Electronic Banking

For many consumers, electronic banking means 24-hour access to cash through 

an automated teller machine (ATM) 

or Direct Deposit of paychecks into 

checking or savings accounts. But 

electronic banking now involves 

many different types of transactions.

Electronic banking, also 

known as electronic fund transfer 

(EFT), uses computer and electronic technology as a substitute for 

checks and other paper transactions. EFTs 

are initiated through devices like cards or codes 

that let you, or those you authorize, access your 

account. Many financial institutions use ATM or 

debit cards and Personal Identification Numbers 

(PINs) for this purpose. Some use other forms 

of debit cards such as those that require, at the 

most, your signature or a scan. The federal Electronic Fund Transfer Act (EFT Act) covers some 

electronic consumer transactions.

Electronic Fund Transfers

EFT offers several services that consumers may 

find practical: 

Q Automated Teller Machines or 24-hour Tellers are electronic terminals that let you bank 

almost any time. To withdraw cash, make 

deposits, or transfer funds between accounts, 

you generally insert an ATM card and 

enter your PIN. Some financial institutions and ATM owners charge 

a fee, particularly to consumers 

who don’t have accounts with 

them or on transactions at remote 

locations. Generally, ATMs must 

tell you they charge a fee and 

its amount on or at the terminal 

screen before you complete the transaction. Check the rules of your institution and 

ATMs you use to find out when or whether a 

fee is charged.

Q Direct Deposit lets you authorize specific deposits, such as paychecks and Social Security 

checks, to your account on a regular basis. 

You also may pre-authorize direct withdrawals so that recurring bills, such as insurance 

premiums, mortgages, and utility bills, are 

paid automatically. Be cautious before you 

pre-authorize direct withdrawals to pay sellers or companies with whom you are unfamiliar; funds from your bank account could 

be withdrawn fraudulently.

Q Pay-by-Phone Systems let you call your 

financial institution with instructions to pay 

December 2006
certain bills or to transfer funds between 

accounts. You must have an agreement with 

the institution to make such transfers.

Q Personal Computer Banking lets you handle 

many banking transactions via your personal 

computer. For instance, you may use your 

computer to view your account balance, 

request transfers between accounts, and pay 

bills electronically.

Q Debit Card Purchase Transactions let you 

make purchases with a debit card, which also 

may be your ATM 

card. This could occur 

at a store or business, 

on the Internet or 

online, or by phone. 

The process is similar 

to using a credit card, 

with some important 

exceptions. While the 

process is fast and easy, 

a debit card purchase 

transfers money — fairly quickly — from 

your bank account to the company’s account. So it’s important that you have funds 

in your account to cover your purchase. This 

means you need to keep accurate records of 

the dates and amounts of your debit card 

purchases and ATM withdrawals in addition 

to any checks you write. Also be sure you 

know the store or business before you provide your debit card information, to avoid 

the possible loss of funds through fraud. 

Your liability for unauthorized use, and your 

rights for error resolution, may differ with a 

debit card. 

Q Electronic Check Conversion converts a paper check into an electronic payment in 

a store or when a company receives your 

check in the mail. In a store, when you give 

your check to a cashier, the check is run 

through an electronic system that captures 

your banking information and the amount 

of the check. You’re asked to sign a receipt 

and you get a copy for your records. When 

your check has been handed back to you, it 

should be voided or marked by the merchant 

so that it can’t be used again. The merchant 

electronically sends information from the check 

(but not the check itself) 

to your bank or other 

financial institution, and 

the funds are transferred 

into the merchant’s account. When you mail-in 

a check for payment to a 

merchant or other company, they may electronically send information from your check (but 

not the check itself) through the system, and 

the funds are transferred into their account. 

For a mailed check, you should still receive 

advance notice from a company that expects 

to send your check information through 

the system electronically. The merchant or 

other company might include the notice on 

your monthly statement or under its terms 

and conditions. The notice also should state 

if the merchant or company will electronically collect from your account a fee — like 

a “bounced check” fee — if you have insufficient funds to cover the transaction. 

Be especially careful in Internet 

and telephone transactions 

that may involve use of your 

bank account information, 

rather than a check.

2 FTC Facts For Consumers
Be especially careful in Internet and telephone transactions that may involve use of your 

bank account information, rather than a check. 

