The Two Most Important Words for Fraud Victims: Zero Liability

When someone steals from you, there’s very little to be happy about. First of all, it’s a stressful situation. On top of that, you have to worry about the value of what you’ve lost, and if your stolen possessions include something like a credit card, cellphone or personally identifying information (PII), you have to be concerned about how much more this thief could cost you. In these situations, these two words might be your best friends: zero liability.

In some cases, consumers may not be liable for any fraudulent activity committed in their name, but consumer protections vary by type of product and the company you got it from. Whenever you realize you’ve become a victim of fraud, act quickly to put a stop to the activity and find out what you’re legally responsible for.

There are different consumer protections for credit cards and debit cards, because they fall under different laws. With credit cards, you can only be liable for up to $50 of unauthorized transactions, but if the card wasn’t present at the time of the transaction (i.e. someone stole your data but not your physical card), you aren’t liable for any of it.

Some credit cards offer zero liability, no matter the circumstances. It’s something to look into when you’re considering getting a new card. Many card issuers have started offering zero liability, but to be sure, you should look at your credit card agreement, says Jonathan G. Stein, a consumer law attorney in California, who works with people on a variety of fraud, debt and identity theft issues.

“I always say, ‘What’s your credit card agreement say?’ and 99.9% of the time, they say, ‘What credit card agreement?’ These days, most people are applying for cards online, and they don’t take the time to read through all the fine print,” Stein says.

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Stein says he often sees banks treating credit and debit card fraud the same, even though the consumer protections differ. With debit cards, typically you must report the stolen card within two business days, otherwise your liability could exceed $50. If your statement shows unauthorized purchases, even though your card isn’t missing, and you don’t report them within 60 days of the statement date, you could be liable for all of the transactions.

Stein suggests filing a police report in the event of any unauthorized use of your personal information — including loan fraud and card theft — in addition to notifying the financial institution. Even if your contract with the bank or card issuer says you’re liable for some fraudulent transactions, it doesn’t hurt to try negotiating.

“Generally they (agreements) are set in stone, but banks are willing to waive them for good customers, or if you can convince them there’s a good reason they should,” Stein says.

It’s also important to check your credit reports regularly for signs of fraud — such as new accounts you didn’t apply for, or unexpected higher balances reported on existing accounts. You’re entitled to free credit reports once a year from each of the three major credit reporting agencies. You can also get a free credit report summary from Credit.com, updated every 14 days, to look for important changes.