, DC 20005

Telephone: (800) 999-5136The ATM Cash Card Quiz

Available free from:Federal Trade CommissionConsumer Response Center Washington, DC 20580-0001Telephone: (202) 326-3650http://www.ftc.gov

Cybershopping: Protecting Yourself When Buying Online ElectronicBankingLost or Stolen: Credit and ATM Cards

























http://www.ftc.gov/

http://www.ftc.gov/



Available free from:St. JamesConsumer Information Center - 7DP.O. Box 100Pueblo, CO 81002

http://www.pueblo.gsa.gov Shopping With Your ATM Card

Available free from:Call For Action Network Office5272 River RoadSuite #300Bethesda, MD 20816

Telephone: (800) 647-1756A Smart New Way to Pay; What Savvy Consumers Need to Know AboutDebit Cards

Available free from:Direct Marketing Association1120 Avenue Of The AmericasNew York, NY 10036-6700

Telephone: (212) 768-7277Tips For Cybershopping

Web Sites

Department of the Treasury, Financial Management Service

Consumer Information Center A consumer's Guide To the Expanding Uses of ATM cards, Shopping With

Your ATM Card

http://www.pueblo.gsa.gov/

http://www.fms.treas.gov/eft/general.html

http://www.pueblo.gsa.gov/cic_text/money/shop-atm.txt


http://www.pueblo.gsa.gov/







EFT COMPARISON WORKSHEET

Name of the Financial Institution ____________________________________________

EFT Service Cost Benefits Restrictions

Name of the Financial Institution ____________________________________________

EFT Service Cost Benefits Restrictions

Selected Services __________________________________________________________

http://www.ftc.gov/bcp/conline/pubs/credit/elbank.htm









Fraudulent telemarketers have found yet another wayto steal your money, this time from your checkingaccount. Consumers across the country arecomplaining about unauthorized debits (withdrawals)from their checking accounts.

Automatic debiting of your checking account can be alegitimate payment method; many people paymortgages or make car payments this way. But thesystem is being abused by fraudulent telemarketers.

Therefore, if a caller asks for your checking accountnumber or other information printed on your check,you should follow the same warning that applies toyour credit card number -- do not give out checking

account information over the phone unless you are

familiar with the company and agree to pay for

something. Remember, if you give your checkingaccount number over the phone to a stranger for "verification" or "computer purposes," that personcould use it to improperly take money from your checking account.

HOW THE SCAM WORKS

You either get a postcard or a telephone call sayingyou have won a free prize or can qualify for a major credit card, regardless of past credit problems. If yourespond to the offer, the telemarketer often asks youright away, "Do you have a checking account?" If yousay "yes," the telemarketer then goes on to explain theoffer. Often it sounds too good to pass up.

Near the end of the sales pitch, the telemarketer mayask you to get one of your checks and to read off all of the numbers at the bottom. Some deceptive tele-marketers may not tell you why this information isneeded. Other deceptive telemarketers may tell youthe account information will help ensure that youqualify for the offer. And, in some cases, thelegitimate telemarketer will honestly explain that thisinformation will allow them to debit your checkingaccount.

Once a telemarketer has your checking accountinformation, it is put on a "demand draft," which is processed much like a check. The draft has your name,account number, and states an amount. Unlike a check,however, the draft does not require your signature.

When your bank receives the draft, it takes the amounton the draft from your checking account and pays thetelemarketers' bank. You may not know that your bank has paid the draft until you receive your bank statement.

WHAT YOU CAN DO TO PROTECT

YOURSELF

It can be difficult to detect an automatic debit scam before you suffer financial losses. If you do not knowwho you are talking to, follow these suggestions tohelp you avoid becoming a victim:

U Don't give out your checking account number over

the phone unless you know the company andunderstand why the information is necessary.

U If someone says they are taping your call, ask why.

U Don't be afraid to ask questions.

U Companies do not ask for your bank accountinformation unless you have expressly agreed tothis payment method.

ITS THE LAW

Since December 31, 1995, a seller or telemarketer isrequired by law to obtain your verifiable authorizationto obtain payment from your bank account. Thatmeans whoever takes your bank account information

over the phone must have your express permission todebit your account, and must use one of three ways toget it. The person must tell you that money will betaken from your bank account. If you authorize payment of money from your bank account, they mustthen get your written authorization, tape record your authorization, or send you a written confirmation before debiting your bank account.

If they tape record your authorization, they mustdisclose, and you must receive, the followinginformation:

U The date of the demand draft;

U the amount of the draft(s);

U the payers' name (who will receive your money);

U the number of draft payments (if more than one);

U a telephone number that you can call duringnormal business hours; and

U the date that you are giving your oralauthorization.

If a seller or telemarketer uses written confirmation toverify your authorization, they must give you all theinformation required for a tape recorded authorizationand tell you in the confirmation notice the refund procedure you can use to dispute the accuracy of theconfirmation and receive a refund.

