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My bank plans to replace existing ATM cards with network-branded debit cards. Does the bank need to provide a change in terms notice?

My bank has not offered new ATM cards for a number of years, although many of our consumer customers still have and use them. The bank is now planning to discontinue ATM cards completely and will be replacing them with network-branded debit cards.

It appears that replacing the ATM cards with debit cards qualifies as a substitute card under §1005.5(a)(2) of Regulation E and thus the requirements related to access device issuance do not apply.

It also appears that the bank does not need to provide a change in terms notice under §1005.7(b) as the change will not result in:

  1. Increased fees for the consumer;
  2. Increased liability for the consumer;
  3. Fewer types of available electronic fund transfers; or
  4. Stricter limitations on the frequency or dollar amount of transfers.

Do you agree?

It appears that there are two questions here: one, whether this is a substitution under §1005.5; and two, whether the bank must provide a change in terms notice. The answer is a qualified “yes” that the card is s substitution and “yes” that a change in terms is required.

First, though the regulation is not explicit, it appears that this is a substitution. Section 1005.5 allows banks to issue an access device if the consumer requests the access device or if they are replacing a previously accepted access device. The debit card is replacing a previously accepted ATM card. In addition, the section cited below explaining the change in terms notice requirement appears to assume that such a switch is a substitution and not a new access device.

Second, it appears that a change-in-terms notice is required in this case.

Comment 1 to §1005.5(a)(2) states, “If the replacement device…permits either fewer or additional types of electronic fund transfer services, a change-in-terms notice or new disclosures are required.” (Emphasis added.) The general debit card presumably will allow additional types of electronic funds transfers, i.e., payment for purchases, which the ATM card does not. Moreover, the fact that the consumer may use the debit card without a PIN increases the potential for unauthorized transactions. Thus, the bank may either utilize a change-in- terms notice or provide new Regulation E disclosures with the new device. (December 2019)

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