```

[Federal Register Volume 76, Number 248 (Tuesday, December 27, 2011)]
[Rules and Regulations]
[Pages 81020-81058]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-31725]

[[Page 81019]]

Vol. 76

Tuesday,

No. 248

December 27, 2011

Part II

Bureau of Consumer Financial Protection

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12 CFR Part 1005

Electronic Fund Transfers (Regulation E); Interim Final Rule

Federal Register / Vol. 76 , No. 248 / Tuesday, December 27, 2011 / 
Rules and Regulations

[[Page 81020]]

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BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1005

[Docket No. CFPB-2011-0021]
RIN 3170-AA06

Electronic Fund Transfers (Regulation E)

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Interim final rule with request for public comment.

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SUMMARY: Title X of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (Dodd-Frank Act) transferred rulemaking authority for a 
number of consumer financial protection laws from seven Federal 
agencies to the Bureau of Consumer Financial Protection (Bureau) as of 
July 21, 2011. The Bureau is in the process of republishing the 
regulations implementing those laws with technical and conforming 
changes to reflect the transfer of authority and certain other changes 
made by the Dodd-Frank Act. In light of the transfer of the Board of 
Governors of the Federal Reserve System's (Board's) rulemaking 
authority for the Electronic Fund Transfer Act (EFTA) to the Bureau, 
the Bureau is publishing for public comment an interim final rule 
establishing a new Regulation E (Electronic Fund Transfers). This 
interim final rule does not impose any new substantive obligations on 
persons subject to the existing Regulation E, previously published by 
the Board.

DATES: This interim final rule is effective December 30, 2011. Comments 
must be received on or before February 27, 2012.

ADDRESSES: You may submit comments, identified by Docket No. CFPB-2011-
0021 or RIN 3170-AA06, by any of the following methods:
     Electronic: http://www.regulations.gov. Follow the 
instructions for submitting comments.
     Mail: Monica Jackson, Office of the Executive Secretary, 
Bureau of Consumer Financial Protection, 1500 Pennsylvania Avenue NW., 
(Attn: 1801 L Street), Washington, DC 20220.
     Hand Delivery/Courier in Lieu of Mail: Monica Jackson, 
Office of the Executive Secretary, Bureau of Consumer Financial 
Protection, 1700 G Street NW., Washington, DC 20006.
    All submissions must include the agency name and docket number or 
Regulatory Information Number (RIN) for this rulemaking. In general, 
all comments received will be posted without change to http://www.regulations.gov. In addition, comments will be available for public 
inspection and copying at 1700 G Street NW., Washington, DC 20006, on 
official business days between the hours of 10 a.m. and 5 p.m. Eastern 
Time. You can make an appointment to inspect the documents by 
telephoning (202) 435-7275.
    All comments, including attachments and other supporting materials, 
will become part of the public record and subject to public disclosure. 
Sensitive personal information, such as account numbers or social 
security numbers, should not be included. Comments will not be edited 
to remove any identifying or contact information.

FOR FURTHER INFORMATION CONTACT: Gregory Evans or Jane Gao, Office of 
Regulations, at (202) 435-7700.

SUPPLEMENTARY INFORMATION:

I. Background

    The Electronic Fund Transfer Act (15 U.S.C. 1693 et seq.) (EFTA), 
enacted in 1978, provides a basic framework establishing the rights, 
liabilities, and responsibilities of participants in electronic fund 
transfer (EFT) systems. Historically, the EFTA was implemented in 
Regulation E of the Board of Governors of the Federal Reserve System 
(Board), 12 CFR Part 205. The Dodd-Frank Wall Street Reform and 
Consumer Protection Act (Dodd-Frank Act) \1\ amended a number of 
consumer financial protection laws, including the EFTA. In addition to 
various substantive amendments, the Dodd-Frank Act generally 
transferred the Board's rulemaking authority for the EFTA to the Bureau 
of Consumer Financial Protection (Bureau), effective July 21, 2011.\2\ 
See sections 1061 and 1084 of the Dodd-Frank Act. Pursuant to the Dodd-
Frank Act and EFTA, as amended, the Bureau is publishing for public 
comment an interim final rule establishing a new Regulation E 
(Electronic Fund Transfers), 12 CFR Part 1005, implementing the EFTA.
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    \1\ Public Law 111-203,124 Stat. 1376 (2010).
    \2\ The Dodd-Frank Act section 1029, generally excludes from 
this transfer of authority, subject to certain exceptions, any 
rulemaking authority over a motor vehicle dealer that is 
predominantly engaged in the sale and servicing of motor vehicles, 
the leasing and servicing of motor vehicles, or both. See also Dodd-
Frank Act, sections 1002(12)(C), 1084(3) (Board retains rulemaking 
authority with respect to section 920 of EFTA, dealing with debit 
card interchange fees, network arrangements, and routing 
restrictions);12 CFR Part 235.
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II. Summary of the Interim Final Rule

A. General

    The interim final rule substantially duplicates the Board's 
Regulation E as the Bureau's new Regulation E, 12 CFR Part 1005, making 
only certain non-substantive, technical, formatting, and stylistic 
changes. To minimize any potential confusion, the Bureau is preserving 
the numbering of the Board's Regulation E, other than the new part 
number. While this interim final rule generally incorporates the 
Board's existing regulatory text, appendices (including model forms and 
clauses), and supplements, the rule has been edited as necessary to 
reflect nomenclature and other technical amendments required by the 
Dodd-Frank Act. Notably, this interim final rule does not impose any 
new substantive obligations on regulated entities.