WHAT TO DO IF YOU ARE A VICTIM

If telemarketers cause money to be taken from your bank account without your knowledge or authorization, they have violated the law. If youreceive a written confirmation notice that does notaccurately represent your understanding of the sale,follow the refund procedures that should have been provided and request a refund of your money. If youdo not receive a refund, it's against the law.

If you believe you have been a victim of fraud, contactyour bank immediately. Tell the bank that you did notokay the debit and that you want to prevent further debiting. You also should contact your state Attorney

General. Depending on the timing and the circum-stances, you may be able to get your money back.

MORE INFORMATION

To learn more about your rights under the telemarket-ing Sales Rule and how to protect yourself fromfraudulent telephone sales practices, request a freecopy of Straight Talk About Telemarketing . Contact.

Consumer Response Center Federal Trade Commission

Washington DC 20580

















































































































































(202) 326-2222TDD: (202) 326-2502

U U U U U U U U U U U U

U





























The Indiana Department of Financial Institutions,Division of Consumer Credit has many other creditrelated brochures available, such as:

Answers to Credit ProblemsApplying for Credit

At Home Shopping RightsBankruptcy FactsBuried in DebtCar Financing ScamsCharge Card Fraud

Choosing A Credit CardCo-SigningCredit and DivorceCredit and Older ConsumersDeep in Debt?Equal Credit OpportunityFair Credit ReportingFair Debt CollectionGold Cards

Hang up on FraudHigh Rate Mortgages

Home Equity Credit LinesHow to Avoid Bankruptcy

Indiana Uniform Consumer Credit CodeLook Before you LeaseMortgage LoansRepossessionReverse Mortgage LoansRule of 78s – What is it?Scoring for CreditShopping for CreditUsing Credit CardsVariable Rate CreditWhat is a Budget?What is the DFI?

Call our toll-free number or write to the address on thecover for a copy of any of the brochures listed or for further consumer credit information.

Automatic

DebitScams

DEPARTMENT OF FINANCIAL INSTITUTIONS

Consumer Credit Division30 South Meridian Street, Suite 300

Indianapolis, Indiana 46204317-232-3955

1-800-382-4880





















































What To Do If They're Lost or

Stolen

Many people find it easy and convenient touse credit and ATM cards. The Fair CreditBilling Act (FCBA) and the Electronic Funds Transfer Act (EFTA) offer procedures for youand businesses to use if your cards are lostor stolen.

Limiting Your Financial Loss

Report the loss or theft of your credit andATM cards to the card issuers as quickly aspossible. Many companies have toll-freenumbers and 24-hour service to deal withsuch emergencies. It's a good idea to followup your phone calls with a letter. Includeyour account number, when you noticedyour card was missing, and the date youfirst reported the loss.

You also may want to check yourhomeowner's insurance policy to see if itcovers your liability for card thefts. If not,some insurance companies will allow you tochange your policy to include thisprotection.

Credit Card Loss. If you report the lossbefore the cards are used, the FCBA saysthe card issuer cannot hold you responsiblefor any unauthorized charges. If a thief usesyour cards before you report them missing,

the most you will owe for unauthorizedcharges is $50 per card. This is true even if a thief uses your credit card at an ATMmachine to access your credit card account.

However, it's not enough simply to reportyour credit card loss. After the loss, reviewyour billing statements carefully. If theyshow any unauthorized charges, send aletter to the card issuer describing eachquestionable charge. Again, tell the cardissuer the date your card was lost or stolen

and when you first reported it to them. Besure to send the letter to the address

provided for billing errors. Do not send itwith a payment or to the address where yousend your payments unless you are directedto do so.

ATM Card Loss. If you report an ATM cardmissing before it's used without yourpermission, the EFTA says the card issuercannot hold you responsible for anyunauthorized withdrawals. If unauthorizeduse occurs before you report it, the amountyou can be held liable for depends uponhow quickly you report the loss. Forexample, if you report the loss within twobusiness days after you realize your card ismissing, you will not be responsible formore than $50 for unauthorized use.

However, if you don't report the loss withintwo business days after you discover theloss, you could lose up to $500 because of an unauthorized withdrawal. You riskunlimited loss if you fail to report anunauthorized transfer or withdrawal within60 days after your bank statement is mailedto you. That means you could lose all themoney in your bank account and the unusedportion of your line of credit established foroverdrafts.

If unauthorized transactions show up onyour bank statement, report them to thecard issuer as quickly as possible. Onceyou've reported the loss of your ATM card,you cannot be held liable for additionalamounts, even if more unauthorizedtransactions are made.

Protecting Your Cards

The best protections against card fraud areto know where your cards are at all timesand to keep them secure. For ATM cardprotection, it's important to keep yourPersonal Identification Number (PIN) asecret. Don't use your address, birth date,

phone or social security number. Memorizethe number. Statistics show that in one-third

of ATM card frauds, cardholders wrote theirPINS on their ATM cards or on slips of paperkept with their cards.

The following suggestions may help youprotect your credit and ATM card accounts.

For Credit Cards:

U Be cautious about disclosing youraccount number over the phone unlessyou know you are dealing with areputable company.

U Never put your account number on theoutside of an envelope or on a postcard.

