EFT Flashcards
What types of electronic funds transfer services are protected under the act? (6)
• transfers through automated teller machines (ATMs);
• point-of-sale (POS) terminals;
• automated clearinghouse (ACH) systems;
• telephone bill-payment plans in which periodic or recurring transfers are contemplated;
• remote banking programs; and
• remittance transfers. (wires)
What is an access device?
What two items are not considered access devices under the act?
A card, code, or other means of access to a consumer’s account or a combination of these used by the consumer to initiate EFTs. Access devices include debit cards, personal identification numbers (PINs), telephone transfer and telephone bill payment codes, and other means to initiate an EFT to or from a consumer account.
The following are not considered access devices:
• Magnetic tape or other devices used internally by a financial institution to initiate electronic transfers.
• A check or draft used to capture the MICR (Magnetic Ink Character Recognition) encoding or routing, account, and serial numbers to initiate a one-time ACH debit
What is an accepted access device? (3)
It is an access device that a consumer:
• Requests and receives, signs, or uses (or authorizes another to use) to transfer money between accounts or to obtain money, property, or services.
• Requests to be validated even if it was issued on an unsolicited basis.
• Receives as a renewal or substitute for an accepted access device from either the financial institution that initially issued the device or a successor
What is considered an account under EFT? (2)
• Checking, savings, or other consumer asset account held by a financial institution (directly or indirectly),
including certain club accounts, established primarily for personal, family, or household purposes
• A prepaid account
What types of accts are included in the definition of a prepaid account? (4)
• a payroll card account, which is an account established directly or indirectly through an employer, to which EFTs of the consumer’s wages, salary, or other employee compensation (such as commissions), are made on a recurring basis;
• a government benefit account, which is an account established by a government agency for distributing govt benefits to a consumer electronically (can be through ATM or POS, also does not include distributions under a needs-tested benefit program)
• an account that is marketed or labeled as “prepaid” and that is redeemable upon presentation at multiple, unaffiliated merchants for goods or services or usable at ATMs; or
• an account
(1) that is issued on a prepaid basis in a specified amount or not issued on a prepaid basis but capable of being loaded with funds thereafter,
(2) whose primary function is to conduct transactions with multiple, unaffiliated merchants for goods or services or at ATMs, or to conduct person-to-person transfers, and
(3) that is not a checking account, share draft account, or negotiable order of withdrawal account.
What are some examples of things that are not considered accounts under EFT? (5)
• An account held by a financial institution under a bona fide trust agreement.
• An occasional or incidental credit balance in a credit plan.
• Profit-sharing and pension accounts established under a bona fide trust agreement.
• Escrow accounts such as for payments of real estate taxes, insurance premiums, or completion of repairs
or improvements.
• Accounts for purchasing U.S. savings bonds
A prepaid account does not include what? (5)
• An account that is loaded only with funds from a health savings account, flexible spending arrangement, medical savings account, health reimbursement arrangement, dependent care assistance program, or transit or parking reimbursement arrangement;
• An account that is directly or indirectly established through a third party and loaded only with qualified
disaster relief payments;
• The person-to-person functionality of an account established by or through the United States government
whose primary function is to conduct closed-loop transactions on U.S. military installations or vessels,
or similar government facilities;
• A gift certificate, store gift card, loyalty, award, or promotional gift card, or a general use prepaid card that is marketed and labeled as a gift card or gift certificate.
• An account established for distributing needs-tested benefits in a program established under state or local law or administered by a state or local agency
A payroll account does not include a card used how? (3)
• Solely to disburse incentive-based payments (other than commissions when they represent the primary means through which a consumer is paid) that are unlikely to be a consumer’s primary source of salary or other compensation;
• Solely to make disbursements unrelated to compensation, such as petty cash reimbursements or travel per diem payments; or
• In isolated instances to which an employer typically does not make recurring payments
What does activity mean under EFT?
means any action that results in an increase or decrease of the funds underlying a certificate or card, other
than the imposition of a fee, or an adjustment due to an error or a reversal of a prior transaction
What is an electronic check conversion (ECK) transaction?
transactions where a check, draft, or similar paper instrument is used as a source of information to initiate a one-time electronic fund transfer from a consumer’s account. The consumer must authorize the transfer
What is an electronic fund transfer?
a transfer of funds initiated through an electronic terminal, telephone, computer (including on-line banking) or magnetic tape for the purpose of ordering, instructing, or authorizing a financial institution to debit or credit a consumer’s account.