B. Specific Changes

    The Bureau has made certain nomenclature and other non-substantive 
changes consistently throughout Regulation E. References to the Board 
and its administrative structure have been replaced with references to 
the Bureau. Conforming edits have been made to internal cross-
references, as well as addresses or other contact information. 
Conforming edits have also been made to reflect the scope of the 
Bureau's authority pursuant to the EFTA, as amended by the Dodd-Frank 
Act. Historical references that are no longer applicable, and 
references to effective dates that have passed, have been removed as 
appropriate. In addition, certain changes have been made to the text of 
the Board's Regulation E to conform to current codification standards 
of the Code of Federal Regulations. For example, previously 
undesignated paragraphs in the regulation and the official commentary 
have been enumerated.
    The Bureau is eliminating three provisions of Regulation E that are 
no longer applicable and renumbering one section that is affected by 
this deletion. The deleted provisions include the following:

     Section 1005.3(b)(2)(iii), which expired December 31, 
2009. What would have been Sec.  1005.3(b)(2)(iv) was renumbered 
1005.3(b)(2)(iii).
     Section 1005.3(b)(3)(iii), which expired December 31, 
2007.
     Section 1005.16(d), which provided a technical 
exemption for certain automated teller machines through December 31, 
2004. What would have been Sec.  1005.16(e) was renumbered 
1005.16(d).

[[Page 81021]]

    The Bureau is also eliminating Appendix B, entitled ``Federal 
Enforcement Agencies,'' because it was designed to be informational 
only and is unnecessary for the implementation of the EFTA, as amended.
    Moreover, the Bureau is revising Form A-9, Model Consent Form for 
Overdraft Services, in Appendix A to the Bureau's new Regulation E. The 
revised Form A-9 is, however, identical to the Board's version in 
substance. The only revision was to modernize the spelling of 
``website'' (in place of ``Web site'') to parallel a stylistic change 
the Bureau is making in the corresponding regulatory text of Sec. Sec.  
1005.18 and 1005.20. This change does not necessitate any revision to 
standard forms that institutions may use in reliance on Model Form A-9 
because the term, ``website,'' appears in the model form within 
brackets, indicating that the institution is to replace the placeholder 
with its own website address. Thus, neither ``website'' nor ``website'' 
appears in overdraft services consent forms actually delivered to 
consumers.
    Finally, the Bureau is updating references to the EFTA by 
correcting statutory citations to the EFTA in cases where the numbering 
of the Act was altered by section 1084 of the Dodd-Frank Act. These 
updated references occur in the following provisions of Regulation E:

     Section 1005.3(c)(5)
     Section 1005.3(c)(7)
     Section 1005.12(c)(2)
     Section 1005.13(b)(2)
     Section 1005.20(h)(2)
     Appendix C--Official Interpretations

III. Legal Authority

A. Rulemaking Authority

    The Bureau is issuing this interim final rule pursuant to its 
authority under the EFTA and the Dodd-Frank Act. Effective July 21, 
2011, section 1061 of the Dodd-Frank Act transferred to the Bureau the 
``consumer financial protection functions'' previously vested in 
certain other Federal agencies. The term ``consumer financial 
protection function'' is defined to include ``all authority to 
prescribe rules or issue orders or guidelines pursuant to any Federal 
consumer financial law, including performing appropriate functions to 
promulgate and review such rules, orders, and guidelines.'' \3\ The 
EFTA is a Federal consumer financial law, except with respect to 
section 920 of the EFTA, dealing with debit card interchange fees, 
network arrangements, and routing restrictions.\4\ Accordingly, 
effective July 21, 2011, the authority of the Board to issue 
regulations pursuant to the EFTA transferred to the Bureau.\5\
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    \3\ Public Law 111-203, section 1061(a)(1). Effective on the 
designated transfer date, the Bureau is also granted ``all powers 
and duties'' vested in each of the Federal agencies, relating to the 
consumer financial protection functions, on the day before the 
designated transfer date. Until this and other interim final rules 
take effect, existing regulations for which rulemaking authority 
transferred to the Bureau continue to govern persons covered by this 
rule. See 76 FR 43569 (July 21, 2011).
    \4\ Public Law 111-203, section 1002(14) (defining ``Federal 
consumer financial law'' to include the ``enumerated consumer 
laws''); id. Section 1002(12) (defining ``enumerated consumer laws'' 
to include the EFTA, except with respect to section 920 of the 
EFTA).
    \5\ Section 1066 of the Dodd-Frank Act grants the Secretary of 
the Treasury interim authority to perform certain functions of the 
Bureau. Pursuant to that authority, Treasury is publishing this 
interim final rule on behalf of the Bureau.
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    EFTA section 904(a) authorizes the Bureau to prescribe regulations 
necessary to carry out the purposes of the title. The express purposes 
of the EFTA, as amended by the Dodd-Frank Act, are to establish ``the 
rights, liabilities, and responsibilities of participants in electronic 
fund and remittance transfer systems'' and to provide ``individual 
consumer rights.'' EFTA section 902(b), 15 U.S.C. 1693. EFTA section 
904(c), as amended by the Dodd-Frank Act, further provides that 
regulations prescribed by the Bureau may contain any classifications, 
differentiations, or other provisions, and may provide for such 
adjustments or exceptions for any class of electronic fund transfers or 
remittance transfers that the Bureau deems necessary or proper to 
effectuate the purposes of the title, to prevent circumvention or 
evasion, or to facilitate compliance.\6\
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    \6\ 15 U.S.C. 1693b.
