Topic: Electronic Fund Transfer Act (EFTA)
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For the error resolution notices required for our prepaid accounts, we generally provide an abbreviated notice on our periodic statements. However, for one of our prepaid card account products, we do not provide periodic statements but are providing the alternative electronic or written transaction histories. Can you review our error resolution notices and confirm that it is correct to use Model Form A-7(b) in that case?
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While we cannot review your institution’s error resolution notices for compliance with regulatory requirements, as we cannot provide legal advice, we can provide general guidance on the use of the model forms in Regulation E. We believe that your bank should use a modified version of the error resolution notice in Appendix A-3(b) when providing…
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We want to create a program for consumer loans secured by marketable securities, offered to our private banking clients. We would require loan payments to be automatically deducted from an account held at our bank. Our compliance department has advised me that Regulation E prohibits creditors from requiring loan payments by preauthorized electronic fund transfers. Is this accurate, or does the prohibition only apply to preauthorized electronic fund transfers from an account held at another bank, but not from an account held at our bank?
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Your bank’s compliance department is correct that Regulation E prohibits banks from requiring borrowers to repay consumer loans by preauthorized electronic fund transfers. This rule applies to preauthorized electronic fund transfers from “consumers’ available funds at the same institution via direct transfers, or at other institutions via recurring ACH transfers.” While your bank is prohibited…
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If a cash deposit is made at a retail store to a prepaid card account, does the transaction description on the periodic statement need to include the name and location of the retail store? Does the answer change for a cash or a check deposit at an ATM? Also, for retail purchases that are made in person or online, should the periodic statement list the city and state? Is the street address required?
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Cash Deposits No, we do not believe your bank is required to list the name and location of a retail store on your periodic statement when a cash deposit is made to a prepaid account at the retail store. As to the retail store location, when a consumer initiates a transfer at an electronic terminal…
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Are we required to send a receipt of loan payment when we originate an ACH debit to deduct a loan payment from our loan customer’s deposit account held at another bank?
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No, we are not aware of any requirement to issue a receipt when initiating an ACH debit transaction, unless your loan agreement includes such a requirement.
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Can we attach a HELOC to a customer’s pre-existing demand deposit account so that the customer can use their debit card to access the HELOC funds?
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Yes, we believe your bank may attach a home equity line of credit (HELOC) to a deposit account to enable your customers to access HELOC funds with a debit card. We are not aware of any Illinois or federal law that would prohibit this practice. For example, Regulation E recognizes that a home equity line…
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We record our collection calls and authorizations for one-time ACH loan payments. Are there any specific Illinois laws that would govern the record retention relating to recorded collection calls?
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We recommend retaining ACH authorizations for two years, as required by Regulation E and the NACHA Operating Rules. We are not aware of any record retention requirements applicable to recordings of collection calls. While Illinois law does require customer consent before recording such calls, it does not set any time period for retaining the call…
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We recently changed our cutoff time for deposits made into our ATMs from 2:00 to 6:00 p.m. Are we required to send disclosures of the change to our impacted customers within thirty days of the change taking effect?
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We believe that notice is required of an extended ATM deposit cutoff time, assuming that the change in the cutoff time will result in expedited availability of deposited funds. Regulation CC requires notification to customers of a change that expedites the availability of funds no later than thirty days after implementation of the change. If…
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The Official Interpretations for Regulation E note that an unauthorized electronic fund transfer (EFT) includes a transfer made by a consumer at an ATM who was “induced by force to initiate the transfer.” Does similar logic apply when other types of electronic payments are initiated by threat or force? For example, would a customer held at gunpoint and forced to make an EFT using a mobile payment app (such as Venmo) be considered unauthorized?
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In our view, an electronic payment initiated by a consumer through a third-party mobile app like Venmo under threat or force technically would not be considered an “unauthorized transaction.” However, while a consumer may not be eligible for a legally mandated reimbursement for such a transaction, your bank could voluntarily reimburse the customer based on…
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On our website we list the different types of accounts our bank offers. Can we put hyperlinks leading to the account disclosures on a different page, or do the disclosures need to be on the same page? We do not display any rates, but we do have disclosures related to mobile banking (carrier fees may apply) and foreign ATMs (fees may be charged by non-bank owned ATMs).
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Yes, we believe it would be acceptable for a webpage describing different account types to include a link to a separate page that provides disclosures regarding mobile banking and ATM fees. We are not aware of any specific requirements for disclosing that a carrier may impose messaging or data rates, although we do view this…
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We are merging with another bank, and they provide a form letter for customers to use when reporting unauthorized card transactions under Regulation E. The letter states that if a customer reports an unauthorized transaction that the bank finds to have been initiated by the customer, the bank will charge a service fee for each disputed transaction. Can that be done?
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Yes, we believe that your bank may charge a service fee for investigating a customer’s notice of error, provided that your bank has determined that no error occurred. Regulation E prohibits banks from charging a fee for “any aspect of the error-resolution process” if a billing error occurred. But if there has been no billing…