EFTs include, but are not limited to, point-of-sale (POS) transfers; automated teller machine (ATM) transfers; direct deposits or withdrawals of funds; transfers initiated by telephone; and transfers resulting from debit card transactions, whether or not initiated through an electronic terminal
What is an electronic terminal?
is an electronic device, other than a telephone call by a consumer, through which a consumer may initiate an EFT. The term includes, but is not limited to, point of-sale terminals, automated teller machines, and cash dispensing machines
What types of card, codes and other devices are excluded from the Gift Card definition? (6)
i.e not subject to dormancy fee, inactivity fee, service fee, or expiration date restrictions
• Useable solely for telephone services;
• Reloadable and not marketed or labeled as a gift card or gift certificate. For purposes of this exception, the term “reloadable” includes a temporary non-reloadable card issued solely in connection with a reloadable card, code, or other device;
• A loyalty, award, or promotional gift card (except that these must disclose on the card or device itself, information such as the date the funds expire, fee information and a toll-free number);
• Not marketed to the general public;
• Issued in paper form only; or
• Redeemable solely for admission to events or venues at a particular location or group of affiliated locations, or to obtain goods or services in conjunction with admission to such events or venues, at the event or venue or at specific locations affiliated with and in geographic proximity to the event or venue.
What is a general use prepaid card? (2)
a card, code, or other device:
• Issued on a prepaid basis primarily for personal, family, or household purposes to a consumer in a specified
amount, whether or not that amount may be increased or reloaded, in exchange for payment; and
• That is redeemable upon presentation at multiple, unaffiliated merchants for goods or services, or that may be usable at automated teller machines
What is the definition of a gift certificate?
A card, code, or other device issued on a prepaid basis primarily for personal, family, or household purposes to a consumer in a specified amount that may not be increased or reloaded in exchange for payment and
redeemable upon presentation at a single merchant or an affiliated group of merchants for goods or services
What is a loyalty, award, or promotional gift card? (3)
Is a card, code, or other device
(1) issued on a prepaid basis primarily for personal, family, or household purposes to a consumer in connection with a loyalty, award, or promotional program;
(2) that is redeemable upon presentation at one or more merchants for goods or services, or usable at automated teller machines; and
(3) that sets forth certain disclosures, including a statement indicating that the card, code, or other device is issued for loyalty, award, or promotional purposes
What is an overdraft service?
And overdraft service does not include payments made from where? (4)
A financial institution provides an overdraft service if it assesses a fee or charge for paying a transaction (including a check or other item) when the consumer has insufficient or unavailable funds in the account to pay the transaction.
However, an overdraft service does not include payments made from the following:
• A line of credit subject to Regulation Z, such as a credit card account, a home equity line of credit, or an overdraft line of credit;
• A service that transfers funds from another account held individually or jointly by the consumer, such as a savings account;
• A line of credit or other transaction in securities or commodities accounts in which credit is extended by a broker-dealer registered with the Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC); or
• A covered separate credit feature accessible by a hybrid prepaid-credit card, or credit extended through a negative balance on the asset feature of the prepaid account
What is a preauthorized EFT?
is an EFT authorized in advance to recur at substantially regular intervals
What is a service fee?
(prepaid giftcards)
Means a periodic fee for holding or use of a gift certificate, store gift card, or general-use prepaid card. A periodic fee includes any fee that may be imposed on a gift certificate, store gift card, or general-use prepaid card from time to time for holding or using the certificate or card.
For example, a service fee may include a monthly maintenance fee, a transaction fee, an ATM fee, a reload fee, a foreign currency transaction fee, or a balance inquiry fee, whether or not the fee is waived for a certain period of time or is only imposed after a certain period of time.
However, a service fee does not include a one-time fee or a fee that is unlikely to be imposed more than once while the underlying funds are still valid, such as an initial issuance fee, a cash-out fee, a supplemental card fee, or a lost or stolen certificate or card replacement fee.
What is a dormancy fee and inactivity fee?
means a fee for non-use of or inactivity on a gift certificate, store gift card, or general-use prepaid card
What is an Unauthorized EFT?