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B. Authority To Issue an Interim Final Rule Without Prior Notice and 
Comment

    The Administrative Procedure Act (APA) \7\ generally requires 
public notice and an opportunity to comment before promulgation of 
regulations.\8\ The APA provides exceptions to notice-and-comment 
procedures, however, where an agency for good cause finds that such 
procedures are impracticable, unnecessary, or contrary to the public 
interest or when a rulemaking relates to agency organization, 
procedure, and practice.\9\ The Bureau finds that there is good cause 
to conclude that providing notice and opportunity for comment would be 
unnecessary and contrary to the public interest under these 
circumstances. In addition, substantially all the changes made by this 
interim final rule, which were necessitated by the Dodd-Frank Act's 
transfer of EFTA authority from the Board to the Bureau, relate to 
agency organization, procedure, and practice and are thus exempt from 
the APA's notice-and-comment requirements.
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    \7\ 5 U.S.C. 551 et seq.
    \8\ 5 U.S.C. 553(b), (c).
    \9\ 5 U.S.C. 553(b)(3)(A), (B).
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    The Bureau's good cause findings are based on the following 
considerations. As an initial matter, the Board's existing regulation 
was a result of notice-and-comment rulemaking to the extent required. 
Moreover, the interim final rule published today does not impose any 
new, substantive obligations on regulated entities. Rather, the interim 
final rule makes only non-substantive, technical changes to the 
existing text of the regulation, such as renumbering, changing internal 
cross-references, replacing appropriate nomenclature to reflect the 
transfer of authority to the Bureau, and changing the address for 
filing applications and notices. Given the technical nature of these 
changes, and the fact that the interim final rule does not impose any 
additional substantive requirements on covered entities, an opportunity 
for prior public comment is unnecessary. In addition, recodifying the 
Board's regulation to reflect the transfer of authority to the Bureau 
will help facilitate compliance with the EFTA and its implementing 
regulation, and the new regulation will help reduce uncertainty 
regarding the applicable regulatory framework. Using notice-and-comment 
procedures would delay this process and thus be contrary to the public 
interest.
    The APA generally requires that rules be published not less than 30 
days before their effective dates. See 5 U.S.C. 553(d). As with the 
notice and comment requirement, however, the APA allows an exception 
when ``otherwise provided by the agency for good cause found and 
published with the rule.'' 5 U.S.C. 553(d)(3). The Bureau finds that 
there is good cause for providing less than 30 days notice here. A 
delayed effective date would harm consumers and regulated entities by 
needlessly perpetuating discrepancies between the amended statutory 
text and the implementing regulation, thereby hindering compliance and 
prolonging uncertainty regarding the applicable regulatory 
framework.\10\
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    \10\ This interim final rule is one of 14 companion rulemakings 
that together restate and recodify the implementing regulations 
under 14 existing consumer financial laws (part III.C, below, lists 
the 14 laws involved). In the interest of proper coordination of 
this overall regulatory framework, which includes numerous cross-
references among some of the regulations, the Bureau is establishing 
the same effective date of December 30, 2011 for those rules 
published on or before that date and making those published 
thereafter (if any) effective immediately.

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[[Page 81022]]

    In addition, delaying the effective date of the interim final rule 
for 30 days would provide no practical benefit to regulated entities in 
this context and in fact could operate to their detriment. As discussed 
above, the interim final rule published today does not impose any new, 
substantive obligations on regulated entities. Instead, the rule makes 
only non-substantive, technical changes to the existing text of the 
regulation. Thus, regulated entities that are already in compliance 
with the existing rules will not need to modify business practices as a 
result of this rule.

C. Section 1022(b)(2) of the Dodd-Frank Act

    In developing the interim final rule, the Bureau has conducted an 
analysis of potential benefits, costs, and impacts.\11\ The Bureau 
believes that the interim final rule will benefit consumers and covered 
persons by updating and recodifying Regulation E to reflect the 
transfer of authority to the Bureau and certain other changes mandated 
by the Dodd-Frank Act. This will help facilitate compliance with the 
EFTA and its implementing regulation and help reduce any uncertainty 
regarding the applicable regulatory framework. The interim final rule 
will not impose any new substantive obligations on consumers or covered 
persons and it is not expected to have any impact on consumers' access 
to consumer financial products and services.
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    \11\ Section 1022(b)(2)(A) of the Dodd-Frank Act addresses the 
consideration of the potential benefits and costs of regulation to 
consumers and covered persons, including the potential reduction of 
access by consumers to consumer financial products or services; the 
impact on depository institutions and credit unions with $10 billion 
or less in total assets as described in section 1026 of the Dodd-
Frank Act; and the impact on consumers in rural areas. Section 
1022(b)(2)(B) requires that the Bureau ``consult with the 
appropriate prudential regulators or other Federal agencies prior to 
proposing a rule and during the comment process regarding 
consistency with prudential, market, or systemic objectives 
administered by such agencies.'' The manner and extent to which 
these provisions apply to interim final rules and to benefits, 
costs, and impacts that are compelled by statutory changes rather 
than discretionary Bureau action is unclear. Nevertheless, to inform 
this rulemaking more fully, the Bureau performed the described 
analyses and consultations.
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    Although not required by the interim final rule, covered entities 
may incur some costs in updating compliance manuals and related 
materials to reflect the new numbering and other technical changes 
reflected in the new Regulation E. The Bureau has worked to reduce any 
such burden by preserving the existing numbering to the extent possible 
and believes that such costs will likely be minimal. These changes 
could be handled in the short term by providing a short, standalone 
summary alerting users to the changes and in the long term could be 
combined with other updates at the covered person's convenience. The 
Bureau intends to continue investigating the possible costs to affected 
entities of updating manuals and related materials to reflect these 
changes and solicits comments on this and other issues discussed in 
this section.