U Draw a line through blank spaces oncharge slips above the total so theamount cannot be changed.

U Don't sign a blank charge slip.

U

Tear up carbons and save your receiptsto check against your monthly billingstatements.

U Open billing statements promptly andcompare them with your receipts.Report mistakes or discrepancies assoon as possible to the special addresslisted on your statement for "billinginquiries." Under the FCBA, the cardissuer must investigate billing errorsreported to them within 60 days of thedate your statement was mailed to you.

U Keep a record — in a safe placeseparate from your cards — of youraccount numbers, expiration dates, andthe telephone numbers of each cardissuer so you can report a loss quickly.

U Carry only those cards that youanticipate you'll need.

For ATM cards:








































































































































U Don't carry your PIN in your wallet orpurse or write it on your ATM card.

U Never write your PIN on the outside of adeposit slip, an envelope, or on apostcard.

U Take your ATM receipt after completinga transaction.

U Reconcile all ATM receipts with bankstatements as soon as possible.

Buying a RegistrationService

For an annual fee of $10 to $35, companieswill notify the issuers of your credit and ATMaccounts if your card is lost or stolen. Thisservice allows you to make only one phonecall to report all card losses rather thancalling individual issuers. Most services alsowill request replacement cards on your

behalf .

Purchasing a card registration service maybe convenient, but it's not required. TheFCBA and the EFTA give you the right tocontact your card issuers directly in theevent of a loss or suspected unauthorizeduse.

If you decide to buy a registration service,

compare offers. Carefully read the contractto determine the company's obligations andyour liability. For example, will the companyreimburse you if it fails to notify card issuerspromptly once you've called in the loss tothe service? If not, you could be liable for

unauthorized charges.

U U U U U U U U U U U

U U U





































































The Indiana Department of FinancialInstitutions, Division of Consumer Credit hasmany other credit related brochuresavailable, such as:

Answers to Credit Problems Applying for Credit At Home Shopping RightsBankruptcy FactsBuried in DebtCar Financing ScamsCharge Card FraudChoosing A Credit CardCo-SigningCredit and DivorceCredit and Older ConsumersDeep in Debt?Equal Credit OpportunityFair Credit ReportingFair Debt CollectionGold CardsHang up on FraudHigh Rate MortgagesHome Equity Credit Lines

How to Avoid BankruptcyIndiana Uniform Consumer Credit CodeLook Before you LeaseMortgage LoansRepossessionReverse Mortgage LoansRule of 78s – What is it?Scoring for CreditShopping for CreditUsing Credit CardsVariable Rate CreditWhat is a Budget?What is the DFI?

Call our toll-free number or write to theaddress on the cover for a copy of any of thebrochures listed or for further consumer creditinformation..

CREDIT

AND

ATM

CARDSDEPARTMENT OF FINANCIAL INSTITUTIONS

Consumer Credit Division30 South Meridian Street, Suite 300




















































Indianapolis, Indiana 46204317-232-3955

1-800-382-4880

PROTECTING YOURSELF WHENBUYING ONLINE

With a few key strokes and the click of amouse you can shop at home from yourcomputer. Sounds great, right? No traffic.No parking problems. No lines or crowds. Nohassles with the weather.

Online shopping can give new meaning toconvenience and choice. But before youvisit your favorite boutique on the Net, takecare to make your cyber-shoppingexperience safe.

THE BASICS

Think security, starting with your connection-- the way your computer connects throughtelephone wires to contact the Internet --and your browser -- the software that actslike a telephone to receive information onthe Internet.

Unsecured information sent over theInternet can be intercepted. That's why youshould consider a secure browser, which willencrypt or scramble purchase information.Use a secure browser that complies with

industry standards, such as Secure SocketsLayer (SSL) or Secure Hypertext TransferProtocol (S-HTTP). These often are includedwith Internet connection services. The creditand charge card industry is working on anenhanced level of security using SecuredElectronic Transactions (SET). SET protocolprovides a highly encrypted communicationbetween card issuers, merchants and cardmembers.

If you don't have encryption software to

assure the security of your transaction,consider calling the company's 800 number,

faxing your order, or paying by check ormoney order.

Shop with companies you know. If you'd liketo try a new merchant, ask for a papercatalog or brochure to get a better idea of their merchandise and services. Determinethe company's refund and return policiesbefore you place an order.

Never give out yourInternet password.

Be original when creating your password(s).Consider using a combination of numbers,letters, and symbols, or use a phrase toremember it. For example: UR2G$48* --"You are to give money for eight stars."

Avoid using established numbers for yourpassword, such as your house number, birth

date, or a portion of your telephone orSocial Security numbers. It's a good idea touse different passwords to access specificareas on the Internet, such as the WorldWide Web.

Be cautious if you're asked to supplypersonal information to conduct atransaction, such as your Social Securitynumber. It's rarely necessary and shouldraise a red flag. The Internet provides avaluable information service for consumers.

But some con artists who have usedtelemarketing, infomercials, newspapers,magazines, and the mail to attractconsumers are turning to the Internet andonline services to promote their scams.