And this definition does not include an EFT initiated in what ways? (3)
Is an EFT from a consumer’s account initiated by a person other than the consumer without actual authority to initiate the transfer and from which the consumer receives no benefit.
This does not include an EFT initiated in any of the following ways:
• By a person who was furnished the access device to the consumer’s account by the consumer, unless the
consumer has notified the financial institution that transfers by that person are no longer authorized;
• With fraudulent intent by the consumer or any person acting in concert with the consumer; or
• By the financial institution or its employee
Generally, what is included under Subpart A (9) and Subpart B (7) of the Regulation?
Subpart A:
-Scope and Definitions
-Disclosures
-Overdraft Opt In
-Issuance of Access Devices
-Liability and Error Resolution
-Receipts and Periodic Statements
-Gift Cards
-Prepaid Account Requirements
-Internet posting of Prepaid account agreements
Subpart B:
-Remittance Transfer Definitions
-Disclosures
-Estimates
-Procedures for resolving errors
-Procedures for Cancellation and Refund of Remittance Transfers
-Acts of Agents
-Transfers Scheduled before the date of transfer
What applies under subpart A of the regulation (general EFT requirements)?
Generally what is covered, and what types of accounts are covered?
Any EFT that authorizes a financial institution to debit or credit a consumer account.
The requirements of subpart A of Regulation E apply only to accounts for which there is an agreement for EFT services to or from the account between (i) the consumer and the financial institution or (ii) the consumer and a third party, when the account-holding financial institution has received notice of the agreement and the fund transfers have begun
What is excluded from coverage under Subpart A (general EFT requirements)? (7)
(transfers that are not EFTs)
-Transfers originated by check, draft, or paper
-check guarantee or authorization services that do not directly result in a debit or credit to a consumer’s account
-Transfer of funds from a consumer within a system that is used primarily to transfer funds between financial institutions or businesses (Fedwire)
-transfer of funds for purchase or sale of securities/ commodities.
-intra-institutional automatic transfers under an agreement between a consumer and bank
-transfers initiated by telephone between a consumer and bank provided the transfer is not a function of written plan contemplating periodic or recurring transfers. (written plan includes brochures)
-preauthorized transfers to or from financial institutions with assets of less than $100MM in preceding Dec 31. However such transfers remain subject to the compulsory use prohibition, civil and criminal liability.
Is an Electronic Check Conversion treated as an EFT under Subpart A?
Yes, although transfers originated by checks are not covered by subpart A, an ECK is treated as an EFT and not a payment originated by check.
In an ECK transaction, a consumer provides a check to a payee and information from the check is used to initiate a one-time EFT from the consumer’s account.
What are the requirements for Payees in ECK transactions?
Payees must obtain the consumer’s authorization for each ECK transaction. A consumer authorizes a one-time EFT for an ECK transaction when the consumer receives notice that the transaction will or may be processed as an EFT and goes forward with the underlying transaction.
For POS transactions, the notice must be posted in a prominent and conspicuous location and a copy of the notice must be provided to the consumer at the time of the transaction.
If a payee re-presents electronically a check that has been returned unpaid, is that transaction an EFT?
Does Subpart A apply?
No it is not an EFT and subpart A does not apply because the transaction originated by check.
However, subpart A applies to a fee collected electronically from a consumer’s account for a check or EFT returned unpaid. A consumer authorizes a one-time EFT from the consumer’s account to pay the fee for the returned item or transfer if the person collecting the fee provides notice to the consumer stating the amount of the fee, and the consumer goes forward with the underlying transaction.
True or false:
Financial institutions have the option of disclosing additional information and combining disclosures required by other laws with regulation E disclosures.
True
Can a bank combine required disclosures into a single statement if a consumer holds multiple accounts at the same bank?
How many disclosures must be provided for a joint account?
Yes if the consumer holds two or more accounts. Thus a single periodic statement or error resolution notice is sufficient for multiple accounts.
Its only necessary for a financial institution to provide one set of disclosures for a joint account.
What disclosures must a bank provide before the first EFT is made? (2)
The bank must provide initial disclosures of the terms and conditions of EFT services before the first EFT is made or at the time the consumer contracts for an EFT service.
What must be included as part of the initial disclosure of terms and conditions of EFT services? (5)
The disclosures must include a summary of various consumer rights under the regulation, including:
-the consumer’s liability for unauthorized EFTs,
-the types of EFTs the consumer may make,
-limits on the frequency or dollar amount,
-fees charged by the financial institution, and
-the error-resolution procedures.