    The interim final rule will have no unique impact on depository 
institutions or credit unions with $10 billion or less in assets as 
described in section 1026(a) of the Dodd-Frank Act. Also, the interim 
final rule will have no unique impact on rural consumers.
    In undertaking the process of recodifying Regulation E, as well as 
regulations implementing thirteen other existing consumer financial 
laws,\12\ the Bureau consulted the Federal Deposit Insurance 
Corporation, the Office of the Comptroller of the Currency, the 
National Credit Union Administration, the Board of Governors of the 
Federal Reserve System, the Federal Trade Commission, and the 
Department of Housing and Urban Development, including with respect to 
consistency with any prudential, market, or systemic objectives that 
may be administered by such agencies.\13\ The Bureau also has consulted 
with the Office of Management and Budget for technical assistance. The 
Bureau expects to have further consultations with the appropriate 
Federal agencies during the comment period.
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    \12\ The fourteen laws implemented by this and its companion 
rulemakings are: the Consumer Leasing Act, the Electronic Fund 
Transfer Act (except with respect to section 920 of that Act), the 
Equal Credit Opportunity Act, the Fair Credit Reporting Act (except 
with respect to sections 615(e) and 628 of that act), the Fair Debt 
Collection Practices Act, Subsections (b) through (f) of section 43 
of the Federal Deposit Insurance Act, sections 502 through 509 of 
the Gramm-Leach-Bliley Act (except for section 505 as it applies to 
section 501(b)), the Home Mortgage Disclosure Act, the Real Estate 
Settlement Procedures Act, the S.A.F.E. Mortgage Licensing Act, the 
Truth in Lending Act, the Truth in Savings Act, section 626 of the 
Omnibus Appropriations Act, 2009, and the Interstate Land Sales Full 
Disclosure Act.
    \13\ In light of the technical but voluminous nature of this 
recodification project, the Bureau focused the consultation process 
on a representative sample of the recodified regulations, while 
making information on the other regulations available. The Bureau 
expects to conduct differently its future consultations regarding 
substantive rulemakings.
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IV. Request for Comment

    Although notice and comment rulemaking procedures are not required, 
the Bureau invites comments on this notice. Commenters are specifically 
encouraged to identify any technical issues raised by the rule. The 
Bureau is also seeking comment in response to a notice published at 76 
FR 75825 (Dec. 5, 2011) concerning its efforts to identify priorities 
for streamlining regulations that it has inherited from other Federal 
agencies to address provisions that are outdated, unduly burdensome, or 
unnecessary.

V. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), as amended by the Small 
Business Regulatory Enforcement Fairness Act of 1996, requires each 
agency to consider the potential impact of its regulations on small 
entities, including small businesses, small governmental units, and 
small not-for-profit organizations.\14\ The RFA generally requires an 
agency to conduct an initial regulatory flexibility analysis (IRFA) and 
a final regulatory flexibility analysis (FRFA) of any rule subject to 
notice-and-comment rulemaking requirements, unless the agency certifies 
that the rule will not have a significant economic impact on a 
substantial number of small entities.\15\ The Bureau also is subject to 
certain additional procedures under the RFA involving the convening of 
a panel to consult with small business representatives prior to 
proposing a rule for which an IRFA is required.\16\
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    \14\ 5 U.S.C. 601 et seq.
    \15\ 5 U.S.C. 603, 604.
    \16\ 5 U.S.C. 609.
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    The IRFA and FRFA requirements described above apply only where a 
notice of proposed rulemaking is required,\17\ and the panel 
requirement applies only when a rulemaking requires an IRFA.\18\ As 
discussed above in part III, a notice of proposed rulemaking is not 
required for this rulemaking.
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    \17\ 5 U.S.C. 603(a), 604(a); 5 U.S.C. 553(b)(B).
    \18\ 5 U.S.C. 609(b).
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    In addition, as discussed above, this interim final rule has only a 
minor impact on entities subject to Regulation E. The rule imposes no 
new, substantive obligations on covered entities. Accordingly, the 
undersigned certifies that this interim final rule will not have a 
significant economic impact on a substantial number of small entities.

VI. Paperwork Reduction Act

    The Bureau may not conduct or sponsor, and a respondent is not 
required to respond to, an information collection unless it displays a 
currently valid Office of Management and Budget (OMB) control number. 
This rule contains information collection

[[Page 81023]]

requirements under the Paperwork Reduction Act (PRA), which have been 
previously approved by OMB under the following OMB control number 
issued to the Board, and the PRA burden for which is unchanged by this 
rule: OMB Control No(s). 7100-0200. There are no new information 
collection requirements in this interim final rule. The Bureau's OMB 
control number for this information collection is: 3170-0014.

List of Subjects in 12 CFR Part 1005

    Banks, Banking, Consumer protection, Credit unions, Electronic fund 
transfers, National banks, Reporting and recordkeeping requirements, 
Savings Associations.

Authority and Issuance

    For the reasons set forth above, the Bureau of Consumer Financial 
Protection adds part 1005 to Chapter X in Title 12 of the Code of 
Federal Regulations to read as follows:

PART 1005--ELECTRONIC FUND TRANSFERS (REGULATION E)

Sec.