Pay close attention to the information you’reentering when you place an order. Forexample, an additional keystroke could getyou 10 shirts when you wanted only one.Check to make sure the shipping charge isacceptable to you and all charges are

calculated correctly.

Make a note of the company's shippingtime. If you need the merchandise earlier,ask if your order can be "expressed" for anadditional fee.

The same laws that protect you when youshop by phone or mail apply when you shopin cyberspace: Under the law, a companyshould ship your order within the timestated in its ads. If no time is promised, the

company should ship your order within 30days after receiving it, or give you an"option notice." This notice gives you thechoice of agreeing to the delay or cancelingyour order and receiving a prompt refund. There is one exception to the 30-day rule. If a company doesn't promise a shipping time,and you are applying for credit to pay foryour purchase, the company has 50 daysafter receiving your order to ship.

Should you decide to pay by credit orcharge card, your transaction will beprotected by the Fair Credit Billing Act.Some cards may provide additionalwarranty or purchase protection benefits. If you're not comfortable entering your creditor charge card account number, call it intothe company's 800 number, or fax it.

Print out a copy of your order andconfirmation number for your records.

The Fair Credit Billing ActWhether you’re buying online, by phone,mail, or in person at a store, using yourcredit or charge card to pay offers someprotections.

Errors…

If you find a billing error on your monthlycredit or charge card statement, you maydispute the charge and withhold payment in

that amount while the error is in dispute. The error might be a charge for the wrong



























































































































amount, for something you didn't accept, orfor something that wasn't delivered asagreed.

To Dispute a Charge…

xWrite to the creditor at the special addressindicated on the monthly statement for"billing inquiries." Include your name,address, and credit or charge card number,

and describe the billing error.

xSend your letter as soon as possible. Itmust reach the creditor within 60 days afterthe first bill containing the error was mailedto you.

The creditor must acknowledge yourcomplaint in writing within 30 days of receiving it, unless the problem has alreadybeen resolved. The creditor must resolvethe dispute within two complete billingcycles -- but not more than 90 days -- afterreceiving your letter.

Unauthorized Charges…

If your credit or charge card is used withoutyour authorization, you can be held liablefor up to $50 per account. If you report theloss of your card before it is used, you arenot liable for any unauthorized charges.See our Brochure on Fair Credit Billing.

FOR MORE INFORMATION

The Federal Trade Commission (FTC)publishes brochures on topics such as:automobiles, credit, products and services,and telemarketing. You can contact the FTCat: Consumer Response Center, Federal Trade Commission, Washington, D.C. 20580,202-326-2222 , TDD: 202-326-2502,http://www.ftc.gov.

The Indiana Department of Financial

Institutions, Division of Consumer Credit has

many other credit related brochuresavailable, such as:

Answers to Credit Problems Applying for Credit At Home Shopping RightsBankruptcy FactsBuried in DebtCar Financing ScamsCharge Card FraudChoosing A Credit Card

Co-SigningCredit and DivorceCredit and Older ConsumersDeep in Debt?Equal Credit OpportunityFair Credit ReportingFair Debt CollectionGold CardsHang up on FraudHigh Rate MortgagesHome Equity Credit LinesHow to Avoid BankruptcyIndiana Uniform Consumer Credit Code

Look Before you LeaseMortgage LoansRepossessionReverse Mortgage LoansRule of 78s – What is it?Scoring for CreditShopping for CreditUsing Credit CardsVariable Rate CreditWhat is a Budget?What is the DFI?

Call our toll-free number or write to theaddress on the cover for a copy of any of the

brochures listed or for further consumer creditinformation.


















































































CYBER-

SHOPPING

DEPARTMENT OF FINANCIAL INSTITUTIONSConsumer Credit Division

30 South Meridian Street, Suite 300Indianapolis, Indiana 46204

317-232-39551-800-382-4880

As debit cards become increasingly popular,strains are appearing among customers,merchants, and banks.

The problems range from difficulties when thecards are lost or stolen to complaints frommerchants that the fees to accept these cardsare too high.

Not All Plastic is

Created Equal

New car rental rules represent the first case inwhich debit cards cannot be used in the sameway as credit cards. The big car rental

companies, including Hertz and Avis, haverecently stopped letting people rent cars using just a Visa Check card or the similar Master Money card from MasterCard. The cardcompanies, and the banks that issue thesecards - known as debit cards - are furious. Andso are some customers.

For years, the car rental companies have used possession of a credit card as a crude way to

weed out potentially risky renters, just as theyhave usually ruled out renters under the age of 25. But this test does not work with debitcards because banks will now give them tonearly any one with a bank account.

Charges on debit cards, which go under manynames, come directly out of a consumer'schecking account almost immediately rather than appearing on a monthly credit card

statement. In contrast to using a credit card,

which the debit card physically resembles, noloan is involved in the transaction.Debit cards "provide no qualification of credit-worthiness," a Hertz spokesperson said.Car rental companies believe they are entitledto a certain level of confidence because in car rental, unlike almost any other business, thecustomer is given total control of a vehicle

with an approximate value of $20,000.

