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#834612 - 10/15/07 04:19 PM "Decoupled" debit card
RebekahL CRCM Offline
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Has anyone heard about the new product Capital One is coming out with -- a "decoupled" debit card? It which draws funds directly from any bank account the cardholder maintains at any financial institution. It is called "decoupled" because it severs the link debit cards traditionally have to a particular bank account with a particular card issuer. The transactions are processed via ACH debits, and the card issuer (Capital One) doesn't know the customer's balance.

Profitability and loyalty concerns aside (i.e. loss of interchange income, loss of customers carrying bank-branded cards, etc.), can anyone opine on the compliance aspect of these cards?

My questions include:

- Can we deny the ACH debit if it overdraws the customer's account? Traditional debit card transactions must be honored, but what about these transactions? I'm thinking we CAN return NSF ACH items, and Cap One will have to eat them.

- How do Reg E claims fall into all of this? If a transaction error occurs, to whom does the customer make a claim? I hoping it would be Cap One.

I'm sure there are other issues, but those are the biggies that come to mind right away. Thoughts?
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#834673 - 10/15/07 05:22 PM Re: "Decoupled" debit card [Re: RebekahL CRCM]
John Burnett Offline
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If the card is obtained from Party A and can access accounts at a bank (any bank that is not Party A), the provisions of Regulation E, section 205.14(a) kick in (assuming there's no contract between Party A and the bank holding the account):
Quote:
(a) Provider of electronic fund transfer service. A person that provides an electronic fund transfer service to a consumer but that does not hold the consumer's account is subject to all requirements of this part if the person:
(1) Issues a debit card (or other access device) that the consumer can use to access the consumer's account held by a financial institution; and
(2) Has no agreement with the account-holding institution regarding such access.


There are a number of changes to the compliance responsibilities incumbent on Party A, and the bank is "off the hook," except that it must cooperate with Party A in Party A's Section 205.11 error resolution efforts.

Assuming that there are no contractual agreements between your bank and the issuer of the card, and that the transactions arrive at your bank for posting via ACH, they should arrive as "POS" ACH entries, and you should have return rights for ODs, no-account, etc.

Whether Capitol One -- or anyone else filling the shoes of Party A -- would have to "eat" a return will be up to its contract with the cardholder. Presumably there will be some protections for the issuer.
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#834919 - 10/15/07 08:35 PM Re: "Decoupled" debit card [Re: John Burnett]
Andy_Z Offline
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#835304 - 10/16/07 04:42 PM Re: "Decoupled" debit card [Re: Andy_Z]
RebekahL CRCM Offline
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Good stuff, guys. Thank you!
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#835311 - 10/16/07 04:47 PM Re: "Decoupled" debit card [Re: Andy_Z]
X O Offline
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there was an article on this in the August MPX Monthly mailing
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#835439 - 10/16/07 06:42 PM Re: "Decoupled" debit card [Re: X O]
Milby Offline
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I have to say the product developers at Capital One are really good. I would hate to have to administer the program, but it is a genious way to make money...heck, I'll get one as soon as they are available here.

They also have a great marketing department/firm. Does anybody NOT know the commercials with barbarians plundering your wallet?

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#844586 - 10/29/07 07:34 PM Re: "Decoupled" debit card [Re: Milby]
Anonymous
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My question may be answered in the article, but since I am 'blocked' from reading the article, I'll ask my question here. If the card can have multiple bank accounts on it and they are presumably POS transactions, how does it know which account to send the transaction to?

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#844677 - 10/29/07 08:31 PM Re: "Decoupled" debit card [Re: ]
John Burnett Offline
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I don't believe that the article says anything about accessing multiple accounts. It does say it "could be settled from any demand deposit account at any institution," which means to me that Capital One will link it to any (one) transaction account of the cardholder's choosing, at any institution.

Access to a choice from multiple accounts would require decision points in the customer interface, like those offered by ATMs that are handling on-us transactions for cardholders with multiple account access. That would require some changes to the authorization communication set and re-programming of merchant POS terminals, at a minimum.
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#846294 - 10/31/07 03:56 PM Re: "Decoupled" debit card [Re: John Burnett]
X O Offline
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the maelstrom
everything I have read implies only one account per card.
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