1005.1 Authority and purpose.
1005.2 Definitions.
1005.3 Coverage.
1005.4 General disclosure requirements; jointly offered services.
1005.5 Issuance of access devices.
1005.6 Liability of consumer for unauthorized transfers.
1005.7 Initial disclosures.
1005.8 Change in terms notice; error resolution notice.
1005.9 Receipts at electronic terminals; periodic statements.
1005.10 Preauthorized transfers.
1005.11 Procedures for resolving errors.
1005.12 Relation to other laws.
1005.13 Administrative enforcement; record retention.
1005.14 Electronic fund transfer service provider not holding 
consumer's account.
1005.15 Electronic fund transfer of government benefits.
1005.16 Disclosures at automated teller machines.
1005.17 Requirements for overdraft services.
1005.18 Requirements for financial institutions offering payroll 
card accounts.
1005.20 Requirements for gift cards and gift certificates.
Appendix A to Part 1005--Model Disclosure Clauses and Forms
Appendix B to Part 1005--[Reserved]
Appendix C to Part 1005--Issuance of Official Interpretations
Supplement I to Part 1005--Official Interpretations

    Authority:  12 U.S.C. 5512, 5581; 15 U.S.C. 1693b.

Sec.  1005.1  Authority and purpose.

    (a) Authority. The regulation in this part, known as Regulation E, 
is issued by the Bureau of Consumer Financial Protection (Bureau) 
pursuant to the Electronic Fund Transfer Act (15 U.S.C. 1693 et seq.). 
The information-collection requirements have been approved by the 
Office of Management and Budget under 44 U.S.C. 3501 et seq. and have 
been assigned OMB No. 3170-0014.
    (b) Purpose. This part carries out the purposes of the Electronic 
Fund Transfer Act, which establishes the basic rights, liabilities, and 
responsibilities of consumers who use electronic fund transfer services 
and of financial institutions that offer these services. The primary 
objective of the Act and this part is the protection of individual 
consumers engaging in electronic fund transfers.

Sec.  1005.2  Definitions.

    For purposes of this part, the following definitions apply:
    (a)(1) ``Access device'' means a card, code, or other means of 
access to a consumer's account, or any combination thereof, that may be 
used by the consumer to initiate electronic fund transfers.
    (2) An access device becomes an ``accepted access device'' when the 
consumer:
    (i) Requests and receives, or signs, or uses (or authorizes another 
to use) the access device to transfer money between accounts or to 
obtain money, property, or services;
    (ii) Requests validation of an access device issued on an 
unsolicited basis; or
    (iii) Receives an access device in renewal of, or in substitution 
for, an accepted access device from either the financial institution 
that initially issued the device or a successor.
    (b)(1) ``Account'' means a demand deposit (checking), savings, or 
other consumer asset account (other than an occasional or incidental 
credit balance in a credit plan) held directly or indirectly by a 
financial institution and established primarily for personal, family, 
or household purposes.
    (2) The term includes a ``payroll card account'' which is an 
account that is directly or indirectly established through an employer 
and to which electronic fund transfers of the consumer's wages, salary, 
or other employee compensation (such as commissions), are made on a 
recurring basis, whether the account is operated or managed by the 
employer, a third-party payroll processor, a depository institution or 
any other person. For rules governing payroll card accounts, see Sec.  
1005.18.
    (3) The term does not include an account held by a financial 
institution under a bona fide trust agreement.
    (c) ``Act'' means the Electronic Fund Transfer Act (Title IX of the 
Consumer Credit Protection Act, 15 U.S.C. 1693 et seq.).
    (d) ``Business day'' means any day on which the offices of the 
consumer's financial institution are open to the public for carrying on 
substantially all business functions.
    (e) ``Consumer'' means a natural person.
    (f) ``Credit'' means the right granted by a financial institution 
to a consumer to defer payment of debt, incur debt and defer its 
payment, or purchase property or services and defer payment therefor.
    (g) ``Electronic fund transfer'' is defined in Sec.  1005.3.
    (h) ``Electronic terminal'' means an electronic device, other than 
a telephone operated by a consumer, through which a consumer may 
initiate an electronic fund transfer. The term includes, but is not 
limited to, point-of-sale terminals, automated teller machines (ATMs), 
and cash dispensing machines.
    (i) ``Financial institution'' means a bank, savings association, 
credit union, or any other person that directly or indirectly holds an 
account belonging to a consumer, or that issues an access device and 
agrees with a consumer to provide electronic fund transfer services, 
other than a person excluded from coverage of this part by section 1029 
of the Consumer Financial Protection Act of 2010, Title X of the Dodd-
Frank Wall Street Reform and Consumer Protection Act, Public Law 111-
203, 124 Stat. 1376.
    (j) ``Person'' means a natural person or an organization, including 
a corporation, government agency, estate, trust, partnership, 
proprietorship, cooperative, or association.
    (k) ``Preauthorized electronic fund transfer'' means an electronic 
fund transfer authorized in advance to recur at substantially regular 
intervals.
    (l) ``State'' means any state, territory, or possession of the 
United States; the District of Columbia; the Commonwealth of Puerto 
Rico; or any political subdivision of the thereof in this paragraph 
(l).
    (m) ``Unauthorized electronic fund transfer'' means an electronic 
fund transfer from a consumer's account initiated by a person other 
than the consumer without actual authority to initiate the transfer and 
from which the consumer receives no benefit. The term does not include 
an electronic fund transfer initiated:

[[Page 81024]]

    (1) By a person who was furnished the access device to the 
consumer's account by the consumer, unless the consumer has notified 
the financial institution that transfers by that person are no longer 
authorized;
    (2) With fraudulent intent by the consumer or any person acting in 
concert with the consumer; or
    (3) By the financial institution or its employee.

