How to Report Debit Cards and Overdrawn Deposit Accounts in Metro 2

When should a debit card or an overdrawn deposit account be reported to the consumer reporting agencies, and how should these accounts be reported?

Debit cards and checking accounts are not credit products by default, so they don’t belong on a consumer’s credit report just because a consumer has one. That changes when credit is attached. If a debit card is backed by a line of credit or overdraft protection, the consumer has access to borrowed funds. Metro 2 sets clear limits on when these accounts can be reported and how to report them. Given the regulatory and public attention on overdraft practices, furnishers should apply those limits carefully.

Definitions and context

This topic covers two related but different reporting scenarios:

• Debit card backed by credit: A debit card linked to a line of credit or overdraft protection, so the consumer can draw on credit when the deposit balance runs short.
• Deposit account with overdraft protection that has been overdrawn: A checking or deposit account where the overdraft feature was used and the negative balance was not repaid.

The key principle for both: deposit activity alone is not credit activity. Only the credit component, or an unpaid overdraft balance that has gone to loss or collection, creates a reportable tradeline.

Reporting standards: debit cards

Report a debit card only when a line of credit or overdraft protection backs it. A standalone debit card that draws only on the consumer’s own deposited funds should not be reported.

When the card qualifies, report these Base Segment fields:

1. Account Type Code: 43 (Debit Card)
2. Portfolio Type: C (Line of Credit), O (Open) or R (Revolving), depending on the terms of the credit feature
3. Credit Limit: the assigned credit limit for the line of credit or overdraft protection
4. Highest Credit or Original Loan Amount: the highest amount of credit the consumer used through the overdraft protection

Pick the Portfolio Type based on how the credit feature actually works. A line of credit with a minimum payment structure reports differently from an overdraft feature that must be repaid in full.

Reporting standards: overdrawn deposit accounts

Report a deposit account with overdraft protection only when it has been charged off or placed in collection. Routine overdrafts that the consumer repays should not show up on the credit file.

When the account qualifies, report these Base Segment fields:

1. Portfolio Type: O (Open)
2. Account Type Code: 8B (Deposit Account with Overdraft Protection)
3. Date Opened: the date the account was opened
4. Credit Limit: the assigned overdraft limit
5. Highest Credit/Original Loan Amount: the highest overdrawn amount
6. Terms Duration: 001
7. Scheduled Monthly Payment Amount: zero fill
8. Account Status Code: one of these four:
   • 93: Account assigned to internal or external collections
   • 97: Unpaid balance reported as a loss (charge-off)
   • 62: Account paid in full, was a collection
   • 64: Account paid in full, was a charge-off
9. Current Balance: the outstanding balance
10. Amount Past Due: the total amount 30 days or more past the due date
11. Date of First Delinquency: the date the account was first overdrawn
12. Date Closed: the date the account was closed to further use

Compliance requirements

The Date of First Delinquency field carries the most compliance risk here. Under the FCRA, the seven-year reporting period for collections and charge-offs is tied to the start of the delinquency. For an overdrawn deposit account, Metro 2 sets that start as the date the account was first overdrawn, not the date it was charged off, closed or sent to collections. Using a later date extends how long the derogatory item stays on the report, which exposes the furnisher to accuracy disputes and possible FCRA liability.

Other common problems:

• Reporting debit cards with no credit feature. These are not credit obligations and should not be furnished.
• Reporting overdrawn accounts too early. These accounts should be reported only after charge-off or collection placement, not while the bank is still handling a routine negative balance.
• Deleting paid accounts. When the consumer pays off a collection or charge-off, update the status to 62 or 64. Don’t delete the tradeline, because Metro 2 requires paid derogatory accounts to be reported as paid.

Impact on consumers

For many consumers, an unpaid overdraft is the first derogatory item on their credit file, and it can come as a surprise because they think of a checking account as separate from credit. Applying the reporting limits correctly keeps routine banking activity off the credit report, while charged-off overdraft balances are reported accurately and for the right length of time. An accurate DOFD makes sure the item ages off on schedule. Updating to a paid status gives consumers credit for resolving the debt.

Conclusion

Report a debit card only when a line of credit or overdraft protection backs it, using Account Type 43 and a Portfolio Type that matches the credit terms. Report an overdrawn deposit account only after charge-off or collection placement, using Account Type 8B, Account Status 93, 97, 62 or 64, and a Date of First Delinquency equal to the date the account was first overdrawn. These rules keep non-credit banking activity off credit reports and keep overdraft-related derogatory reporting accurate, FCRA compliant and easy to defend.