Topic: Electronic Fund Transfer Act (EFTA)
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Our core processor has offered a feature allowing us to email deposit receipts to the customer. We will allow customers to choose whether they want a printed receipt or email receipt. Do we need to get a consent in writing to be compliant with E-Sign requirements before delivering electronic receipts?
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No, we do not believe that your bank needs to meet the disclosure and consent requirements in the federal E-Sign Act before providing electronic receipts for deposits. The E-Sign Act’s disclosure and consent requirements apply only to documents that are required by law to be in writing. We are not aware of any federal or…
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We originate our first lien mortgage loans through a subsidiary. Can we require those borrowers to open a checking account with us?
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Yes, we believe that your bank can require borrowers to open a deposit account at your bank — provided that the requirement is applied consistently to avoid any fair lending implications. There is no prohibition against tying a loan product offered through a subsidiary to a deposit account product at your bank. Illinois and federal…
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We are offering a new savings account where we disclose that we will automatically send electronic account statements unless the customer opts to pay a small fee for paper statements. Some customers have indicated that they don’t want either electronic or paper statements. Can we honor that request? The savings accounts can receive electronic funds transfers.
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No, we do not believe that it would be appropriate to honor a customer’s request to not send statements for a deposit account, due to federal and state laws pertaining to electronic fund transfers, as well as checks. For any account that allows electronic fund transfer (EFT) activity, Regulation E requires monthly periodic statements for…
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If a commercial customer issues a written stop payment order with respect to a recurring preauthorized ACH debit entry, does that stop payment order apply to all future recurring transfers indefinitely? Or does it apply only to one specific transfer and only for a period of six months? Also, can a consumer customer stop payment on a preauthorized electronic transfer any time before it posts on their account? Or can our bank require three business days’ notice?
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In our view, a commercial customer’s written stop payment order regarding a preauthorized recurring ACH transaction applies only to a single transfer and is limited in duration to six months, unless it is renewed in writing. The NACHA rules distinguish between consumer and non-consumer stop payment orders. With respect to consumer stop payment orders, the…
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If we fail to send out a final periodic statement for a closed demand deposit account held by a consumer, does that violate Regulation DD?
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No, we do not believe that it violates Regulation DD to fail to send out a final periodic statement for a closed account. However, you may be required to send a periodic statement under Regulation E or the terms of your account agreement. Regulation DD does not require banks to provide periodic statements; it only…
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Under Regulation E, can we charge a business customer an overdraft fee when a debit transaction creates an overdraft on their account? Do business account customers have to opt in to an overdraft program?
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Yes, your bank may charge overdraft fees to business customers for debit card overdrafts, and they are not subject to the opt-in requirements in Regulation E. Regulation E, including its overdraft and opt-in provisions, does not apply to business accounts. We also are not aware of any other law or regulation that would impose restrictions…
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One of our customers recently reported unauthorized ACH transfers out of her deposit account. The unauthorized transactions started over five months ago. Are we liable for the last sixty days of unauthorized transactions, or for the first sixty days of unauthorized transactions?
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Your bank may be liable for the unauthorized transactions that occurred within sixty days after transmitting the first periodic statement containing the unauthorized transaction. Your customer is liable for the unauthorized transactions that occurred after the sixtieth day, due to her failure to notify your bank. Under Regulation E, when a customer fails to report…
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Do we qualify for the safe harbor exemption from the Regulation E international remittance transfer rules? Our customers receive more than one hundred international ACH transactions (IATs) every year; do those transactions disqualify us? These IATs typically are Paypal transactions, and we are the receiving financial institution.
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No, we do not believe that IATs received by your bank would disqualify your bank from the safe harbor exemption in Regulation E. The Regulation E remittance transfer rules exempt entities that provided one hundred or fewer remittance transfers in the previous and current calendar year. A remittance transfer is one “requested by a sender…
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We have a Visa Business Cardholder who has reported several unauthorized transactions. Does the Visa Zero Liability Rule apply to ATM transactions or other purchases that did not go through the Visa network, such as Pulse, Mac/Star? Can we deny reimbursement for such unauthorized transactions? We believe that our disclosure permits us to deny such reimbursement claims.
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No, according to Visa’s website, Visa’s Zero Liability does not apply to ATM transactions, or PIN transactions not processed by Visa, or certain commercial card transactions. In addition, because this is a business customer, Regulation E’s unauthorized transaction requirements do not apply. However, before denying reimbursement for the unauthorized transactions, we do recommend reviewing your…
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If a business customer wants to use our bank to pay its employees through ACH transactions, could we be liable for the customer’s payroll taxes if they overdraw their account with us when initiating payroll payments? We are not providing any payroll processing services. The customer would calculate the wages and tax withholdings on its own and use our online system to make payroll payments via ACH.
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Yes, we believe that your bank might face potential liability for honoring a customer’s overdraft in order to permit the customer to cover wages, provided that your bank is deemed to have knowledge that the employer lacked the intent or ability pay its payroll taxes. However, this issue has not been settled in Illinois; we…