The rental car companies are requiring acustomer with only a debit card to follow thesame procedures as someone who pays cash torent a car. That involves making anapplication several weeks in advance andleaving a substantial deposit.

Higher Fees?

The new debit cards have become more popular because they are easier to use andmore widely accepted than those that require personal identification numbers. Moreover,for the tens of millions of Americans who donot qualify for a credit card, the cards are their first opportunity to put a card with aMasterCard or Visa label in their wallets.

Until recently, such cards also provided theeasiest way for such individuals, many of whom have had financial troubles, to rent acar or buy merchandise over the phone.Banks like the debit cards becausetransactions on them are less costly to processthan paper checks. Also, some banks chargecustomers a fee for the cards. And for theMasterCard and Visa versions, banks receive afee from merchants of about one percent of

the purchase price. Retailers, though, have














































































become increasingly unhappy about thegrowth of these debit cards precisely becausethey do not want to pay the fee.

Confusingly, a single card can have both aVisa or MasterCard logo and the mark of anautomated teller machine network like NYCEor MAC. If a signature is used, rather than a

personal identification number, the fee paid bythe merchant is higher.

The credit card companies say the higher feeis justified because of the greater risk. Eventhough both types of transactions involveelectronic verification of the amount of moneyin the consumer's checking account, the cardcompanies say their experience has been thatthe signature method results in more

overdrafts.

For consumers, the debit cards also carry alittle more risk. If the card is stolen, a thief cango on a spending spree with the money in thecustomer's checking account.

Federal law limits liability to $50 if thecardholder notifies the bank within two daysof discovering the missing card. But the bank

has up to 20 days to put the money back intothe checking account.

See our Brochure on Credit and ATM Cards.






























llllllllllllllllllllllll

The Indiana Department of Financial Institutions,Division of Consumer Credit has many other creditrelated brochures available, such as:

Answers to Credit ProblemsApplying for CreditAt Home Shopping RightsBankruptcy FactsBuried in DebtCar Financing Scams

Charge Card FraudChoosing A Credit CardCo-SigningCredit and DivorceCredit and Older ConsumersDeep in Debt?Equal Credit Opportunity

Fair Credit ReportingFair Debt CollectionGold CardsHang up on FraudHigh Rate MortgagesHome Equity Credit Lines

How to Avoid BankruptcyIndiana Uniform Consumer Credit CodeLook Before you LeaseMortgage LoansRepossessionReverse Mortgage LoansRule of 78s – What is it?Scoring for CreditShopping for CreditUsing Credit Cards

Variable Rate CreditWhat is a Budget?What is the DFI?

Call our toll-free number or write to the address on thecover for a copy of any of the brochures listed or for further consumer credit information.

DEBIT

vs.

CREDITCARDS



317-232-39551-800-382-4880





















































FAST FACTS

x Electronic banking, also known as electronicfund transfer (EFT), uses computer and electronictechnology as a substitute for checks and otherpaper transactions.

x An access device is a means of gaining accessto your account, such as a card or a code, for thepurpose of initiating EFTs. Most institutions use apersonal identification number (PIN) for this

purpose.x Take care of your EFT card. Know where it is atall times and report its loss as soon as possible.

x Choose a PIN different from your address,telephone number, social security number, orbirth date.

x Keep and compare your EFT receipts with yourperiodic statements so that you can find andpromptly report errors and unauthorizedtransfers. Prompt reporting is necessary to limityour liability for these problems

To most of us, electronic banking means having24-hour access to cash through an automatedteller machine (ATM) or having our paychecksdeposited directly into our checking or savingsaccounts. But electronic banking offers severalother services that you may find useful.

This brochure lists types of consumertransactions that are covered under the federalElectronic Fund Transfer Act (EFT Act), discussesthe information financial institutions mustdisclose, explains what you can do if you find

errors on your monthly statements, discussesyour liability if your ATM card is lost or stolen,and describes your limited stop-paymentprivileges.

ELECTRONIC FUND TRANSFERS

Electronic banking, also known as electronicfund transfer (EFT), uses computer andelectronic technology as a substitute for checksand other paper transactions. Because EFTs areso convenient, you may wish to know the fullrange of their services.

Automated Teller Machines or 24-hourTellers are electronic terminals that permit you

to bank at almost any time of the day or night. To withdraw cash, make deposits, or transferfunds between accounts, you generally insert aspecial ATM card and enter your personalidentification number (PIN).

Direct Deposits or Withdrawals allow you toauthorize specific deposits such as paychecksand social security checks to go directly to youraccount on a regular basis. You also can arrangeto have recurring bills, such as insurance

premiums and utility bills, paid automatically. This service applies only if you authorizetransactions in advance.

Pay-by-Phone Systems permit you totelephone your bank (or other financialinstitutions) with instructions to pay certain billsor to transfer funds between accounts. Youmust have an agreement in advance with thefinancial institution to make such transfers.