A legitimate merchant that lets you use your 

bank account information to make a purchase 

or pay on an account should post information 

about the process on their website or explain the 

process over the telephone. The merchant also 

should ask for your permission to electronically 

debit your bank account for the item you’re purchasing or paying on. However, because Internet and telephone electronic debits don’t occur 

face-to-face, you should be cautious with whom 

you reveal your bank account information. Don’t 

give this information to sellers with whom you 

have no prior experience or with whom you have 

not initiated the call, or to companies that seem 

reluctant to provide information or discuss the 

process with you.

Not all electronic fund transfers are covered 

by the EFT Act. For example, some financial 

institutions and merchants issue cards with cash 

value stored electronically on the card itself. 

Examples include prepaid telephone cards, mass 

transit passes, and some gift cards. These “storedvalue” cards, as well as transactions using them, 

may not be covered by the EFT Act. This means 

you may not be covered for the loss or misuse 

of the card. Ask your financial institution or 

merchant about any protections offered for these 

cards.

Disclosures 

To understand your legal rights and responsibilities regarding your EFTs, read the documents 

you receive from the financial institution that issued your “access device.” That is, a card, code or 

other means of accessing your account to initiate 

electronic fund transfers. Although the means 

varies by institution, it often involves a card and/

or a PIN. No one should know your PIN except 

you and select employees of the financial institution. You also should read the documents you 

receive for your bank account, which may contain more information about EFTs.

Before you contract for EFT services or make 

your first electronic transfer, the institution must 

tell you the following information in a form you 

can keep.

Q A summary of your liability for unauthorized 

transfers. 

Q The telephone number and address of the 

person to be notified if you think an unauthorized transfer has been or may be made, a 

statement of the institution’s “business days” 

(which is, generally, the days the institution 

is open to the public for normal business), 

and the number of days you have to report 

suspected unauthorized transfers. 

Q The type of transfers you can make, fees for 

transfers, and any limits on the frequency 

and dollar amount of transfers. 

Q A summary of your right to receive documentation of transfers, to stop payment on a 

pre-authorized transfer, and the procedures 

to follow to stop payment. 

Q A notice describing the procedures you must 

follow to report an error on a receipt for an 

EFT or your periodic statement, to request 

more information about a transfer listed on 

FTC Facts For Consumers 3
your statement, and how long you have to 

make your report. 

Q A summary of the institution’s liability to 

you if it fails to make or stop certain transactions. 

Q Circumstances under which the institution 

will disclose information to third parties concerning your account. 

Q A notice that you may be charged a fee by 

ATMs where you don’t have an account.

In addition to these 

disclosures, you will receive 

two other types of information for most transactions: terminal receipts and 

periodic statements. Separate rules apply to passbook accounts from which 

pre-authorized transfers are 

drawn. The best source of 

information about those 

rules is your contract with 

the financial institution for that account. You’re 

entitled to a terminal receipt each time you initiate an electronic transfer, whether you use an 

ATM or make a point-of-sale electronic transfer. 

The receipt must show the amount and date of 

the transfer, and its type, such as “from savings 

to checking.” When you make a point-of-sale 

transfer, you’ll probably get your terminal receipt 

from the salesperson.

You won’t get a terminal receipt for regularly 

occurring electronic payments that you’ve preauthorized, like insurance premiums, mortgages, 

or utility bills. Instead, these transfers will appear 

on your periodic statement. If the pre-authorized 

payments vary, however, you should receive a 

notice of the amount that will be debited at least 

10 days before the debit takes place.

You’re also entitled to a periodic statement 

for each statement cycle in which an electronic 

transfer is made. The statement must show the 

amount of any transfer, the date it was credited 

or debited to your account, the type of transfer 

and type of account(s) to or from which funds 

were transferred, and the address and telephone 

number for inquiries. 

You’re entitled to a quarterly statement whether 

or not electronic transfers 

were made.

Keep and compare 

your EFT receipts with 

your periodic statements 

the same way you compare 

your credit card receipts 

with your monthly credit 

card statement. This will 

help you make the best use of your rights under 

federal law to dispute errors and avoid liability 

for unauthorized transfers.

