We are not aware of any age restrictions on issuing debit cards in Illinois or federal law, but we recommend contacting your debit card issuer and reviewing any agreements for age limitations. Additionally, we caution you against making individual exceptions to your policies and procedures. If you decide to open these accounts, you may wish to consider revising your policies and procedures to allow other similarly-aged minors to use debit cards for joint accounts opened with their parent or guardian — particularly in light of UDAAP and disparate impact concerns.

The Illinois Banking Act specifically authorizes state banks to accept deposits made by minors and open accounts in their names, and a bank’s rules and regulations with respect to an account opened in the name of a minor is binding on them as if they were of full age and legal capacity. However, this provision of the Illinois Banking Act was enacted long before overdrafts became a common account feature, and it has not been tested in court with respect to deposit account features that could be considered credit-related, such as overdrafts and right of setoff provisions.

Additionally, Illinois courts have held that contracts with minors are voidable by the minor on attaining the age of majority (which is eighteen in Illinois), although such contracts are not void outright. A minor’s ability to void agreements may make your account agreement’s overdraft and other provisions unenforceable as to the minor, but we believe these provisions would be effective against the parent or guardian who is a joint owner on the account. At least one Illinois court has held that a joint account owner is liable for overdrafts caused by another joint account owner. Another court has held that banks may set off the debts of either joint owner against a joint account as specified in the joint account agreement.

As to the Regulation E risks, if a minor allows a friend to use the debit card, we do not believe the transaction would be considered “unauthorized” under Regulation E. Consumers are liable for electronic fund transfers (including debit card transactions) initiated by persons to whom the consumer furnished the card — unless the consumer notifies you that transfers by that person are no longer authorized. As such, we do not believe a parent or guardian could successfully claim that a transaction was unauthorized if it was initiated by the minor or a friend to whom they gave the card — and you may wish to caution the parent or guardian about this possibility.

We also caution that granting certain exceptions to your general policies and procedures for minor accounts has the potential to raise concerns about discrimination if you do not allow other similarly-aged minor account holders to be issued debit cards. Although minors are not a protected class, a practice of allowing some but not all similarly-aged minor account holders to use debit cards could result in a disparate impact on one or more protected classes. Even though fair lending laws do not apply to deposit accounts, the general prohibition on unfair, deceptive, and abuse acts and practices (UDAAP) could apply. Consequently, you may wish to revise your policies and procedures to allow all minor account holders above a specified age (whose parent or guardian is a joint accountholder) to be issued debit cards. 

For resources related to our guidance, please see:

• Illinois Banking Act, 205 ILCS 5/45.1 (“A state bank may accept deposits made by a minor and may open an account in the name of such minor and the rules and regulations of such bank with respect to each such deposit and account shall be as binding upon such minor as if such minor were of full age and legal capacity.”)

• Fletcher v. Marshall, 260 Ill. App. 3d 673, 675 (1994) (“A contract of a minor is not void ab initio, but merely voidable at the election of the minor upon his attaining majority.”)

• Thornhill v. Midwest Physician Ctr., 337 Ill. App. 3d 1034, 1052 (2003) (“In Illinois the age of majority is 18 years old.”)

• Joint Tenancy Act, 765 ILCS 1005/3 (“Except as otherwise provided in this Act, all joint obligations and covenants shall be taken and held to be joint and several obligations and covenants.”)

• Pacenta v. Am. Sav. Bank, 195 Ill. App. 3d, 808, 809, 814–15 (4th Dist. 1990) (“The trial court held that the defendant bank had the lawful right to charge back against plaintiff’s individual account the amount of an overdraft created in a joint checking account to which her husband and the plaintiff were cosignatories. We affirm. . . . [P]ublic policy requires that one who has established a joint account be held liable, to the extent of his funds held in other accounts in that bank, for the amount of credit the bank gives the joint account, and for any overdrafts which result from this credit, regardless of who personally presents the check on that account. Such a bank has the right, under the Code, to unilaterally charge this debt against any account the plaintiff customer may have with the bank, including plaintiff’s individual account or CD, regardless of whether the account card has a specific indemnification clause for the bank.”)

• Selby v. DuQuoin State Bank, 223 Ill. App. 3d 104, 109 (5th Dist. 1991) (“[A] plain reading of the set-off provision of the signature-card agreement indicates to this court that the Bank asserted a right to set off each depositor’s debts or obligations owing to the Bank against the deposit account and that each depositor recognized this right of the Bank to set off either depositor’s debts against the joint account. . . . because the joint depositors, Smith and plaintiff, agreed that the Bank’s right of setoff applied to the joint account for a debt or obligation owing by either of them, the Bank’s setoff of these funds was proper.”)

• Regulation E, 12 CFR 1005.2(m) (“‘Unauthorized electronic fund transfer’ means an electronic fund transfer from a consumer’s account initiated by a person other than the consumer without actual authority to initiate the transfer and from which the consumer receives no benefit. The term does not include an electronic fund transfer initiated: (1) By a person who was furnished the access device to the consumer's account by the consumer, unless the consumer has notified the financial institution that transfers by that person are no longer authorized . . . “)

• Regulation E, Official Interpretations, Paragraph 1005.2(m), Comment 2 (“If a consumer furnishes an access device and grants authority to make transfers to a person (such as a family member or co-worker) who exceeds the authority given, the consumer is fully liable for the transfers unless the consumer has notified the financial institution that transfers by that person are no longer authorized.”)

• Equal Credit Opportunity Act, 15 USC 1691 (“It shall be unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction—(1) on the basis of race, color, religion, national origin, sex or marital status, or age (provided the applicant has the capacity to contract); (2) because all or part of the applicant’s income derives from any public assistance program; or (3) because the applicant has in good faith exercised any right under this chapter.”)

• Equal Credit Opportunity Act, 15 USC 1691a(d) (“The term ‘credit’ means the right granted by a creditor to a debtor to defer payment of debt or to incur debts and defer its payment or to purchase property or services and defer payment therefor.”)

• UDAAP, 12 USC 5531(a) (“The Bureau may take any action authorized under part E to prevent a covered person or service provider from committing or engaging in an unfair, deceptive, or abusive act or practice under Federal law in connection with any transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service.”)