Point-of-Sale Transfers allow you to pay forretail purchases with an EFT (or "debit") card. This is similar to using a credit card, but with

one important exception -- the money for thepurchase is transferred immediately (or soonthereafter) from your bank account to thestore's account. Both MasterCard and Visa,among others, offer debit cards that can beused at participating retailers, and an increasingnumber of merchants are accepting this type of payment. For example, these transfers arebecoming more common at grocery stores, oilcompanies, and convenience stores. However,because point of sale transfers are still relativelynew, they might not yet be widely available atretailers in your region of the country.

DISCLOSURES

The best way to understand your legal rightsand responsibilities regarding your EFT accountis to read the documents you receive from thefinancial institution that issued you the "accessdevice." An access device is a card, code, orother means of gaining access to your accountfor the purpose of initiating electronic fundtransfers. The means may vary from institutionto institution, but most use a PIN for thispurpose. This unique number should be knownonly to you and to select employees of the

financial institution.

Before you contract for EFT services or makeyour first electronic transfer, the institution isrequired to disclose to you the followinginformation in a form you can keep.

x A summary of your liability for unauthorizedtransfers.

x The telephone number and address of theperson to be notified when you believe thatan unauthorized transfer has been or maybe made, along with a statement of the

institution's "business days." Thisinformation will tell you the number of daysyou have to report suspected unauthorizedtransfers.

x The type of transfers you can make, theamount of any charges for transfers, andany limitations on the frequency and dollaramount of transfers.

x A summary of your right to receivedocumentation of transfers, of your right tostop payment on a pre-authorized transfer,and the procedures to follow to stoppayment.

xA notice describing the procedures youmust follow to report an error on a receiptfor an EFT, how to request more informationabout a transfer listed on your statement,and the time period in which you must makeyour report.

x A summary of the institution's liability toyou if it fails to make or stop certaintransactions.

x Circumstances under which the institutionwill disclose information to third partiesconcerning your account.

In addition to these disclosures, you will receive

for most transactions two other types of important papers -- terminal receipts andperiodic statements. (Separate rules apply topassbook accounts from which pre-authorizedtransfers are drawn. Your contract for thataccount is the best source of information aboutthose rules.) You are entitled to a terminalreceipt each time you initiate an electronictransfer, whether you use an ATM or make apoint-of-sale electronic transfer. Among otherthings, the receipt must show the date and theamount of the transfer and the type of thetransfer, such as "transfer from savings to

checking." When you make a point-of-saletransfer, you probably will get your terminal




































































































































































receipt from the salesperson. If you make awithdrawal from a cash-dispensing machine thatcannot issue receipts, the institution is requiredto mail you a receipt on the next business dayfollowing the transfer.

New provisions to the EFTA, effectiveimmediately; compliance mandatory as of October 1, 2001, require ATM operators thatimpose a fee for providing electronic fundtransfer services to post a notice in a prominent

and conspicuous location on or at the ATM. Theoperator must also disclose that a fee will beimposed and the amount of the fee, either onthe screen of the machine or on a paper notice,before the consumer is committed tocompleting the transaction. In addition, whenthe consumer contracts for an electronic fundtransfer service, financial institutions arerequired to provide initial disclosures, includinga notice that a fee may be imposed forelectronic fund transfers initiated at an ATMoperated by another entity.

You also are entitled to a periodic statement foreach statement cycle in which an electronictransfer is made. This statement must show,among other things, the amount of any transfer,the date it was credited or debited to youraccount, the type of transfer and type of account(s) to or from which funds weretransferred, and the address and telephonenumber to be used for inquiries. You are entitledto a quarterly statement even if you made noelectronic transfers within that quarter.

Keep and compare your EFT receipts with yourperiodic statements each month in the same

way you compare your credit card invoices withyour monthly credit card statement or yourchecks against your monthly bank statements.Doing so will enable you to make the best use of your rights under federal law to dispute errorsand avoid liability for unauthorized transfers.

ERRORS

You have 60 days from the date a problem orerror appears on your periodic statements orterminal receipt to notify your financialinstitution. The best way to protect yourself inthe event of an error (or a lost or stolen ATM orEFT card) is to notify the issuer by certifiedletter, return receipt requested, so you can

prove that the institution received your letter.Keep a copy of the letter you send for yourrecords.

After notification about an error on yourstatement, the institution has 10 business daysto investigate and tell you the results. If theinstitution needs more time, it may take up to45 days to complete the investigation -- but onlyif the money in dispute is returned to youraccount and you are notified promptly of the

credit. At the end of the investigation, if no erroris found, the institution may take the moneyback, if it sends you a written explanation.

If you fail to notify the institution of the errorwithin 60 days, you may have little recourse.Under federal law, the institution has noobligation to conduct an investigation if youhave missed the 60-day deadline.

If your failure to notify the institution within thetime periods allowed was due to an extenuatingcircumstance, such as lengthy travel or illness,the issuer must extend the time period for

notification to what is reasonable. Also, if statelaw or your contract imposes lower liabilitylimits, those lower limits apply instead of thelimits in the federal EFT Act.

