What should we include in our bank disclosures and policies regarding Mastercard debit card limits? Can we lower a debit card’s limits or cancel a debit card if a customer has had repeated overdrafts? If we lower a customer’s debit card limits or cancel their debit card, do we need to send written notice to the customer? Also, are there any parameters for canceling a customer’s debit card if they have been repeatedly scammed and submitted numerous disputes?

We believe that the Regulation E requirement to disclose limitations on the frequency and dollar amount of debit card transactions would require you to include any limits imposed by Mastercard in your disclosures. However, we do not believe that you are required to disclose when you cancel a debit card. We do recommend caution before lowering debit card limits or canceling a card in response to a customer’s submission of multiple disputes, which would violate the Equal Credit Opportunity Act (ECOA) unless you can show that the disputes were not submitted in good faith. Additionally, we recommend reviewing your institution’s agreement with Mastercard to see if it contains any requirements regarding debit card limits.

Regulation E requires financial institutions to disclose any limitations on the frequency and dollar amount of electronic fund transfers with other required information in your initial disclosures (which must be made at the time a consumer contracts for an electronic fund transfer service or before the first electronic fund transfer is made involving the consumer’s account). The term “electronic fund transfer” includes transfers resulting from debit card transactions. If Mastercard imposes limits on funds transfers made through its debit cards, we believe you must disclose those limits in the initial disclosures for your customers with Mastercard debit cards.

Additionally, Regulation E requires written notice of any account changes that would result in stricter limitations on the frequency or dollar amount of electronic fund transfers at least twenty-one days before the effective date of the change (unless an immediate change is necessary for security purposes). Consequently, we believe that any reduction in debit card transaction limits should be disclosed to the customer with a change-in-terms notice. However, Regulation E’s Official Interpretations state that the cancellation of access devices (including debit cards) does not require a disclosure.

We do not recommend lowering debit card limits or cancelling debit cards attached to an account subject to overdraft protection due to a customer’s repeated submission of disputed transactions — unless your institution can show that the disputes were not submitted in good faith. The ECOA prohibits discrimination on several bases, including “because the applicant has in good faith exercised any right under this chapter,” including the dispute rights under the Electronic Fund Transfer Act. The federal banking agencies have interpreted ECOA’s discrimination protections as applicable to overdraft protection programs, and we believe that discriminating with respect to a debit card tied to an account subject to overdraft protection likely would be viewed as violating ECOA. Consequently, we do not recommend lowering limits or cancelling cards on the basis of repeated submissions of disputes, unless you can show that the customer was not submitting the disputes in good faith.

For resources related to our guidance, please see:

Regulation E, 12 CFR 1005.7(b)(4) (“A financial institution shall provide the following disclosures, as applicable: . . . (4) The type of electronic fund transfers that the consumer may make and any limitations on the frequency and dollar amount of transfers. Details of the limitations need not be disclosed if confidentiality is essential to maintain the security of the electronic fund transfer system.”)

Regulation E, 12 CFR 1005.7(a) (“A financial institution shall make the disclosures required by this section at the time a consumer contracts for an electronic fund transfer service or before the first electronic fund transfer is made involving the consumer’s account.”)

Regulation E, 12 CFR 1005.3(b)(1)(v) (“The term ‘electronic fund transfer’ means any transfer of funds that is initiated through an electronic terminal, telephone, computer, or magnetic tape for the purpose of ordering, instructing, or authorizing a financial institution to debit or credit a consumer’s account. The term includes, but is not limited to: . . . (v) Transfers resulting from debit card transactions, whether or not initiated through an electronic terminal.”)

Regulation E, 12 CFR 1005.8(a)(1)(iv) (“A financial institution shall mail or deliver a written notice to the consumer, at least 21 days before the effective date, of any change in a term or condition required to be disclosed under § 1005.7(b) of this part if the change would result in: . . . (iv) Stricter limitations on the frequency or dollar amount of transfers.”)

Regulation E, 12 CFR 1005.8(a)(2) (“A financial institution need not give prior notice if an immediate change in terms or conditions is necessary to maintain or restore the security of an account or an electronic fund transfer system. . . .”)

Regulation E, Official Interpretations, Paragraph 8(a), Comment 2 (“The following changes do not require disclosure: . . . ii. Cancellation of an access device.”)

Regulation E, 12 CFR 1005.2(a)(1) (“‘Access device’ means a card, code, or other means of access to a consumer’s account, or any combination thereof, that may be used by the consumer to initiate electronic fund transfers.”)

Regulation E, Official Interpretations, Paragraph 2(a), Comment 1 (“The term ‘access device’ includes debit cards. . .”)

Equal Credit Opportunity Act, 15 USC 1691(a) (“It shall be unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction . . . (3) because the applicant has in good faith exercised any right under this chapter.”)

Joint Guidance on Overdraft Protection Programs, 70 Fed. Reg. 9127, 9131 (February 24, 2005) (“Under the Equal Credit Opportunity Act (ECOA) and Regulation B, creditors are prohibited from discriminating against an applicant on a prohibited basis in any aspect of a credit transaction. This prohibition applies to overdraft protection programs.”)