Question & Answer

Question: Our bank is planning to offer a "debit" card. Is there anything we should be concerned about under ECOA?

Answer: Good question! ECOA regulates credit, not deposits. Ordinarily, a strict debit card would not be subject to credit laws. However many banks forget that there are ways in which a debit card can be used for credit. If it can be used for credit, the ECOA rules can affect it.

For example, if the card can be used to access an overdraft line of credit, the transaction is a credit transaction subject to ECOA and other credit laws. In this case, the card should be processed in the same way that the bank would process a credit application, including notification to the applicant of any adverse action. This could happen if the card was used at point of sale to trigger an overdraft. A refusal to accept the overdraft would trigger ECOA notification requirements as a denial of credit.

Copyright © 1995 Compliance Action. Originally appeared in Compliance Action, Vol. 1, No. 1, 11/95