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Background and Summary of Regulation E

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The Electronic Fund Transfer Act (EFTA) (15 USC 1693) was enacted on November 10, 1978. Implemented by the Board’s Regulation E (12 CFR 205), the law’s primary objective is to provide a basic framework establishing the rights, liabilities, and responsibilities of participants in electronic fund transfer systems. Examples of electronic fund transfer (EFT) services are automated teller machine transfers, telephone bill-payment services, point-of-sale (POS) terminal transfers in stores, and preauthorized transfers from or to a consumer’s account (for example, direct deposit of Social Security payments).
The term “electronic fund transfer” generally refers to a transaction initiated through an electronic terminal, telephone, computer, or magnetic tape that instructs a financial institution either to credit or debit a consumer’s asset account. It includes all transactions resulting from debit card transactions whether or not an electronic terminal is involved at the time of the transactions. An account includes a consumer checking, savings, or share account held by an institution and established by the consumer primarily for family, personal, or household purposes. The term “electronic terminal” includes POS terminals, automated teller machines, and cash-dispensing machines. The consumer is usually issued a card or a code (known as access devices), or both, that may be used to initiate such transfers.
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REQUIRED DISCLOSURES

Regulation E requires financial institutions to provide initial disclosures of the terms and conditions of EFT services. They must disclose the consumer’s liability for unauthorized EFTs, the types of EFTs the consumer may make and any limit on the frequency or dollar amount, fees charged by the institution, and the error-resolution procedures. Institutions must also provide a summary of various consumer rights under the regulation.
If there are adverse changes in fees, the consumer’s liability, types of transfers available, or limits on transfers, the institution must provide a change-in-terms notice at least 21 days before the changes take effect. The institution must periodically send a reminder of the error-resolution procedures. It may send a detailed notice annually or send an abbreviated notice with each account statement.
Appendix A provides model clauses that may be used to provide the various required disclosures.
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ISSUANCE OF ACCESS DEVICES

Regulation E prohibits financial institutions from issuing an access device unless a consumer has requested it either in writing or orally. However, a renewal or substitute access device may be issued to replace an existing one. Also, an unsolicited access device may be issued under certain conditions (for example, if the device is not active when issued).
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RESOLVING ERRORS

If a consumer notifies an institution that an error involving an EFT has occurred, the institution must investigate and resolve the claim within specified deadlines. Errors covered by this requirement include unauthorized EFTs, incorrect EFTs, and the omission from an account statement of an EFT that should have been included. The consumer must file an error claim within 60 days of the date of the account statement on which the error appears. The institution must either resolve the error within 10 business days of receiving the claim, or provisionally credit the consumer’s account and complete the process within 45 calendar days. Different time periods apply to POS and foreign-initiated transfers. The regulation limits a consumer’s liability for unauthorized EFTs (such as those arising from a loss or theft of an access device). The consumer’s liability is generally limited to $50, although it can be $500 or unlimited under certain circumstances.
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DOCUMENTATION

Regulation E requires documentation in two forms: terminal receipts and periodic statements. Terminal receipts must be provided when a consumer initiates an EFT at an electronic terminal and must include the type of EFT, the amount and date of the transaction, the location of the terminal, and other information. Generally, periodic statements must be sent monthly; under a few circumstances, statements may be sent quarterly. Statements must include the same information required on terminal receipts, as well as certain additional information, and disclose any fees imposed.
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PREAUTHORIZED TRANSFERS

Preauthorized transfers are EFTs that recur at substantially regular intervals—for example, direct deposits (such as of salary or benefits) and preauthorized bill payments. Regulation E requires the institution to provide some form of notice so that the consumer can determine whether or not a direct deposit occurred as scheduled. For preauthorized bill payments, the regulation requires the consumer’s advance written authorization, sets forth stop-payment rights, and provides for notices of payments varying in amount. Consumers have certain protections against compulsory use of direct deposit and preauthorized bill payment.
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MISCELLANEOUS PROVISIONS

Regulation E contains special rules for two types of EFT services: retail POS EFT services offered by retailers that issue debit cards to their customers, and electronic benefit transfer programs set up by local, state, or federal government agencies. It also contains provisions on relation to state laws, record retention, and administrative enforcement. Appendix B lists the administrative enforcement agencies for the various types of institutions.
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