Topic: Electronic Fund Transfer Act (EFTA)
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Can a bank require its employees to establish an account at the bank? I know this is prohibited for payroll purposes.
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We are not aware of any laws that prohibit your bank from requiring employees to establish an account, but we recommend that you consult with bank counsel before implementing such a requirement. As you point out, there are payroll deposit restrictions in state and federal law. Illinois law prohibits employers from designating a particular bank…
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Over two years ago, we returned a remotely created check that our customer reported as unauthorized. Recently, the company that initiated the remotely created check contacted us and provided a signed copy of its agreement with the customer authorizing the check. The company is asking us to return the amount of the check and has threatened litigation. Can we offset the customer’s account for the amount of the check?
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First, because the company that initiated the electronic check has threatened litigation against your bank, we highly recommend consulting with bank counsel going forward. In your discussions with bank counsel, we would note that Illinois law does permit a bank to exercise its right of setoff against a customer’s deposit account in this situation. Under…
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We just completed a data bureau conversion that eliminated savings and loan passbooks. Now that we are not using the passbook system, are we required to provide receipts for deposits not made in person? Or can we notify customers that we plan to discontinue sending receipts and that they can review their deposits by accessing their accounts online? Our deposit agreements do not require receipts, but I want to confirm whether any state law applies.
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We are not aware of any Illinois law that requires financial institutions to issue receipts for deposits not made in person. If your account agreements do not require receipts, you may discontinue issuing them. However, we recommend that you proceed with your plan to provide your customers with advance notice of the change. In addition,…
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Can we initiate Regulation E’s error dispute procedure when a customer notifies us of an unauthorized transaction that is still pending? What regulatory risk do we face if we wait until the transaction actually posts?
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Yes, you may begin investigating the error when a customer notifies you of an unauthorized transaction that is still pending. However, in our view, Regulation E’s 10-day deadline for completing the investigation (or 45-day deadline if you have provided provisional credit) does not start until the transaction actually posts. Regulation E’s error resolution requirements are…
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Our bank has contracted with a third party vendor to provide a personal payment service (facilitating person-to-person payments). Customers may access the service through their mobile devices and our online banking website. The transfers are executed by ACH transfer. The disclosures that we provide to our customers state that “we must hear from you no later than sixty (60) days after the transaction in which the problem or error appears is first posted in the transaction history.” Does Regulation E apply to this service, and if so, are we violating its disclosure requirements?
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Yes, we believe that Regulation E would apply because the person-to-person payments are executed by ACH transfer. As a result, your disclosures should comply with Regulation E’s disclosure and error resolution provisions. From what you have told us, your error resolution notice does not appear to comply with Regulation E (and it may confuse customers…
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We plan to start offering a bill pay service through a third party vendor. When paying a customer’s bill, the vendor will pay the bill directly (by check) and separately initiate an ACH debit against the customer’s account for the bill amount. If the customer’s account has insufficient funds, we will reject the ACH debit and charge the customer an insufficient funds (NSF) fee. We will not charge any other fees and will not pass on the vendor’s fees to the customer. In the event of a rejected ACH payment, the vendor will attempt to collect the unpaid amount from the customer and will freeze the customer’s other bill payments made through its service for three days. If the bill pay vendor cannot collect from the customer within sixty days, it will collect the unpaid amount directly from our bank, and we will assume the collection efforts. Would this arrangement be considered an overdraft program requiring the customer’s opt-in under Regulation E?
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No, we do not believe this arrangement would be considered an overdraft program, nor does Regulation E require a customer to opt-in before charging an overdraft fee for an ACH transaction. Regulation E defines “overdraft service” as “a service under which a financial institution assesses a fee or charge . . . for paying a…
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Do the ATM advertising restrictions in the Illinois Electronic Fund Transfer Act (EFTA) apply to nationally chartered banks? We have seen a few national banks advertise their products and services on the home screen of their ATMs, which is visible to non-customers.
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In our view, the advertising restrictions in the Illinois EFTA do not apply to national banks. The Illinois EFTA prohibits advertising to non-customers on ATM terminal screens, and this prohibition applies to banks “established under the laws of the United States.” However, a federal court of appeals (outside of Illinois) has determined that state laws…
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A customer just notified us of unauthorized transactions on the customer’s personal account made through prearranged PPD ACH transactions. Some are from last month, and others are from over four months ago. Which, if any, do we have to reimburse him for?
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Regulation E requires you to reimburse the customer for the unauthorized ACH transactions that occurred within the first sixty days after your bank provided a periodic statement showing the unauthorized transactions. For unauthorized transactions on consumer accounts that do not involve a debit card or other access device, Regulation E requires banks to reimburse only…
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May a customer use online banking to transfer from a HELOC or line of credit to the customer’s checking account?
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Yes, your bank may choose to permit customers to transfer line of credit or home equity line of credit (HELOC) disbursements into their checking or other deposit accounts using online banking. We are not aware of any Illinois or federal law that would prohibit or restrict this practice. However, we note that this practice can…
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Under the Illinois Electronic Fund Transfer Act, are we prohibited from advertising our products on our ATM screens if the ATM can be accessed by non-customers?
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No, the Illinois Electronic Fund Transfer Act (EFTA) does not prohibit you from advertising your products and services on the screens of ATMs that may be accessed by non-customers, provided that the advertisement appears only to your customers after they insert a card issued by your bank. The Illinois EFTA generally prohibits a bank from…