Monday, January 28, 2002
Gas Stations Can’t Put Excess Hold on Debit Card Accounts—Lockyer
By a MetNews Staff Writer
It is against the law for gas stations to put a “preauthorization hold” on the bank account of a customer who pays for gas with a debit card if the hold is for a higher amount than the price of the fuel and the customer is not informed, state Attorney General’s Bill Lockyer’s office said Friday.
In an opinion authored on Lockyer’s behalf, Deputy Attorney General Thomas S. Lazar said the practice violates the state’s Unfair Competition Law if the hold continues after the gas is pumped and the transaction concluded.
No reason has been given why service station owners can’t tell customers that a hold is being placed on their bank accounts, the opinion said.
“Second, without such knowledge, these customers may be adversely affected by having their checks dishonored by their financial institutions or by having to pay overdraft fees as a result of subsequent uses of their debit cards or checks,” the opinion said. “Accordingly, in the absence of satisfactory justification for the business practice and the potential for the practice to be substantially injurious to debit cardholders, we find that nondisclosure in these circumstances would constitute a violation of the UCA.”
The issue was raised by state Sen. Wesley Chesbro, D-Arcata.
More customers have been paying for gasoline at service stations with debit cards than credit cards. Some franchises accept only debit cards and cash.
Debit cards operate much like instant checks, essentially paying for a transaction by withdrawing the money from the holder’s bank account.
Stations often place holds on those bank accounts as the customer begins pumping, to make sure there is enough in the account to pay for the transaction. Unlike with other products bought with a debit card, the gasoline cannot be returned to the retailer if it turns out there was not enough money in the account.
If the amount of the hold does not exceed the price of the fuel that is ultimately purchased or if the hold is immediately reversed after fueling is finished, the customer need not know of the hold’s existence, the Attorney General’s Office said.
Copyright 2002, Metropolitan News Company