# Electronic Fund Transfer Act

The Electronic Fund Transfer Act was passed by the U.S. Congress in 1978 and signed by President Jimmy Carter, to establish the rights and liabilities of consumers as well as the responsibilities of all participants in electronic funds transfer activities.
The act's provisions were implemented through Federal Reserve Board Regulation E.

## Rights of consumers

The EFT Act recognizes the right of consumers to choose the financial institution to which their payments are directed
The EFT Act also prohibits a creditor or lender from requiring a consumer to repay a loan or other credit by electronic fund transfer, except when there is an overdraft on checking plans.

## Financial institution liability

The financial institution must give the customer notice of his liability in case the card is lost or stolen. This notice must include a phone number for reporting card loss and a description of the financial institution's error resolution process.

## Limit to customer liability on loss or theft of card

If a customer promptly reports a missing or stolen card to the financial institution before any unauthorized transactions occur, the cardholder will not be held responsible for subsequent transactions.
A customer can be liable for unauthorized withdrawals if their card is lost or stolen and they do not follow certain criteria:
* Loss is limited to $50 if the institution is notified within two business days
* Loss could be up to $500 if the institution is notified between 3 and 59 days
* If the loss is not reported within 60 business days customer risks unlimited loss on transfers made after the 60-day period – could lose all money in the account plus maximum overdraft if any.

## EFT errors

EFT is not a perfect system; therefore customers should still be diligent in reviewing their EFT statements for possible errors as they would with any other type of transaction. Should a customer notice that there has been an error in an electronic fund transfer relating to their account certain steps must be taken:
Under the Act, the customer must:
* Write or call the financial institution immediately if possible
* Must be no later than 60 days from the date of the erroneous statement
* Give their name and account number
* Explain why they believe there is an error, the type, dollar amount and date
* May be required to send details of the error in writing within 10 business days
Under the Act, the financial institution must:
* Promptly investigate the error and resolve it within 45 days
* Errors involving new accounts (opened last 30 days), POS transactions, and foreign transactions may take up to 90 days
* If it takes more than 10 business days to complete the investigation:
** Must recredit the amount in question
* For new accounts may take up to 20 business days to recredit the account
* Must notify the customer of the results of the investigation:
** If there was an error – correct it or make recredit final
** If no error – explanation in writing, notify the customer of deducted recredit
* Customer has the right to ask for copies of any documents relied on in the investigation

## What the EFT Act Covers

* The EFT Act does not apply to every type of pre-authorized plan. The EFT Act does not apply to automatic transfers from any account held in the name of the institution the consumer uses to the account the consumer uses.
** An example of this would be where the EFT Act would not apply to any automatic payments put towards a mortgage held by the financial institution where a consumer would hold their electronic fund's account.
* The EFT Act also does not apply to automatic transfers between a consumer's accounts at the same financial institution
* The EFT Act also does not cover all transfers. Some banks, other financial institutions, and vendors will produce cards with a cash value imprinted into the card itself
** Examples of these include public transit passes, store gift cards, and prepaid telephone cards. These cards may not be covered by the EFT Act.
* When using electronic funds transfer, the Act does not give the consumer the right to stop payment.
* State law or any contract that imposes a lower liability limit than those mentioned in the “Loss or Theft: Customer Liability” will be preempted (overridden) by the federal EFT Act unless the state law provides protections that are greater than that provided under Federal law. (See Section 919 of the Act).