(a) Preauthorized transfers to consumer’s account.
(1) Notice by
financial institution. When a person initiates preauthorized
electronic fund transfers to a consumer’s account at least once every
60 days, the account-holding financial institution shall provide notice
to the consumer by:
(i) Positive
notice. Providing oral or written notice of the transfer within
two business days after the transfer occurs; or
(ii) Negative
notice. Providing oral or written notice, within two business
days after the date on which the transfer was scheduled to occur,
that the transfer did not occur; or
(iii) Readily-available
telephone line. Providing a readily available telephone line
that the consumer may call to determine whether the transfer occurred
and disclosing the telephone number on the initial disclosure of account
terms and on each periodic statement.
(2) Notice by
payor. A financial institution need not provide notice of a transfer
if the payor gives the consumer positive notice that the transfer
has been initiated.
(3) Crediting. A financial institution
that receives a preauthorized transfer of the type described
in paragraph (a)(1) of this section shall credit the amount of the
transfer as of the date the funds for the transfer are received.
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(b) Written authorization
for preauthorized transfers from consumer’s account. Preauthorized
electronic fund transfers from a consumer’s account may be authorized
only by a writing signed or similarly authenticated by the consumer.
The person that obtains the authorization shall provide a copy to
the consumer.
(c) Consumer’s
right to stop payment.
(1) Notice. A consumer may stop payment of a preauthorized electronic fund transfer
from the consumer’s account by notifying the financial institution
orally or in writing at least three business days before the scheduled
date of the transfer.
(2) Written confirmation. The financial
institution may require the consumer to give written confirmation
of a stop-payment order within 14 days of an oral notification. An
institution that requires written confirmation shall inform the consumer
of the requirement and provide the address where confirmation must
be sent when the consumer gives the oral notification. An oral stop-payment
order ceases to be binding after 14 days if the consumer fails to
provide the required written confirmation.
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(d) Notice of transfers varying in amount.
(1) Notice. When a preauthorized electronic fund transfer from the
consumer’s account will vary in amount from the previous transfer
under the same authorization or from the preauthorized amount, the
designated payee or the financial institution shall send the consumer
written notice of the amount and date of the transfer at least 10
days before the scheduled date of transfer.
(2) Range. The designated payee or the institution shall inform the consumer
of the right to receive notice of all varying transfers, but may give
the consumer the option of receiving notice only when a transfer falls
outside a specified range of amounts or only when a transfer differs
from the most recent transfer by more than an agreed-upon amount.
(e) Compulsory use.
(1) Credit. No financial institution or other
person may condition an extension of credit to a consumer on the consumer’s
repayment by preauthorized electronic fund transfers, except for credit
extended under an overdraft credit plan or extended to maintain a
specified minimum balance in the consumer’s account. This exception
does not apply to a covered separate credit feature accessible by
a hybrid prepaid-credit card as defined in Regulation Z, 12 CFR 1026.61.
(2) Employment
or government benefit. No financial institution or other person
may require a consumer to establish an account for receipt of electronic
fund transfers with a particular institution as a condition of employment
or receipt of a government benefit.
