Bank hold on cards contested Bill seeks to limit firms’ ability to freeze assets

AUGUSTA – A midcoast lawmaker is hoping to provide relief for thousands of Mainers who have found themselves literally “held up” by banks that have been freezing their assets when they use their debit and credit cards.

Rep. Walter E. Ash Jr., D-Belfast, is the lead sponsor of LD 1835, a bill that seeks to impose what he perceives as more reasonable limits on bank policies that place debit and credit card holds on amounts of money exceeding an actual purchase price for an extended period of time.

Ash said he has heard of convenience store customers who paid for $30 worth of gasoline with a debit card and had $75 or more from their checking account frozen for a day or longer until the transaction cleared the customer’s bank. The length of time the hold remains on an account and the amount of the customer’s money tied up during the transaction vary from bank to bank.

The practice has resulted in overdrawn checking accounts and overdraft charges for many Mainers who are unaware such a policy is in place at the business where the transaction occurs. Furthermore, businesses are under no obligation to inform customers that a hold may be placed on their checking account until the debit transaction clears the customer’s bank.

“While for some this is an inconvenience, there are many families in our state who live paycheck to paycheck, not to mention our many seniors on a fixed income,” Ash told members of the Legislature’s Business, Research and Economic Development Committee. “This is much more than a nuisance. That money which is held – their money – represents groceries, prescriptions and day care costs. … This is wrong.”

LD 1835 would require banks and businesses that place holds on debit and credit accounts to limit those holds to no more than the actual amount of the purchase. Fines of up to $1,000 could be imposed on businesses or banks that violate the proposed law.

“While ensuring that a card is valid and sufficient funds are available makes sense, merchants should not be entitled to tie up money that they have no legal right to,” Ash said. “Mainers work hard for their money and shouldn’t be denied access to it.”

Rep. Herb Adams, D-Portland, a co-sponsor of the bill, told the committee about one of his constituents who emigrated to the United States from Somalia and opened his first checking account. A debit card purchase for $25 worth of gasoline went through just fine, but the Somalian learned within a day that a $100 grocery check he wrote had bounced even though he knew he had sufficient money in his account to cover the purchase.

“My friend is a Somali and his English is not necessarily very good, but it is good enough for him to work two jobs, pay his own way, provide for his family, pay his taxes and be absolutely amazed that all Americans just aren’t grateful every day,” Adams said. “It’s also, as it turns out, good enough for him to be clipped by a debit card hold and to be amazed by that, too.”

The hold policy presents a particular hardship for students according to Rep. Emily Ann Cain, D-Orono, who said young people live close to the edge of their financial limits, adding it was “not fair” for merchants to “hold money hostage for any amount of time.” Rep. Hannah Pingree, D-North Haven, agreed, saying she had been stung by a hold policy when she rented a car during a trip to North Carolina. She had a $500 hold placed on her account while the company waited for her $90 rental car fee to clear the bank.

“I’m sure they were concerned about the car,” she said. “But there was no disclosure about the $500 hold.”

Opponents like Pattie Aho, a consultant with the Portland-based law firm Pierce Atwood representing the Maine Oil Dealers Association and the Convenience Store Council of Maine, said her clients are aware of how hold policies affect consumers. But she said a better answer than LD 1835 would be educating consumers about the use of their cards, how bank transaction systems work and the results a hold could pose to consumer checking accounts.

“As drafted, the bill would place a merchant in violation if a hold were placed on a consumer’s account for more than an hour following the completion of the transaction,” Aho said. “We must oppose this bill because it would place merchants in violation for actions that take place in a very complicated system and that are beyond their control.”

Aho said one of the indicators of a potential hold for a consumer can be found in whether the merchant requires the customer to confirm their debit transaction with a signature or by entering their personal identification number at the time of the sale. The PIN number transaction, she said, represents a real time, or instantaneous, transaction while a signature debit could take days to process and trigger the need for a hold.

Aho’s contentions were reinforced by Jinger Duryea, a convenience store manager with C.N. Brown Co., who said the lawmakers were operating under a misperception if they thought the hold policy originated with merchants.

“The merchant never places a hold on a customer’s bank account,” she said. “We have no access to a customer’s bank account. We have no ability to release a hold on a customer’s bank account. When a bank places a hold on the account, remember, the funds are still in the account and that no funds have changed hands.”

The committee has scheduled a work session on LD 1835 for Jan. 31.