Sec.  1005.3  Coverage.

    (a) General. This part applies to any electronic fund transfer that 
authorizes a financial institution to debit or credit a consumer's 
account. Generally, this part applies to financial institutions. For 
purposes of Sec. Sec.  1005.3(b)(2) and (3), 1005.10(b), (d), and (e), 
1005.13, and 1005.20 this part applies to any person, other than a 
person excluded from coverage of this part by section 1029 of the 
Consumer Financial Protection Act of 2010, Title X of the Dodd-Frank 
Wall Street Reform and Consumer Protection Act, Public Law 111-203, 124 
Stat. 1376.
    (b) Electronic fund transfer. (1) Definition. The term ``electronic 
fund transfer'' means any transfer of funds that is initiated through 
an electronic terminal, telephone, computer, or magnetic tape for the 
purpose of ordering, instructing, or authorizing a financial 
institution to debit or credit a consumer's account. The term includes, 
but is not limited to:
    (i) Point-of-sale transfers;
    (ii) Automated teller machine transfers;
    (iii) Direct deposits or withdrawals of funds;
    (iv) Transfers initiated by telephone; and
    (v) Transfers resulting from debit card transactions, whether or 
not initiated through an electronic terminal.
    (2) Electronic fund transfer using information from a check. (i) 
This part applies where a check, draft, or similar paper instrument is 
used as a source of information to initiate a one-time electronic fund 
transfer from a consumer's account. The consumer must authorize the 
transfer.
    (ii) The person initiating an electronic fund transfer using the 
consumer's check as a source of information for the transfer must 
provide a notice that the transaction will or may be processed as an 
electronic fund transfer, and obtain a consumer's authorization for 
each transfer. A consumer authorizes a one-time electronic fund 
transfer (in providing a check to a merchant or other payee for the 
MICR encoding, that is, the routing number of the financial 
institution, the consumer's account number and the serial number) when 
the consumer receives notice and goes forward with the underlying 
transaction. For point-of-sale transfers, the notice must be posted in 
a prominent and conspicuous location, and a copy thereof, or a 
substantially similar notice, must be provided to the consumer at the 
time of the transaction.
    (iii) A person may provide notices that are substantially similar 
to those set forth in Appendix A-6 to comply with the requirements of 
this paragraph (b)(2).
    (3) Collection of returned item fees via electronic fund 
transfer.(i) General. The person initiating an electronic fund transfer 
to collect a fee for the return of an electronic fund transfer or a 
check that is unpaid, including due to insufficient or uncollected 
funds in the consumer's account, must obtain the consumer's 
authorization for each transfer. A consumer authorizes a one-time 
electronic fund transfer from his or her account to pay the fee for the 
returned item or transfer if the person collecting the fee provides 
notice to the consumer stating that the person may electronically 
collect the fee, and the consumer goes forward with the underlying 
transaction. The notice must state that the fee will be collected by 
means of an electronic fund transfer from the consumer's account if the 
payment is returned unpaid and must disclose the dollar amount of the 
fee. If the fee may vary due to the amount of the transaction or due to 
other factors, then, except as otherwise provided in paragraph 
(b)(3)(ii) of this section, the person collecting the fee may disclose, 
in place of the dollar amount of the fee, an explanation of how the fee 
will be determined.
    (ii) Point-of-sale transactions. If a fee for an electronic fund 
transfer or check returned unpaid may be collected electronically in 
connection with a point-of-sale transaction, the person initiating an 
electronic fund transfer to collect the fee must post the notice 
described in paragraph (b)(3)(i) of this section in a prominent and 
conspicuous location. The person also must either provide the consumer 
with a copy of the posted notice (or a substantially similar notice) at 
the time of the transaction, or mail the copy (or a substantially 
similar notice) to the consumer's address as soon as reasonably 
practicable after the person initiates the electronic fund transfer to 
collect the fee. If the amount of the fee may vary due to the amount of 
the transaction or due to other factors, the posted notice may explain 
how the fee will be determined, but the notice provided to the consumer 
must state the dollar amount of the fee if the amount can be calculated 
at the time the notice is provided or mailed to the consumer.
    (c) Exclusions from coverage. The term ``electronic fund transfer'' 
does not include:
    (1) Checks. Any transfer of funds originated by check, draft, or 
similar paper instrument; or any payment made by check, draft, or 
similar paper instrument at an electronic terminal.
    (2) Check guarantee or authorization. Any transfer of funds that 
guarantees payment or authorizes acceptance of a check, draft, or 
similar paper instrument but that does not directly result in a debit 
or credit to a consumer's account.
    (3) Wire or other similar transfers. Any transfer of funds through 
Fedwire or through a similar wire transfer system that is used 
primarily for transfers between financial institutions or between 
businesses.
    (4) Securities and commodities transfers. Any transfer of funds the 
primary purpose of which is the purchase or sale of a security or 
commodity, if the security or commodity is:
    (i) Regulated by the Securities and Exchange Commission or the 
Commodity Futures Trading Commission;
    (ii) Purchased or sold through a broker-dealer regulated by the 
Securities and Exchange Commission or through a futures commission 
merchant regulated by the Commodity Futures Trading Commission; or
    (iii) Held in book-entry form by a Federal Reserve Bank or Federal 
agency.
    (5) Automatic transfers by account-holding institution. Any 
transfer of funds under an agreement between a consumer and a financial 
institution which provides that the institution will initiate 
individual transfers without a specific request from the consumer:
    (i) Between a consumer's accounts within the financial institution;
    (ii) From a consumer's account to an account of a member of the 
consumer's family held in the same financial institution; or
    (iii) Between a consumer's account and an account of the financial 
institution, except that these transfers remain subject to Sec.  
