Topic: Electronic Fund Transfer Act (EFTA)
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The answer to a prior question on GoToIBA.com related to Regulation E resolution claims states that a bank “may not require the customer to sign an affidavit or provide a proof of purchase, receipt, email, or cancellation number.” Could there ever be a situation where a customer has one of these items for an unauthorized transaction? Wouldn’t the fact that the transaction is unauthorized mean that the customer does not have access to such items? Also, can we inform a customer that we may press charges if we discover that their family member is the source of an unauthorized transaction, or must we research their claim before raising this possibility? We want to inform the customer of this possibility, but we don’t want to discourage error resolution claims.
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We believe there may be circumstances where a customer has a proof of purchase, receipt, email, or cancellation number relating to an unauthorized transaction. For example, a customer may be able to obtain these items by requesting them from the merchant with whom the unauthorized transaction was made. Or, in the case of a forced…
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A customer just notified us that ACH fraud has occurred on their account for the last six months. Does Regulation E require that we credit the customer for unauthorized transactions made during the sixty-day period preceding the notification, or for the sixty-day period occurring after the first unauthorized transaction that occurred when the fraud first began?
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Your bank likely will be required to credit the customer for unauthorized transactions that occurred during the first sixty days after you transmitted a periodic statement showing an unauthorized transaction. Under Regulation E, when a customer fails to report an unauthorized transaction within sixty days after transmittal of the statement showing the unauthorized transaction, the…
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A customer notified us on a Saturday that on the preceding Wednesday, she became aware that she lost her wallet with her debit card inside. Two transactions at a retail store using the debit card PIN occurred before the customer discovered she lost the wallet. One transaction exceeded $300, and another transaction the following day exceeded $200. When we questioned the customer, she said that the PIN was written on a piece of paper kept in her wallet. Are we obligated to credit the customer for these transactions? The Visa rules state that a cardholder’s negligence can increase their liability for an unauthorized transaction, but the commentary to Regulation E states that negligence cannot be used as a basis for imposing greater liability than permissible under the regulation.
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Yes, we believe your bank may be required to provisionally credit and refund your customer for some of the unauthorized transactions. Regulation E Regulation E’s Official Interpretations state that a consumer’s liability for unauthorized electronic fund transfers (including debit card transactions) “is determined solely by the consumer’s promptness in reporting the loss or theft of…
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A customer used the Cash App mobile payment service in a transaction that turned out to be a scam. Although the customer initiated the transaction, they were defrauded by the other party. Is there anything we need to do in this situation, and is there any state law that protects an individual who is a party to a transaction where another party has acted in bad faith?
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No, we do not believe you are required to take action when a customer initiates a mobile peer-to-peer (P2P) transaction that turns out to be fraudulent. Regulation E defines an “unauthorized electronic fund transfer” as “an electronic fund transfer from a consumer’s account initiated by a person other than the consumer without actual authority to…
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Our debit card vendor contacted a customer to inform them of possible “card not present” fraud on the card. The customer replied that the transactions were not fraudulent and asked that the vendor remove a restriction that had been placed on the card. Our vendor closed the case and resumed posting transactions. Approximately ten days after the vendor’s initial notice, the customer contacted us and stated that these transactions were fraudulent. Since the customer previously claimed these transactions were not fraudulent, are we required to issue provisional credit and potentially suffer the loss?
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Yes, your bank may be required to issue provisional credit and refund your customer for some of the fraudulent transactions. Regulation E’s Official Interpretations state that a consumer’s liability for unauthorized electronic fund transfers (including debit card transactions) “is determined solely by the consumer’s promptness in reporting the loss or theft of an access device.”…
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When a customer opens an individual retirement account (IRA), should they receive disclosures regarding funds availability and substitute checks under Regulation CC and electronic fund transfers under Regulation E?
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No, we do not believe these disclosures are required for IRAs. Regulation CC governs the availability of funds for transaction accounts and the holds banks can place on checks. Its disclosure requirements related to funds availability and substitute checks do not apply to IRAs, which are excluded from Regulation CC’s definition of a “transaction account.”…
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We are launching person-to-person payments on our mobile app, using a service provided by our core processor. The service allows our customers to send money to any debit cardholder using the recipient’s debit card number. We have received conflicting opinions as to whether these transactions are covered by Regulation E, meaning that we would be liable for fraud losses (or even customer errors). Our core processor tells us the transactions are not covered by Regulation E, since they are account-to-card transactions.
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We believe that Regulation E and its error resolution requirements would apply to these person-to-person transactions, which qualify as electronic fund transfers. A customer’s electronic authorization of a debit to their account fits squarely in Regulation E’s definition of an “electronic fund transfer.” Regulation E applies to “electronic fund transfers,” defined as transfers initiated through…
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Under Regulation E, if a consumer provides a notice of error more than sixty days after the periodic statement was sent, do we have to provide provisional credit for the alleged error, including interest? Also, are we required to refund overdraft fees related to a notice of error provided more than sixty days after the periodic statement was sent?
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No, you are not required to provide provisional credit (or interest) to a consumer who provides a notice of error more than sixty days after the date the periodic statement was sent. However, you may be required to refund overdraft fees related to errors occurring before the close of the sixty-day period. Under Regulation E,…
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When a customer opens a consumer deposit account, we provide an initial disclosure with all eleven of the Regulation E disclosures required in 12 CFR 1005.7(b). After opening a deposit account, our customers can choose at any time to enroll themselves in online banking, which includes the ability to transfer funds between accounts, use online bill pay to make electronic payments, and make person-to-person (P2P) payments. One of our vendors provides suggested language to use in the contracts that our customers must agree to when enrolling in online banking, but the language does not include all eleven of the Regulation E disclosures. Do our contracts for online banking services need to include all eleven disclosures?
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Your contracts for online banking services do not necessarily need to include all eleven of the Regulation E disclosures for electronic fund transfer (EFT) services if some of those disclosures are inapplicable. The disclosures also may be provided in a separate document from your contract. You are required to provide only the “applicable” disclosures of…
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If a customer is provided with an opt-in disclosure for our bank’s overdraft service at the time of account opening and does not opt in — then decides to opt in several months later — do we need to send a confirmation to the customer?
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Yes, Regulation E requires that a consumer be provided with confirmation of their consent to opt into a bank’s overdraft service, either in writing or, if the consumer agrees, electronically. Regulation E also provides that a consumer may opt into an institutions’ overdraft service “at any time.” For resources related to our guidance, please see:…