Errors 

You have 60 days from the date a periodic statement containing a problem or error was sent to 

you to notify your financial institution. The best 

way to protect yourself if an error occurs — including erroneous charges or withdrawals from 

an account, or for a lost or stolen ATM or debit 

card — is to notify the financial institution by 

Keep and compare your EFT 

receipts with your periodic 

statements the same way you 

compare your credit card 

receipts with your monthly 

credit card statement.

4 FTC Facts For Consumers
certified letter, return receipt requested, so you 

can prove that the institution received your letter. Keep a copy of the letter for your records.

If you fail to notify the institution of the error within 60 days, you 

may have little recourse. Under federal 

law, the institution has no obligation 

to conduct an investigation if you’ve 

missed the 60-day deadline.

Once you’ve notified the financial institution about an error on your statement, it has 10 

business days to investigate. The institution must 

tell you the results of its investigation within 

three business days after completing it and must 

correct an error within one business day after 

determining that the error has occurred. If the 

institution needs more time, it usually may take 

up to 45 days, in most situations, to complete 

the investigation — but only if the money in 

dispute is returned to your account and you’re 

notified promptly of the credit. At the end of 

the investigation, if no error has been found, the 

institution may take the money back if it sends 

you a written explanation.

An error also may occur in connection with 

a point-of-sale purchase with a debit card. For 

example, an oil company might give you a debit 

card that lets you pay for gas purchases directly 

from your bank account. Or you may have a 

debit card that can be used for various types of 

retail purchases. These purchases will appear 

on your periodic statement from the bank. In 

case of an error on your account, however, you 

should contact the card issuer (for example, an 

oil company or a bank) at the address or phone 

number provided by the company. Once you’ve 

notified the company about the error, it has 

10 business days to investigate and tell you the 

results. In this situation, it may take up to 90 

days to complete an investigation, if the money 

in dispute is returned to your account and you’re 

notified promptly of the credit. If no error is 

found at the end of the investigation, the institution may take back the money if it sends you a 

written explanation.

Lost or Stolen ATM 

or Debit Cards 

If your credit card is lost or stolen, you can’t 

lose more than $50. If someone uses your ATM 

or debit card without your permission, you can 

lose much more.

If you report an ATM or debit card missing 

to the card issuer before it’s used without your 

permission, you can’t be held responsible for any 

unauthorized withdrawals.

If unauthorized use occurs before you report 

it, the amount you can be held responsible for 

depends upon how quickly you report the loss to 

the card issuer. 

Q If you report the loss within two business 

days after you realize your card is missing, 

you won’t be responsible for more than $50 

for unauthorized use. 

Q If you fail to report the loss within two business days after you realize the card is missing, 

but do report its loss within 60 days after 

your statement is mailed to you, you could 

lose as much as $500 because of an unauthorized transfer. 

FTC Facts For Consumers 5
Q If you fail to report an unauthorized transfer 

within 60 days after your statement is mailed 

to you, you risk unlimited loss. That means 

you could lose all the money in your account 

and the unused portion of your maximum 

line of credit established for overdrafts. 

If you failed to notify the institution within 

the time periods allowed 

because of an extenuating circumstance, such as 

lengthy travel or illness, the 

issuer must reasonably extend the notification period. In addition, if state law 

or your contract imposes 

lower liability limits, those 

lower limits apply instead 

of the limits in the federal 

EFT Act.

Once you report the loss or theft of your 

ATM or debit card, you’re no longer responsible 

for additional unauthorized transfers occurring after that time. Because these unauthorized 

transfers may appear on your statements, however, you should carefully review each statement 

you receive after you’ve reported the loss or theft. 

If the statement shows transfers that you did not 

make or that you need more information about, 

contact the institution immediately, using the 

special procedures provided for reporting errors.

Limited Stop-Payment 

Privileges 

When you use an electronic fund transfer, the 

EFT Act does not give you the right to stop payment. If your purchase is defective or your order 

is not delivered, it’s as if you paid cash. That is, 

it’s up to you to resolve the problem with the 

seller and get your money back.

There is one situation, 

however, when you can 

stop payment. If you’ve arranged for regular payments 

out of your account to 

third parties, such as insurance companies, you can 

stop payment if you notify 

your institution at least 

three business days before 

the scheduled transfer. The 

notice may be oral or written, but the institution 

may require a written follow-up within 14 days 

of the oral notice. If you fail to provide the written follow-up, the institution’s responsibility to 

stop payment ends.