What are the timing requirements or EFT disclosures under subpart A?
Financial institutions must make the required disclosures at the time a consumer contracts for an electronic fund transfer service or before the first electronic fund transfer is made involving the consumer’s account.
If subsequent accounts are opened/ or the financial institution changes updates services, and the consumer has already received disclosures for another account, the bank need only disclose terms and conditions that differ from those previously given.
What is the required content of the disclosures under subpart A (efts)? (11)
-Liability of consumers for unauthorized EFTs
-Telephone number and address
-Business days
-Types of transfers; limitations on frequency or dollar amount.
-Fees
-Right to documentation
-Stop Payments
-Liability of institution
-Confidentiality
-Error Resolution
-ATM Fees
What do financial institutions need to disclose regarding liability of consumers?
The financial institution must include a summary of the consumer’s liability for unauthorized transfers. A
financial institution does not need to provide the liability disclosures if it imposes no liability.
If it later decides to impose liability, it must first provide the disclosures. The financial institution can choose to include advice on promptly reporting unauthorized transfers or the loss or theft of an access device.
What do financial institutions need to disclose regarding Types of transfers?
Limitations on the frequency and dollar amount of transfers generally must be disclosed in detail.
A limitation on account activity that restricts the consumer’s ability to make EFTs must be disclosed even if the restriction also applies to transfers made by non-electronic means.
Financial institutions are not required to list preauthorized transfers among the types of transfers that a consumer can make. Financial institutions must disclose the fact that one-time EFTs initiated using information from a consumer’s check are among the types of transfers that a consumer can make.
What do financial institutions need to disclose regarding Fees?
They must disclose all fees for EFTs or for the right to make EFTs.
Other fees, like minimum balance fees, stop payment fees, account overdrafts, or ATM fees, MAY, but need no be disclosed under Reg E. (See Reg DD requirements for these disclosures)
A per-item fee for EFTs must be disclosed even if the same fee is imposed on non-electronic transfers. Conditions for such fees also must be disclosed.
What do financial institutions need to disclose regarding documentation?
A summary of the consumer’s right to receipts and periodic statements, and notices regarding preauthorized transfers.
What do financial institutions need to disclose regarding stop payment?
A summary of the consumer’s right to stop payment of preauthorized EFTs and the procedures for placing a stop payment order.
What do financial institutions need to disclose regarding liability of the institution?
A summary of the financial institution’s liability to the consumer under Section 910 of the EFTA for failure to make or to stop certain transfers.
What do financial institutions need to disclose regarding confidentiality?
The circumstances under which, in the ordinary course of business, the financial institution may provide information concerning the consumer’s account to third parties.
A financial institution must describe the circumstances under which any information relating to an account to or from which EFTs are permitted will be made available to third parties, not just information concerning those EFTs. Third parties include other subsidiaries of the same holding company
What do financial institutions need to disclose regarding error resolution?
The error-resolution notice must be substantially similar to Model Form A-3 in Appendix A of Part 1005. A financial institution may use different wording so long as the substance of the notice remains the same.
To take advantage of the longer time periods for resolving errors under 12 CFR 1005.11(c)(3) (for new accounts as defined in Regulation CC, transfers initiated outside the United States, or transfers resulting from POS debit card transactions), a financial institution must have disclosed these longer time periods.
Similarly, for a financial institution relying on the exception from provisional crediting for accounts relating to extension on credit by securities brokers or dealers, must disclose accordingly.
Under what circumstances is a financial institution required to provide a Change in Terms notice? (4)
And when must they provide this notice to consumers? What about for immediate changes?
If a bank contemplates a change, it must provide a Change in terms notice to consumers at least 21 days before the effective date of any change/ condition required to be disclosed, but only if the change would result in one of the following:
-Increased fees or charges
-Increased liability for the consumer
-Fewer types of available EFTs, or
-Stricter limitations on the frequency or dollar amounts of transfers.
If an immediate change is necessary to maintain or restore security of EFT system/ account. The bank need not provide advanced notice, but if the change will be permanent, the institution must provide notice in writing of the change on or with the next periodic statement or within 30 days.
When is the error resolution notice required, and when should it be provided to consumers?
Are there any alternatives?