After reporting the loss or theft of your ATMcard, you are not liable for additionalunauthorized transfers that may be made.Because these unauthorized transfers mayappear on your statements, however, youshould carefully review each statement youreceive after you report the loss or theft. If thestatement shows transfers that you did not

make or that you need more information about,contact the institution immediately, using thespecial procedures provided for reporting errors.

LIMITED STOP-PAYMENT PRIVILEGES

When you use an electronic fund transfer, theEFT Act does not give you the right to stoppayment. If your purchase is defective or if yourorder is not delivered, it is up to you to resolvethe problem with the seller and get your moneyback -- just as if you had paid cash.

There is one situation, however, in which youcan stop payment. If you have arranged regular

payments out of your account to third parties,such as life insurance companies, you can stop

payment if you notify your institution at leastthree business days before the scheduledtransfer. The notice may be oral or written, butthe institution may require a written follow-up tobe made within 14 days of the oral notice. Yourfailure to provide the written follow-up ends theinstitution's responsibility to stop payment. Thisright to stop payment does not apply tomortgage or loan payments you owe to theinstitution that issued the EFT access device.

Although federal law provides only limited rightsto stop payment, individual financial institutionsmay offer more rights or state laws may requirethem. If this feature is important to you, youmay want to shop around to be sure you aregetting the best "stop payment" termsavailable.

SUGGESTIONS

If you decide to become an EFT user, rememberthe following precautions.x Take care of your EFT card. Know where it isat all times and report its loss as soon aspossible.

x Choose a PIN different from your address,telephone number, social security number, orbirth date. Choosing a different number willmake it more difficult for a thief to use your EFTcard.

x Keep and compare your EFT receipts withyour periodic statements so that you can findand promptly report errors and unauthorizedtransfers.

If you believe the institution that issued yourEFT access device has failed to fulfill itsresponsibilities to you under the EFT Act, inaddition to informing the issuer, you may wishto complaint to the federal agency that hasenforcement jurisdiction over that issuer

The Indiana Department of FinancialInstitutions, Division of Consumer Credit hasmany other credit related brochures available,such as:

Answers to Credit Problems Applying for Credit

At Home Shopping RightsBankruptcy Facts























































































































































Buried in DebtCar Financing ScamsCharge Card FraudChoosing A Credit CardCo-SigningCredit and DivorceCredit and Older ConsumersDeep in Debt?Equal Credit OpportunityFair Credit ReportingFair Debt CollectionGold CardsHang up on FraudHigh Rate MortgagesHome Equity Credit LinesHow to Avoid BankruptcyIndiana Uniform Consumer Credit CodeLook Before you LeaseMortgage LoansRepossessionReverse Mortgage LoansRule of 78s – What is it?Scoring for CreditShopping for CreditUsing Credit CardsVariable Rate CreditWhat is a Budget?What is the DFI?

ELECTRONIC

BANKING



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SWINDLERS HAVE COMPUTERS TOO

Cyberspace is a vast new territory forunscrupulous marketers. The National FraudInformation Center reports that whilefraudulent commercial activity on theInternet is not yet a major problem, as useexpands, there is sure to be a majorincrease in deceptive and misleadingpromotions.

Swindlers are attracted to the Internetbecause they can reach thousands of consumers inexpensively, quickly andanonymously. Few restrictions exist on theInternet, making it easy to place deceptiveor misleading information online.

Judging the accuracy and reliability of onlineinformation is a major challenge forconsumers. False or misleading informationrelated to personal finance or health issues,

for example, could lead to seriousconsequences for unsuspecting consumers.

FRAUD ON THE NET

The Federal Trade Commission beganinvestigating fraud on the Internet in 1994. They found that the same kinds of fraudthat occur in other places also surface onthe Net. Electronic bulletin boards, chatgroups, and e-mail networks are fertilegrounds for old-fashioned scams that apply

false advertising claims and deceptivemarketing practices.

Electronic Bulletin Boards provide newsources of information to Internet userstelling about products, services, andinvestment opportunities. At the same timethese electronic bulletin boards can carryfalse and misleading ads for products thatpromise quick solutions to desirable goalssuch as weight loss or easy businesssuccess. The plan is to have you use yourPC to make plenty of money in a shortperiod of time.

Discussion groups or chat forums oftenform on the Internet where interestedparties can exchange information onspecific topic areas. These chat roomssometimes appear to be open discussionwhen they are sales pitches in disguise. Insome cases, people involved in thediscussion may have financial ties tobusinesses that sell products or services

related to the topic area. This disguisedadvertising may not be obvious to theconsumer.

E-mail scams involve individuals orcompanies intentionally misleadingconsumers or using deceptive marketingpractices to gain the consumer's interest intheir product. For example, the use of aparticular product is advertised to cure aspecific medical condition. These are thesame health, diet, and fitness schemes that

occur in other marketplace venues, such asmail-order and telemarketing schemes.Other types of e-mail scams involve the saleof worthless products, phony credit repaircompanies, term paper peddlers, expensivework-at-home deals, psychic hotlines, anddeceptive promises related to contests,awards, sweepstakes, and free gifts.

