BISMARCK, N.D.—North Dakota’s credit unions are lobbying against a bill in the state legislature that would require credit unions and other issuers to release a debit card hold placed on an account for the preauthorized amount within two business days when the transaction was satisfied by a means other than the debit card.
Credit union representatives testified before the North Dakota House Business and Labor committee to oppose the bill, which is sponsored by Rep. Mark Dosch (District 32, Bismarck), who owns and operates hotels in Bismarck, Fargo and Grand Forks.
According to the Credit Union Association of the Dakotas, Dosch testified that on occasion customers have problems when debit card issuers (credit unions and banks) hold “pre-authorized funds” for a number of days when a transaction is supposed to have been matched or closed. The CUAD said that Dosch used the example of when a customer uses a debit card at check-in but pays with another means at checkout, meaning the customer does not have access to those funds until the hold is released. The bill would require the issuer to release the pre-authorized funds within a 48-hour time period.
“In our opinion, this bill is a solution in search of a problem,” said the CUAD. “It is a bill to alter or regulate a payment system that performs so efficiently and effectively that more and more merchants are no longer accepting checks. This legislation, however, would task the state to request payment networks, processing centers and debit card issuers to redesign their electronic payment networks.
“Credit unions and other issuers believe that the pre-authorization hold is provided to protect both merchant and the member/consumer,” the CUAD continued. “It protects the merchant from an NSF check, or having to chase down and collect non-paid funds, and it protects the member/consumer from over drawing and having to pay overdraft fees. In the instance where a member consumer holds or guarantees a payment with a debit card and chooses to pay with cash or a credit card, it is really up to the merchant to clear that hold.”
Credit unions also said the bill would lead to new costs, including the requirement to redesign certain forms and disclosures, and the reprogramming of data processing systems.