It seems everyone wants to stop excessive holds on people’s bank accounts when they use debit cards at the gas pump – sometimes tying up two or three times the amount of the purchase – but changing a national problem with state law could be tough.
“Good luck at making a state rule. This is a national system,” said Jinger Duryea of the Big Apple Food Stores, owned by oil dealer C.N. Brown.
Duryea was one of many who testified last week before the Legislature’s Business, Research, and Economic Development Committee, which was reviewing legislation that would put restrictions on debit and credit card holds.
The bill is being sponsored by Rep. Walter Ash, D-Belfast, who said holds are particularly hard on people with fixed or limited incomes.
“There are many families in Maine who live paycheck to paycheck,” said Ash, and seniors who are on fixed incomes. “Because of the hold, they have bounced checks and are charged fees for insufficient funds.”
“Mainers work hard for their money and they should not be denied access to it,” he said.
Ash’s bill would require debit card companies and banks to reduce the hold to the actual amount owed within an hour of the purchase. If they don’t, as the bill is now written, they would be fined. The bill also addresses credit cards, but members of the committee reviewing the bill said the problem largely exists with debit cards.
Right now multiples of the actual amount paid for with a debit card can be held by the bank to assure that sufficient funds are available to pay the merchant. When the hold is on, card users can essentially be blocked access to their funds if the hold puts them over what’s in their account.
While it has long been common at hotels and rental car companies, the practice is starting to hit home at the gas pump because the price of gas has gone up so dramatically. It is also starting to affect more people because of the increased use of debit cards.
Gas stations used to just electronically request a $1 hold to make sure a person’s card was valid. Now they’re requesting holds of $50 to $75, regardless of the actual purchase, because that’s what it can cost to fill up a tank.
Duryea said the big oil companies, like Citgo and Shell, dictate how much stations have to request in terms of a hold. The banks or credit card companies dictate how long the hold stays on after the purchase.
“We absolutely, positively have to follow rules that have been set by MasterCard or Visa or the debit network,” in terms of verifying available funds or credit, Duryea said. “I don’t really think that anybody is trying to screw anybody around. This is the system you have.”
Vicky LaChance, an assistant vice president of electronic banking at TD Banknorth, said the $1 hold that used to be traditional for debit card users at the gas pump covered up to a $50 purchase. Now that some tanks hold more than $50 worth, merchants are requesting more coverage.
“The banks only respond to the hold submitted by the merchants,” LaChance said, but they do control how long the hold stays on an account, which can be up to three days.
She said banks could choose to release their hold after one night, which is what TD Banknorth is going to do. Releasing the hold after an hour may not be possible, however.
“I’m not sure the phone calls could even be made in an hour,” she said.
The Business, Research and Economic Development Council, which was scheduled to vote on the bill Tuesday, instead agreed to allow interested parties to take more time to propose a solution. A committee vote on the bill now is scheduled for Feb. 14.
At the very least, committee members said, they want to require merchants to warn customers that money is being held in excess of the purchase.
The hold can be avoided if customers only use a debit card when a pin-pad is part of the transaction. Pin-pads, which take a person’s individual bank identification number, are usually not located on gas pumps, however.
The other way around the hold is to pay for the transaction inside the gas station so an exact amount is charged. In a hold situation, the merchant is anticipating the maximum amount that could be charged once the person starts pumping.
Several legislators spoke in favor of the bill last week, using personal experience as part of their testimony.
Rep. Hannah Pingree, D-North Haven, said a $500 hold was put on her bank account when she used her debit card for a three-day rental of a $30-a-day rental car.
“I urge you to take far more action, but at a very minimum, I urge to inform people. Consumers have to understand this,” Pingree said.
Rep. Emily Cain, D-Orono, who represents a lot of University of Maine students and was one herself not that long ago, said, “it was not that unusual for me to have a balance that was less than $100,” when she was a student.
“Living with low balances is certainly not fun, but it’s a reality in Maine,” Cain said. “It’s not fair that merchants can hold my money hostage.”
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