For accounts to or from which EFTs can be made, the financial institution must mail, deliver, or provide electronically to the consumer at least once each calendar year, the error resolution notice.
Alternatively, the bank may include an abbreviated error resolution notice substantially similar to the model form with each periodic statement (typically on the back)
What disclosures are required at ATMs?
An ATM operator that charges a fee is required to provide notice that a fee will be imposed and disclose the amount of the fee. The notice must be provided either by showing it on the screen of the automated teller machine or on paper before the consumer is committed to paying a fee.
These fee disclosures are not required where a network owner is not charging a fee directly to the consumer (i.e., some network owners charge an interchange fee to financial institutions whose customers use the network). If the network practices change such that the network charges the consumer directly, these fee disclosure requirements would apply to the network.
A fee may be imposed by an ATM operator only if what two conditions are met?
The fee may be imposed by the ATM operator only if: (1) the consumer is provided the required notice, and (2) the consumer elects to continue the transaction or inquiry after receiving such notice
What disclosures are required to be made on the physical gift card? (5)
What additional disclosure requirements are there for gift cards?
• The existence, amount, and frequency of any dormancy, inactivity, or service fee;
• The expiration date for the underlying funds (or the fact that the funds do not expire);
• A toll-free telephone number and (if any) a website that the consumer may use to obtain a replacement certificate or card if the certificate expires while underlying funds are still available.
• A statement that the certificate or card expires, but the underlying funds do not expire or expire later than the certificate or card, as well as a statement that the consumer may contact the issuer for a replacement card; and
• A toll-free telephone number and (if any) a website that the consumer may use to obtain information about fees
In addition to the disclosure requirements related to dormancy, inactivity, or service fees, all other fees must be disclosed as well. These disclosures must be provided on or with the certificate or card and disclosed prior to purchase. The certificate or card must also disclose a toll-free telephone number and website, if one is maintained, that a consumer may use to obtain fee information or replacement certificates or cards
True or false:
Making gift card disclosures in an accompanying terms and conditions document, on packaging surrounding a certificate or card, or on a sticker or other label affixed to the certificate or card does constitute a disclosure on the certificate or card
False, the required disclosures must be made on the physical card, not anywhere else.
The only exception is that any additional disclosure requirements regarding fees can be provided on or with the card prior to purchase.
To qualify for the exclusion for loyalty, award, or promotional gift cards, what needs to be disclosed? (4)
If they qualify, they are not subject to the substantive restrictions on imposing dormancy, inactivity, or
service fees, or on expiration dates. (i.e they don’t meet the definition of a gift card under Reg E)
• A statement indicating that the card, code, or other device is issued for loyalty, award, or promotional purposes, which must be included on the front of the card, code, or other device;
• The expiration date for the underlying funds, which must be included on the front of the card, code, or other device;
• The amount of any fees that may be imposed in connection with the card, code, or other device, and the conditions under which they may be imposed, which must be provided on or with the card, code, or other device; and
• A toll-free telephone number and, if one is maintained, a website, that a consumer may use to obtain fee information, which must be included on the card, code, or other device.
What disclosures are required on in-store signs, messages during customer service calls, websites, and general advertising regarding gift cards? (3)
• The funds underlying the gift card do not expire;
• Consumers have the right to receive a free replacement card, along with the packaging and materials that typically accompany the gift card; and
• The issuer will charge dormancy, inactivity, or service fees only if the fee is permitted by the gift card rule.
A bank can assess an overdraft fee for paying an ATM or one-time debit card transaction if it has met what requirements? (4)
-Bank has provided consumer with separate overdraft notice describing the overdraft service
-bank has provided the consumer a reasonable opportunity to affirmatively consent (opt-in) to the overdraft service for ATM and one-time debit card transactions.
-the bank has obtained the opt in notice from the consumer, and
-the bank has provided confirmation of the consent, including a statement informing the consumer of the right to revoke consent. An institution complies if it adopts reasonable procedures to ensure that it assesses overdraft fees only for transactions paid after mailing the confirmation to the consumer.
True or false:
A bank is prohibited from paying an ATM or one-time debit overdraft if the consumer’s account is not opted-in to overdraft protection.
False.
Lack of consent does not prohibit the financial institution from paying ATM or one-time debit card overdrafts. However, the financial institution may charge a fee only if the consumer has consented to the institution’s overdraft service for ATM and onetime debit card transactions.
