We have a few commercial customers (LLC and a corp with multiple signers)who have requested debit cards for multiple signers on each account.
In my prior banking experience we have been taught not to issue these. Now I am at a smaller institution and I am also responsible for answering why we do not issue these. We looked into reg E and it doesn't seem to cover this. I think it may have to do with a credit exposure but I'm not sure. Any help on where to turn for the answer would be great. Thanks in advance

You should use a business card product for your commercial customers. The rules are TREMENDOUSLY different from those that apply to consumers.

First, Reg E doesn't cover businesses so that goes out the window.

We will offer debit cards to business customers as long as they sign our agreement. It basically states that they are responsible for the cards and the security of the cards. If there are fraudulent charges, the bank will attempt to recover funds and dispute on their behalf, however, if it comes down to no chargeback rights, the liability falls on the business....regardless of the circumstances of the fraudulent activity. Cards are only issued to signers on the account and in some special cases to those employees that an executive signs off on. AND we only issue to those customers that we are comfortable with.

I really don't think it's so much of a credit exposure risk but more of a security risk. With a consumer, it's very clear cut on what is expected of the bank in cases of unauthorized charges. However, when it comes to businesses, it's not quite so cut and dry. Plus, I think the risk of fraudulent activity goes up (a disgruntled employee embezzles corporate funds for an example). So, while the monetary liability may not legally fall to the bank, it's possible that a customer service and PR nightmare could happen.

I'm not an expert on unauthorized transactions using a debit card on business accounts by any means. We've put such tight controls on it that we haven't had any. So, Brenda if I'm wrong, please correct me!

Yes, there is a greater credit risk with debit cards. If you decide to issue them, you will want to use a good agreement that covers the conditions of how the card will be used and the fact that Reg E does not cover them (unless you choose to offer Reg E-equivalent coverage on your own.)

Alternatively, both Visa and MC now offer a business debit card product. I would look into that rather than issue regular debit cards to businesses. One thing to keep in mind and make sure the customer understands, is that many of the protections offered with these cards that cover employee fraudulent use, do require that the employee is fired before the claim will be handled.

We offer business Visa Debit cards - but be aware! Visa is extending its zero liability and provisional credit policy to the Visa Business check card and that anyone offering this card is required to offer this benefit. It doesn't go as far as Reg E, but Visa’s Zero Liability Policy has been devised to provide the business customer with protection against unauthorized Visa Business check card transactions processed through the Visa network, including Internet and telephone purchases.
BC

Thanks for all the responses.
I have a copy of a proposed contract for the Bus card product and it is quite a bit more expensive then the consumer product and would be riskier. Looks like we need to draft (or have drafted) another agreement that would protect us. But from comments here I have to wonder if the agreement with Visa/MC would allow a bank to write up an indemnity with Visa/MC's promise of 0 liability to the business customer, It seems that these two things may be in conflict. The agreement I have recevied doesn't seem specific enough to cover this. Has anyone confronted this possible conflict?