Although federal law provides only limited 

rights to stop payment, individual financial institutions may offer more rights or state laws may 

require them. If this feature is important to you, 

you may want to shop around to be sure you’re 

getting the best “stop-payment” terms available.

Once you report the loss 

or theft of your ATM or 

debit card, you’re no longer 

responsible for additional 

unauthorized transfers 

occurring after that time.

6 FTC Facts For Consumers
Other Rights 

The EFT Act protects your right of choice in 

two specific situations regarding use of electronic 

fund transfers: First, the Act prohibits financial 

institutions from requiring you to repay a loan 

by electronic transfer. Second, if you’re required 

to receive your salary or government benefit 

check by EFT, you have the right to choose your 

institution.

Suggestions 

If you decide to use EFT, keep these tips in 

mind: 

Q Take care of your ATM or debit card. Know 

where it is at all times; if you lose it, report it 

as soon as possible.

Q Choose a PIN for your ATM or debit card 

that’s different from your address, telephone 

number, Social Security number, or birthdate. This will make it more difficult for a 

thief to use your card.

Q Keep and compare your receipts for all types 

of EFT transactions with your periodic 

statements. That way, you can find errors or 

unauthorized transfers and report them.

Q Make sure you know and trust a merchant 

or other company before you share any 

bank account information or pre-authorize 

debits to your account. Be aware that some 

merchants or companies may use electronic 

processing of your check information when 

you provide a check for payment.

Q Review your monthly statements promptly 

and carefully. Contact your bank or other 

financial institution immediately if you find 

unauthorized transactions and errors. 

Where to File Complaints 

If you think a financial institution or company 

has failed to fulfill its responsibilities to you under the EFT Act, speak up. In addition, you may 

wish to complain to the federal agency listed 

below that has enforcement jurisdiction over 

that company. 

Office of the Comptroller of the Currency: 

Regulates banks with “national” in the name or 

“N.A.” after the name:

Office of the Ombudsman

Customer Assistance Group

1301 McKinney Street, Suite 3450

Houston, TX 77010

800-613-6743 toll-free

www.occ.treas.gov

Board of Governors of the Federal Reserve 

System:

Regulates state-chartered banks that are members of the Federal Reserve System, bank holding 

companies, and branches of foreign banks:

Federal Reserve Consumer Help

PO Box 1200

Minneapolis, MN 55480

888-851-1920 (TTY: 877-766-8533) toll-free 

ConsumerHelp@FederalReserve.gov

FTC Facts For Consumers 7
Federal Deposit Insurance Corporation: 

Regulates state-chartered banks that are not 

members of the Federal Reserve System:

Division of Supervision and Consumer Protection

550 17th Street, NW

Washington, DC 20429

877-ASK-FDIC (275-3342) toll-free

www.fdic.gov

National Credit Union Administration: 

Regulates federally chartered credit unions:

Office of Public and Congressional Affairs

1775 Duke Street

Alexandria, VA 22314-3428

703-518-6330

www.ncua.gov

Office of Thrift Supervision: 

Regulates federal savings and loan associations 

and federal savings banks:

Consumer Programs

1700 G Street, NW

Washington, DC 20552

800-842-6929 toll-free

www.ots.treas.gov

Federal Trade Commission: 

Regulates non-bank lenders:

Consumer Response Center

600 Pennsylvania Avenue, NW

Washington, DC 20580

877-FTC-HELP (382-4357) toll-free

www.ftc.gov

The FTC works to prevent fraudulent, 

deceptive and unfair business practices in the 

marketplace and to provide information to 

help consumers spot, stop and avoid them. 

To file a complaint or get free information on 

consumer issues, visit ftc.gov or call toll-free, 

1-877-FTC-HELP (1-877-382-4357); TTY: 

1-866-653-4261. Watch a new video, How to 

File a Complaint, at ftc.gov/video to learn more. 

The FTC enters consumer complaints into 

the Consumer Sentinel Network, a secure online 

database and investigative tool used by hundreds 

of civil and criminal law enforcement agencies in 

the U.S. and abroad.

8 FTC Facts For Consumers

For The Consumer Federal Trade Commission

ftc.gov 1-877-ftc-help

Federal Trade Commission

Bureau of Consumer Protection

Division of Consumer and Business Education