Conversely, the financial institution is not required to pay an ATM or one-time debit card overdraft even if the consumer has consented to pay a fee
True or false:
If a negative balance is attributable in part to a check, ACH, or other type of transaction not subject to the prohibition on assessing overdraft fees, the institution may charge a daily or sustained overdraft or similar fee, even if the consumer has not opted in.
True.
True or false:
The overdraft law only applies to transactions that are not pre-authorized, such as ATM withdrawals and debit card transactions. Pre-authorized withdrawals, such as automatic bill payments and checks, do not fall under the umbrella of the overdraft protection law and can still lead to overdraft charges.
True
What types of transactions required opt-in for overdrafts, and which ones do not require opt in for overdrafts?
Non-Pre authorized transactions such as ATM or one-time debit card transactions (pos) cannot be associated with an overdraft fee unless the consumer has opted in.
Preauthorized transactions such as ACH, automatic bill pay, and checks do not receive overdraft protection and can still lead to overdraft charges regardless if the consumer has opted in.
What information is required in the content of the notice describing the overdraft service? (5)
What information is optional to include? (3)
Must be substantially similar to Model A-9 and may not contain any other information not expressly permitted.
Required:
• A brief description of the overdraft service and the types of transactions for which the financial institution may charge a fee;
• The dollar amount of any fee that may be charged for an ATM or one-time debit card transaction, including any daily or other overdraft fees;
• The maximum number of fees that may be charged per day, or, if applicable, that there is no limit;
• An explanation of the right to affirmatively consent to the overdraft service, including the methods by which the consumer may consent; and
• The availability of a line of credit or a service that transfers funds from another account to cover overdrafts, if the financial institution offers those alternatives
Optional:
• Disclosure of the right to opt into, or out of, the payment of overdrafts for other types of transactions (e.g., checks, ACH transactions, or automatic bill payments) and a means for the consumer to exercise such choices;
• Disclosure of the financial institution’s returned item fee, as well as the fact that merchants may charge additional fees; and
• Disclosure of the right to revoke consent
When making overdraft disclosures,
If the amount of the fee may vary based on the number of times the consumer has overdrawn the account, the amount of the overdraft, or other factors, how should the institution disclose the dollar amount of the overdraft fee?
The financial institution must disclose the maximum fee.
In the opt in notice, what must an institution disclose regarding the availability of a line of credit, sweep account or other alternatives?
If the institution offers both a line of credit subject to Regulation Z and a service that transfers funds from another account of the consumer held at the institution to cover overdrafts, the institution must state in its opt-in notice that both alternative plans are offered. If the
institution offers one, but not the other, it must state in its opt-in notice the alternative plan that it offers. If the institution does not offer either plan, it should omit the reference to the alternative plans. If the financial institution offers additional alternatives for paying overdrafts, it may (but is not required to) disclose those alternatives
What would be considered a reasonable opportunity for a consumer to consent to overdrafts in the following formats:
Mail, Telephone, Electronic, In person.
Mail would be if the institution provided a form for the consumer to fill out and mail.
Telephone if the institution provides a readily available telephone line the consumer may call.
Electronic if the institution provides a form that can be accessed and processed through its website, where the consumer may click on a button to affirm consent.
In person if the institution provides a form for the consumer to complete and present at a branch or office.
An institution may provide these opportunities to consent and require the consumer to make a choice as a step to opening an account.
How does an institution comply with the requirement to confirm the consumer’s right to revoke consent regarding overdrafts?
Not only must the consumer affirmatively consent, but the institution must mail or deliver to the consumer a written confirmation (or electronic, if the consumer agrees) that the consumer has consented, along with a statement informing the
consumer of the right to revoke the consent at any time. An institution complies with the confirmation requirement if it has adopted reasonable procedures to ensure that overdraft fees are assessed only on transactions paid after the confirmation is
mailed or delivered to the consumer
If a negative balance is attributable in part to an ATM transaction and in part to a check and the consumer has not opted into overdraft protection, can the bank charge an overdraft fee?
Yes, a fee may be assessed based on the date when the check is paid into overdraft, not the date of the ATM or one time debit transaction.
If a consumer has not opted in to overdraft protection can a bank charge an overdraft fee for ATM or one-time debit transactions?
