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Neb. senator targets ‘hold’ charges on debit cards
LINCOLN, Neb. (AP) - Hotels, gas stations and restaurants would have to notify customers if they place temporary hold charges on their debit cards, under a bill set for review in the Nebraska Legislature.
The holds guarantee that merchants are paid for gas bought at the pump or food and service from a restaurant, but they also temporarily deny customers access to money in their accounts - sometimes in amounts of $50 to $100.
Sen. John Harms of Scottsbluff said he introduced the bill to help low-income people who don’t realize their money is being held. Those customers could face overdraft fees, a bounced check or having a purchase declined. The Legislature’s Banking, Commerce and Insurance Committee will review the legislation at a hearing on Monday.
Harms started exploring the issue after talking with a constituent who worked at a local grocery store. A young couple tried to buy diapers and baby food with a credit card, but was denied because a gas station had placed a $75 hold on their account. Without a hold, Harms said the couple could have afforded the items.
“This could really hurt a lot of people, if they don’t understand what’s happening to them,” he said. “The whole intent is to have the public better understand what’s occurring. I think merchants owe it to their customers to let them know the charge, and the maximum that it’s going to be.”
The temporary charges often apply to customers who use cards at gas stations, hotels, restaurants or other businesses when the total bill isn’t immediately known.
The hold charges are imposed when customers swipe their cards. The card terminal connects with a merchant’s card-processing company, which confirms that the account is valid and that enough money is available to cover the purchase. Money is then deducted from the customer’s bank balance, but not immediately transferred to the merchant. The hold is lifted once the merchant is paid, but the process can take a few minutes or a few days.
The bill would require businesses to notify customers orally, electronically or in writing, or with a sign posted at the cash register. The notification would specify the maximum amount of the hold and how long it would stay in effect. Businesses that violate the law could face a $2,000 civil penalty.
It also would require the Department of Banking and Finance to work with interested groups on a consumer awareness brochure for distribution at businesses and banks. The attorney general would also have to report the number of hold-related complaints to the state in 2015.
Kim Robak, a lobbyist for card processors, said the hold amount is decided by merchant to protect themselves, but only the customer’s bank can place the hold. Robak said Harm’s bill represents an effort to educate consumers, though her clients are neutral.
Nebraska business groups say they agree that the holds may create problems, but they aren’t sure how best to address the issue.
Some restaurants use debit holds to account for tips that will increase a meal’s total cost, but it’s not clear how widespread the problem is, said Jim Otto, a lobbyist for the Nebraska Restaurant Association. Otto said he believed card-processing technology would eventually evolve and render the issue moot.
“I’m not a computer whiz, but technologically, when people say they can’t fix it, it blows my mind,” he said.
Legislatures in 13 other states have introduced bills to regulate the credit holds since 2003, according to the National Conference of State Legislatures.
In 2006, Tennessee passed a law that requires merchants to notify customers about any hold that exceeds 25 percent of the transaction amount or $50, whichever is greater.
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