1005.10(e) regarding compulsory use and sections 916 and 917 of the Act 
regarding civil and criminal liability.
    (6) Telephone-initiated transfers. Any transfer of funds that:
    (i) Is initiated by a telephone communication between a consumer 
and a financial institution making the transfer; and
    (ii) Does not take place under a telephone bill-payment or other 
written

[[Page 81025]]

plan in which periodic or recurring transfers are contemplated.
    (7) Small institutions. Any preauthorized transfer to or from an 
account if the assets of the account-holding financial institution were 
$100 million or less on the preceding December 31. If assets of the 
account-holding institution subsequently exceed $100 million, the 
institution's exemption for preauthorized transfers terminates one year 
from the end of the calendar year in which the assets exceed $100 
million. Preauthorized transfers exempt under this paragraph (c)(7) 
remain subject to Sec.  1005.10(e) regarding compulsory use and 
sections 916 and 917 of the Act regarding civil and criminal liability.

Sec.  1005.4  General disclosure requirements; jointly offered 
services.

    (a)(1) Form of disclosures. Disclosures required under this part 
shall be clear and readily understandable, in writing, and in a form 
the consumer may keep, except as otherwise provided in this part. The 
disclosures required by this part may be provided to the consumer in 
electronic form, subject to compliance with the consumer-consent and 
other applicable provisions of the Electronic Signatures in Global and 
National Commerce Act (E-Sign Act) (15 U.S.C. 7001 et seq.). A 
financial institution may use commonly accepted or readily 
understandable abbreviations in complying with the disclosure 
requirements of this part.
    (2) Foreign language disclosures. Disclosures required under this 
part may be made in a language other than English, provided that the 
disclosures are made available in English upon the consumer's request.
    (b) Additional information; disclosures required by other laws. A 
financial institution may include additional information and may 
combine disclosures required by other laws (such as the Truth in 
Lending Act (15 U.S.C. 1601 et seq.) or the Truth in Savings Act (12 
U.S.C. 4301 et seq.) with the disclosures required by this part.
    (c) Multiple accounts and account holders.(1) Multiple accounts. A 
financial institution may combine the required disclosures into a 
single statement for a consumer who holds more than one account at the 
institution.
    (2) Multiple account holders. For joint accounts held by two or 
more consumers, a financial institution need provide only one set of 
the required disclosures and may provide them to any of the account 
holders.
    (d) Services offered jointly. Financial institutions that provide 
electronic fund transfer services jointly may contract among themselves 
to comply with the requirements that this part imposes on any or all of 
them. An institution need make only the disclosures required by 
Sec. Sec.  1005.7 and 1005.8 that are within its knowledge and within 
the purview of its relationship with the consumer for whom it holds an 
account.

Sec.  1005.5  Issuance of access devices.

    (a) Solicited issuance. Except as provided in paragraph (b) of this 
section, a financial institution may issue an access device to a 
consumer only:
    (1) In response to an oral or written request for the device; or
    (2) As a renewal of, or in substitution for, an accepted access 
device whether issued by the institution or a successor.
    (b) Unsolicited issuance. A financial institution may distribute an 
access device to a consumer on an unsolicited basis if the access 
device is:
    (1) Not validated, meaning that the institution has not yet 
performed all the procedures that would enable a consumer to initiate 
an electronic fund transfer using the access device;
    (2) Accompanied by a clear explanation that the access device is 
not validated and how the consumer may dispose of it if validation is 
not desired;
    (3) Accompanied by the disclosures required by Sec.  1005.7, of the 
consumer's rights and liabilities that will apply if the access device 
is validated; and
    (4) Validated only in response to the consumer's oral or written 
request for validation, after the institution has verified the 
consumer's identity by a reasonable means.

Sec.  1005.6  Liability of consumer for unauthorized transfers.

    (a) Conditions for liability. A consumer may be held liable, within 
the limitations described in paragraph (b) of this section, for an 
unauthorized electronic fund transfer involving the consumer's account 
only if the financial institution has provided the disclosures required 
by Sec.  1005.7(b)(1), (2), and (3). If the unauthorized transfer 
involved an access device, it must be an accepted access device and the 
financial institution must have provided a means to identify the 
consumer to whom it was issued.
    (b) Limitations on amount of liability. A consumer's liability for 
an unauthorized electronic fund transfer or a series of related 
unauthorized transfers shall be determined as follows:
    (1) Timely notice given. If the consumer notifies the financial 
institution within two business days after learning of the loss or 
theft of the access device, the consumer's liability shall not exceed 
the lesser of $50 or the amount of unauthorized transfers that occur 
before notice to the financial institution.
    (2) Timely notice not given. If the consumer fails to notify the 
financial institution within two business days after learning of the 
loss or theft of the access device, the consumer's liability shall not 
exceed the lesser of $500 or the sum of:
    (i) $50 or the amount of unauthorized transfers that occur within 
the two business days, whichever is less; and
    (ii) The amount of unauthorized transfers that occur after the 
close of two business days and before notice to the institution, 
provided the institution establishes that these transfers would not 
have occurred had the consumer notified the institution within that 
two-day period.