What about for ACH, Check or automated billing transactions?
They are prohibited from charging fees for ATM and one-time debit if the consumer has not opted in.
However, this prohibition does not apply to negative balances attributed whole or in part to ACH, Check or automatic billing transactions.
True or false:
A financial institution can condition the payment of other types of overdraft transactions (non-ATM or one time debit) on the consumer’s affirmative consent.
False
The financial institution may
not use different criteria for paying other types of overdraft transactions for consumers who have consented and for
consumers who have not consented
Can a financial institution provide consumers who do not affirmatively consent to overdrafts different account terms, conditions, or features than those afforded to consumers who do affirmatively consent?
NO! Consumers who opted out must receive the same account terms, conditions and features as consumers who opt in. That requirement includes:
-Interest rates paid
-Fees assessed
-the Type of ATM or debit card provided (i.e. no separation between consumers who get debit cards with pins and cards without)
-minimum balance requirements
-online bill payment services
For joint accounts, does one or both consumers need to consent to receive overdraft protection?
Any one account holder may consent, or revoke consent, for payment of ATM or one-time debit card transactions from a joint account
When can a consumer consent to overdraft protection, and when can they revoke it?
A consumer may consent to the payment of ATM and onetime debit card overdrafts at any time. A consumer may also revoke consent at any time. The financial institution must
implement a revocation as soon as reasonably practicable
True or false:
A financial institution may terminate overdraft services if the consumer makes excessive use of the service.
True
In general, a financial institution may issue an access device to a consumer only in what two cases?
-The consumer requests it in writing or orally
-it is a renewal of, or a substitute for, an accepted access device.
How many renewal or substitute access devices can a institution issue to replace a previously issued device?
Only one renewal or substitute device may replace a previously issued device. A financial institution may provide additional devices at the time it issues the renewal or substitute
access device provided the institution complies with the
requirements for issuing unsolicited access devices for the additional devices
A bank can issue an unsolicited access device only if the access device meeting what criteria? (4)
The access device is:
• Not validated - that is, it cannot be used to initiate an EFT.
• Accompanied by the explanation that it is not validated and instructions on how the consumer may dispose of it if the consumer does not wish to validate it.
• Accompanied by a complete disclosure, in accordance with 12 CFR 1005.7, of the consumer’s rights and liabilities that will apply if the access device is validated.
• Validated only upon oral or written request from the consumer and after a verification of the consumer’s identity by some reasonable means
When is a consumer deemed to request an access device for a payroll card account?
What about for a prepaid account?
When the consumer chooses to receive salary or other compensation through a payroll card account, or for govt. benefit account when the consumer applied for govt benefits that an agency disburses by means of an EFT.
A consumer is deemed to request an access device for a prepaid account when, for example, the consumer acquires a prepaid account offered for sale at a retail location or applies for a prepaid account by telephone or online.
When does Regulation E apply vs. Regulation Z if EFT is added to a credit card?
The EFTA and Regulation E apply when the capability to initiate EFTs is added to an accepted credit card (as defined under Regulation Z). The EFTA and Regulation E also apply to the issuance of an access device (other than an access device for a prepaid account) that permits credit extensions under a preexisting agreement between the consumer and a financial institution to extend credit only to cover overdrafts (or to maintain a specified minimum balance).
The Truth in Lending Act and Regulation Z govern the addition of a credit feature to an accepted access device, and except as discussed above, the issuance of a credit card that is also an access device.
True or false:
In EFT there is no clear time limit within which consumers must report unauthorized EFTs?
True, the extent of the consumers liability is determined solely by their promptness in notifying the financial institution.
A consumer may be liable depending on when the consumer notifies the bank and whether an access device was used.
Can other factors (aside from time of notification) be used as a basis to hold consumers liable for unauthorized EFTs?
What factors does EFT prohibit as a basis for imposing greater liability than is permissible? (3)
Other factors MAY NOT be used as a basis to hold consumers liable. It is determined solely by the consumer’s promptness in notifying the bank.
The reg prohibits the following factors as the basis for imposing greater liability that is permissible:
-The consumer was negligent (wrote pin on card)
-an agreement between the consumer and the bank provides for greater liability
-consumer is liable for greater amount under state law.
