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 • Debit card transfers • Point-of-sale (POS) • Electronic check transfers conversion • (ATM) transfers • On-line bill payments • Direct deposit or withdrawal • Telephone transfers

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 or 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 or on or before the time they can first use the EFT service • Disclosures may be electronic

Initial Disclosure - Content • Consumer Liability • Right to Documentation • CU Telephone and Address • Stop Payment Rights • CU Business Days • Confidentiality • Types of Transfers and Limitations • Error Resolution • Fees and Charges • 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 of 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 • 20 days to investigate before New accounts (initial deposit providing provisional credit within the last 30 days) • 90 days total for investigation Point-of-sale debit card 90 days total for investigation transactions Transaction not initiated in the 90 days total for investigation U.S.

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 own 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 occurred 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 other transactions because the member hasn’t opted in • Must provide equal services for members who don’t opt-in