Pyramid or Ponzi schemes and chainletters are well suited to the Internetbecause they entice investors with the

promise of quick profits using a homecomputer. Investors make money byrecruiting new investors. The problem isthat soon the program runs out of newinvestors and most players lose the moneythey invested. Chain letter schemes askparticipants to send money to the names atthe top of a list with the promise that theywill eventually receive thousands of dollarswhen their names come to the top.Unsuspecting persons lose money every dayon this illegal practice.

Risk-free investment opportunities onthe Internet offer fraudulent technologicaland exotic investments such as wirelesscable, bogus securities, or worthless land. These investments promise to yield fargreater returns than do commonly availableinvestment products. The term "risk-free" ishighly misleading. Few consumers get theirmoney back, much less make a profit.

Pump and Dump stock manipulationson the Internet encourage investors to buy aparticular stock, which is usually little knownand low cost. The promoters may evenadvertise that they have inside information. They make their profit when consumers buythe stock, or pump up the price and thepromoters then promptly sell, or dump theirshares and the stock prices immediatelyfall. This scheme can also work in reverse; ashort seller makes a profit when the price of the stock goes down.

PROBLEMS WITH INTERNET

TRANSACTIONS

Two problems with Internet salestransactions are personal data privacy andverification that both buyers and sellers areauthentic. Many consumers are concernedabout the confidentiality of their personalfinancial information on the Web, with goodreason. When you make a purchase on theInternet, your credit card number could fall

into the wrong hands. Personal data can becollected and organized into database files.When you become a part of an on-lineservice, your personal data can be availableto everyone in that system. While it isunlikely that reputable merchants woulddeliberately sell your data to others, theirdatabase may be tempting targets forhackers.

Verification that consumers are who theysay they are can be solved by an electronic

equivalent of a signature or a driver'slicense. A software product currently used









































































































































by merchants, banks, and brokerage housestells who the user is and what privileges heor she has. There is a growing interest incredit card payment systems that wouldsafeguard credit card purchases on the Net.Encryption software can scramble yourpersonal information so that it can be readonly by the sender and the receiver. Theproblem remains that personal data mightstill be available to certain employees or

hackers.

Experts urge consumers to avoid dealingwith Internet sites they are not familiar with.Even when dealing with a well-knownbusiness, call the business directly to verifythat the site exists. It continues to be a riskybusiness to give personal information,including address and phone number, creditcard numbers, social security numbers, andbank account numbers on the Internet.

PROTECTION AGAINST INTERNETFRAUD

Most people find it hard to believe that theycould become victims of fraud, but oneshould never underestimate the ingenuity of swindlers who make money by misleadingothers. State and federal laws and agencieshave limited capacity to protect consumersfrom fraud on the Internet. The savvyconsumer must stay alert to the possibilityof fraud. The National Fraud Information

Center offers the following suggestions forside-stepping fraud on the Internet:

Never reveal checking account numbers,credit card numbers, or other personalfinancial data at any Web site or onlineservice location -- unless you are sure youknow where this information will bedirected. When you subscribe to an on-line serviceyou may be asked for credit card

information. When you enter any interactive

service site however, beware of con artistswho may ask you to "confirm" yourenrollment in the service by disclosingpasswords or the credit card accountnumber used to subscribe. Use the same common sense you wouldexercise with any direct or telephone creditcard purchase. A flashy professional InternetWeb site does not guarantee that the

sponsor is legitimate. Know the companywith which you plan to do business.

Report anything you see on the Internet thatyou suspect might be fraudulent. TheNational Fraud Information Center's toll-freenumber is 1-800-876-7060. Their mailingaddress is P.O. Box 65868, Washington, D.C.20035. Their Web address ishttp://www.fraud.org

Your state Office of the Attorney General is

empowered to investigate consumercomplaints, including Internet complaints. They can give you information about anyproblems or concerns they haveencountered with the business.

The Better Business Bureau can tell you if there have been any complaints or inquiriesabout a business and how it was resolved.Some online advertisements will have ablue-seal that you can click on to connect tothe Better Business Bureau for a report on

the advertiser's track record. The onlineWeb site for the BBB ishttp://www.bbbonline.org

The Federal Trade Commission enforcesseveral consumer protection laws that arerelevant to computer transactions, such asfalse advertising and consumer credit.Suspicious actions on the Web, whenreported to the National Fraud InformationCenter, are shared with the Federal TradeCommission and the National Association of Attorneys General. In this way, consumers

join with state and federal agencies inactions to curtail fraud on the Internet.

Although many regulations and agencieshave been established to protect consumersfrom fraud, the principle of let the buyerbeware remains the consumer's bestprotection. Legal protections are limited,fraudulent activities flourish, and oncemoney is lost in a fraudulent scheme the

chances of getting it back are extremelysmall. Awareness of the possibility of fraudis your first line of defense.

The Indiana Department of FinancialInstitutions, Division of Consumer Credit hasmany other credit related brochuresavailable. Call our toll-free number or write tothe address on the cover for a copy of any of our listed or for further consumer creditinformation.














































































































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ON THE

INTERNET



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