A consumer can only be held liable for an unauthorized transaction if what? (3)
-If the bank has provided the following written disclosures to the consumer:
–Summary of consumer’s liability for unauthorized EFT
–telephone number and address for reporting the unauthorized EFT
–Bank business days
-Any access device used to initiate an EFT was an accepted access device
-The bank has provided a means to identify the consumer to whom the access device was issued.
Can a bank impose consumer liability requirements for unauthorized EFTs on prepaid accounts (non payroll and govt benefit)?
Yes, for prepaid accounts that are not payroll card accounts or government benefit accounts, a financial institution is not required to comply with the liability limits and error resolution requirements for any prepaid account for which it has not successfully completed its consumer identification and verification process, provided certain disclosures are given.
What is the max consumer liability for the following unauthorized EFT?
Loss or theft of access device, including if a PIN was used without the card.
Consumer notified the bank within 2 business days after learning of the loss or theft
Max Liability:
-Lesser of $50 OR total amount of unauthorized transfers that occur before notice to the bank.
What is the max consumer liability for the following unauthorized EFT?
Loss or theft of access device.
Consumer notified bank more than 2 bus days after learning of loss or theft up to 60 days after transmittal of statement showing first unauthorized transfer made with access device.
Max liability is the lesser of $500, OR the sum of:
(a) $50 or the total amount of unauthorized transfers occurring in the first two business days, whichever is less; AND
(b) The amount of unauthorized transfers occurring after two business days and before notice to the financial institution. (provided the bank can demonstrate these transfers would not have occurred had notice been given within 2 bus days)
What is the max consumer liability for the following unauthorized EFT?
Loss or theft of access device.
Consumer notified bank 60 days after transmittal of statement showing first unauthorized transfer made with access device.
For transfers occurring within the 60-day period, the lesser of $500, OR the sum of:
(a) Lesser of $50 or the amount of unauthorized transfers in first two business days; AND
(b) The amount of unauthorized transfers occurring after two business days.
For transfers occurring after the 60-day period, unlimited liability (until the financial institution is notified)
What is the max consumer liability for the following unauthorized EFT?
Unauthorized transfer not involving loss or theft of an access device.
Consumer notified bank within 60 days after transmittal of the periodic statement on which the unauthorized transfer first appears.
No Liability
What is the max consumer liability for the following unauthorized EFT?
Unauthorized transfer not involving loss or theft of an access device.
Consumer notified bank more than 60 days after transmittal of the periodic statement on which the unauthorized transfer first appears.
Unlimited liability for unauthorized transfers occurring 60 days after the periodic statement and before notice to the bank.
Does that fact that a consumer has received a periodic statement reflecting an unauthorized transfer conclusive evidence in determining whether the consumer had knowledge of a loss or theft of an access device?
No, it is a factor but not conclusive evidence.
When is notice considered to be given to the financial institution regarding unauthorized transfers?
Is a consumer required to provide information for notice to have been effectively given to limit consumer liability?
A consumer gives notice to a financial institution about unauthorized use when the consumer takes reasonable steps to provide the financial institution with the pertinent information, whether or not a particular employee actually receives the information. Even if the consumer is unable to provide the account number or the card number, the notice effectively limits the consumer’s liability if the consumer sufficiently identifies the account in question, for example, by giving the name on the account and the type of account.
Notice can be given in person, by telephone, or in writing. Notice in writing is considered given as of the mail date.
Notice may also be considered given when the financial institution becomes aware of circumstances leading to the reasonable belief that an unauthorized transfer has been or may be made.
What is considered an Error under EFT? (7)
• An unauthorized EFT.
• An incorrect EFT to or from the consumer’s account.
• The omission from a periodic statement of an EFT to or from the consumer’s account that should have been included.
• A computational or bookkeeping error made by the financial institution relating to an EFT.
• The consumer’s receipt of an incorrect amount of money from an electronic terminal.
• An EFT not identified in accordance with the requirements of 12 CFR 1005.9 or 1005.10(a).
• A consumer’s request for any documentation required by 12 CFR 1005.9 or 1005.10(a) or for additional information or clarification concerning an EFT (12 CFR 1005.11(a)(1)).
The term error does not include what?(2)
• A routine inquiry about the balance in the consumer’s account or a request for duplicate copies of documentation or other information that is made only for tax or other record-keeping purposes
• The fact that a financial institution does not make a terminal receipt available for a transfer of $15 or less in
accordance with
