Regulation E Background Electronic Funds Transfer Act Rights, - - PowerPoint PPT Presentation

Regulation E

Background

• Electronic Funds Transfer Act
• Rights, liabilities, and responsibilities of

the parties involved in an electronic funds transfer (EFT)

• The CFPB has rulemaking authority
• 12 CFR 1005

Examples of EFTs

• ACH transfers
• Point-of-sale (POS)

transfers

• (ATM) transfers
• Direct deposit or

withdrawal

• Telephone transfers
• Debit card transfers
• Electronic check

conversion

• On-line bill

payments

Definitions

• Electronic Terminal
• Access Device
• Accepted Access

Device

Exemptions

• Payments initiated by check
• Check guarantees
• Wire transfers
• Commodities and securities

transactions

Exemptions - Auto Transfers at the CU

• Share to share transfers
• Share to loan payment
• Dividend payments
• Family to family transfers

Exemptions - Certain Phone Transfers

• Initiated by phone
• Not a bill-payment
• r re-occurring

transfer

• Written agreement

Exemptions - Small Institutions

• CUs < than $100 million in assets
• Preauthorized transfers are exempt:
• Direct payroll deposits
• Automatic payment of utilities, loans

and other payments

General Disclosure Requirements

• Clear and readily understandable
• In writing
• In a form the consumer may keep

Initial Disclosure - Delivery

• At the time the

member contracts for the EFT service

• r on or before the

time they can first use the EFT service

• Disclosures may be

electronic

Initial Disclosure - Content

• Consumer Liability
• CU Telephone and

Address

• CU Business Days
• Types of Transfers

and Limitations

• Fees and Charges
• Right to

Documentation

• Stop Payment

Rights

• Confidentiality
• Error Resolution
• ATM Surcharge

Change In Terms

• Provide if change:
• Restricts the EFT services available
• Increases fees or charges
• Increases the member’s liability
• Places stricter limits transfers
• Deliver 21 days prior to change
• Exceptions for emergencies and fraud

Annual Error Resolution Notice

• Annual long-form

notice OR

• Short-form notice on

periodic statements

Documentation of Transfers

• ATM receipts
• Periodic statements

Atm Fee Notice

• Notice must be in a prominent and

conspicuous location on or at the ATM

• Disclose that a fee will be imposed and

the amount (on screen or paper)

• Notification first, transaction second

Authorization for E- Check Conversions

• Consumer must receive notice first
• Notice contents:
• Check will be processed as a one-time

EFT

• Funds may be debited on the same

day

• Check won’t be returned

Preauthorized Transfers to a Member’s Account

• If account will credited at least once every sixty

days, provide one of the following:

• Oral or written notice within two business

days of transfer

• Notice within two business days when transfer

doesn’t occur

• Toll-free phone number to verify deposit
• Toll-free number must be “readily available”
• Transfers posted same day

Transfers From a Member’s Account

• Authorized in

writing

• Regular, recurring

transfers

• Payee provides

authorization

Stop Payments

• Preauthorized debits
• Written or oral notification 3 business

days before scheduled transfer

• One payment or all (revocation)
• Written confirmation may be required

within fourteen days of oral notification

EFT Errors

• Unauthorized EFT
• Incorrect EFT
• Omission from a periodic statement
• Computational error
• Receipt an incorrect amount of money at an

electronic terminal

• Incorrectly identified EFT
• Request for additional EFT information

Notification by Member

• Oral or in writing
• Timely = within 60 days of transmittal
• f first periodic statement with the error
• Adequate information to identify the

member and the error

• Can require written notification to issue

provisional credit

Error Investigation

• Results within 10

days

• 45 days with

provisional credit

Longer Investigations

Circumstance Timeline New accounts (initial deposit within the last 30 days)

• 20 days to investigate before

providing provisional credit

• 90 days total for investigation

Point-of-sale debit card transactions 90 days total for investigation Transaction not initiated in the U.S. 90 days total for investigation

Late Notification

• An investigation is

not required

• Provisions on

liability for unauthorized transfers still applies

Investigation Of Records

• May be limited to a review of the credit union’s
• wn records
• Possible records:
• ACH transaction records
• The transaction history
• Check number sequence
• Member location vs. transaction location
• Third-party service provider record
• Any other information appropriate

Investigation Notification

If an error has occurred:

• One business day = correct the error,

credit any interest, and refund any charges

• Three business days = provide

investigation report (oral or written)

• Notify if provisional credit has been

made permanent

Investigation Notification

No error or different error:

• Three business days = provide

written explanation

• Right to documentation
• Revocation of provisional credit

Unauthorized Transfers

Any EFT from a member’s account:

• Person without

authority

• No member

benefit

Liability After Loss or Theft

Notification within two business days of loss or theft, the lesser of:

• $50

OR

• Amount unauthorized charges

Late Notification

Notification after two business days, liability is the lesser of:

• $500

OR

• The sum of:
• $50 or the amount of the unauthorized transfers

that occurred within the two business days (whichever is less) AND

• The amount of unauthorized transfers that
• ccurred after the two business days and before

notification

Unauthorized Use on Periodic Statement

With a lost or stolen access device:

• Timely notification = notification

within 60 calendar days after the periodic statement was sent

• Without timely notification =

unlimited liability for all unauthorized transfers made after the 60-day period

Stolen Access Device/ Periodic Statement

Liability for unauthorized transfers before the statement is sent and up to 60 days following:

• Up to $50 if the member notifies the

credit union within two business days of learning of the loss or theft.

• Up to $500 if the member notifies the

credit union after two business days of learning of the loss or theft.

Unauthorized Transfers/ No Access Device Used

• Member must notify the credit union

within 60 calendar days after the statement is sent.

• Consumer liability limits don’t apply if

an access device was not used.

Visa/MasterCard Rules

• Zero dollar liability
• For other assertions of

unauthorized transactions, the Regulation E maximum liability of $50 will apply

Overdraft Opt-in

• ATM and One Time Debit Card

Overdrafts

• Provide an opt-in notice and obtain the

member’s affirmative consent before charging any fees for paying overdrafts

Opt-In Exceptions

• Check, ACH, or recurring debit

transactions

• Payment of overdrafts via a line of

credit subject to Reg Z

• Transfer from member’s other share

accounts

Opt-In Process

• 1. Provide opt-in notice
• 2. Member has a reasonable time to opt-in
• 3. Member opts-In
• 4. Provide confirmation to member

Affirmative Consent and Revocation

• Member may revoke overdraft consent at any time
• Member may revoke consent in the same manner

used to opt-in

• Affirmative consent is effective until revocation
• Revocation of consent must be processed as soon as

“reasonably practicable”

• Only one joint account holder needs to give consent
• One joint account holder may revoke consent for all

Opt-in notice

Must Use Model Form

Overdraft Opt-In Prohibitions

• Cannot require opt-in in order to have

checks, ACH and other types of transactions paid

• Cannot decline to pay check, ACH and
• ther transactions because the member

hasn’t opted in

• Must provide equal services for

members who don’t opt-in