    (3) Periodic statement; timely notice not given. A consumer must 
report an unauthorized electronic fund transfer that appears on a 
periodic statement within 60 days of the financial institution's 
transmittal of the statement to avoid liability for subsequent 
transfers. If the consumer fails to do so, the consumer's liability 
shall not exceed the amount of the unauthorized transfers that occur 
after the close of the 60 days and before notice to the institution, 
and that the institution establishes would not have occurred had the 
consumer notified the institution within the 60-day period. When an 
access device is involved in the unauthorized transfer, the consumer 
may be liable for other amounts set forth in paragraphs (b)(1) or 
(b)(2) of this section, as applicable.
    (4) Extension of time limits. If the consumer's delay in notifying 
the financial institution was due to extenuating circumstances, the 
institution shall extend the times specified above to a reasonable 
period.
    (5) Notice to financial institution. (i) Notice to a financial 
institution is given when a consumer takes steps reasonably necessary 
to provide the institution with the pertinent information, whether or 
not a particular employee or agent of the institution actually receives 
the information.
    (ii) The consumer may notify the institution in person, by 
telephone, or in writing.
    (iii) Written notice is considered given at the time the consumer 
mails the notice or delivers it for transmission to the institution by 
any other usual means. Notice may be considered constructively given 
when the institution becomes aware of

[[Page 81026]]

circumstances leading to the reasonable belief that an unauthorized 
transfer to or from the consumer's account has been or may be made.
    (6) Liability under state law or agreement. If state law or an 
agreement between the consumer and the financial institution imposes 
less liability than is provided by this section, the consumer's 
liability shall not exceed the amount imposed under the state law or 
agreement.

Sec.  1005.7  Initial disclosures.

    (a) Timing of disclosures. A financial institution shall make the 
disclosures required by this section at the time a consumer contracts 
for an electronic fund transfer service or before the first electronic 
fund transfer is made involving the consumer's account.
    (b) Content of disclosures. A financial institution shall provide 
the following disclosures, as applicable:
    (1) Liability of consumer. A summary of the consumer's liability, 
under Sec.  1005.6 or under state or other applicable law or agreement, 
for unauthorized electronic fund transfers.
    (2) Telephone number and address. The telephone number and address 
of the person or office to be notified when the consumer believes that 
an unauthorized electronic fund transfer has been or may be made.
    (3) Business days. The financial institution's business days.
    (4) Types of transfers; limitations. The type of electronic fund 
transfers that the consumer may make and any limitations on the 
frequency and dollar amount of transfers. Details of the limitations 
need not be disclosed if confidentiality is essential to maintain the 
security of the electronic fund transfer system.
    (5) Fees. Any fees imposed by the financial institution for 
electronic fund transfers or for the right to make transfers.
    (6) Documentation. A summary of the consumer's right to receipts 
and periodic statements, as provided in Sec.  1005.9 of this part, and 
notices regarding preauthorized transfers as provided in Sec.  
1005.10(a) and (d).
    (7) Stop payment. A summary of the consumer's right to stop payment 
of a preauthorized electronic fund transfer and the procedure for 
placing a stop-payment order, as provided in Sec.  1005.10(c).
    (8) Liability of institution. A summary of the financial 
institution's liability to the consumer under section 910 of the Act 
for failure to make or to stop certain transfers.
    (9) Confidentiality. The circumstances under which, in the ordinary 
course of business, the financial institution may provide information 
concerning the consumer's account to third parties.
    (10) Error resolution. A notice that is substantially similar to 
Model Form A-3 as set out in Appendix A of this part concerning error 
resolution.
    (11) ATM fees. A notice that a fee may be imposed by an automated 
teller machine operator as defined in Sec.  1005.16(a)(1), when the 
consumer initiates an electronic fund transfer or makes a balance 
inquiry, and by any network used to complete the transaction.
    (c) Addition of electronic fund transfer services. If an electronic 
fund transfer service is added to a consumer's account and is subject 
to terms and conditions different from those described in the initial 
disclosures, disclosures for the new service are required.

Sec.  1005.8  Change in terms notice; error resolution notice.

    (a) Change in terms notice. (1) Prior notice required. A financial 
institution shall mail or deliver a written notice to the consumer, at 
least 21 days before the effective date, of any change in a term or 
condition required to be disclosed under Sec.  1005.7(b) of this part 
if the change would result in:
    (i) Increased fees for the consumer;
    (ii) Increased liability for the consumer;
    (iii) Fewer types of available electronic fund transfers; or
    (iv) Stricter limitations on the frequency or dollar amount of 
transfers.
    (2) Prior notice exception. A financial institution need not give 
prior notice if an immediate change in terms or conditions is necessary 
to maintain or restore the security of an account or an electronic fund 
transfer system. If the institution makes such a change permanent and 
disclosure would not jeopardize the security of the account or system, 
the institution shall notify the consumer in writing on or with the 
next regularly scheduled periodic statement or within 30 days of making 
the change permanent.
    (b) Error resolution notice. For accounts to or from which 
electronic fund transfers can be made, a financial institution shall 
mail or deliver to the consumer, at least once each calendar year, an 
error resolution notice substantially similar to the model form set 
forth in Appendix A of this part (Model Form A-3). Alternatively, an 
institution may include an abbreviated notice substantially similar to 
the model form error resolution notice set forth in Appendix A of this 
part (Model Form A-3), on or with each periodic statement required by 
Sec.  1005.9(b).

Sec.  1005.9  Receipts at electronic terminals; periodic statements.

    (a) Receipts at electronic terminals--General. Except as provided 
in paragraph (e) of this section, a financial institution shall make a 
receipt available to a consumer at the time the consumer initiates an 
electronic fund transfer at an electronic terminal. The receipt shall 
set forth the following information, as applicable:
    (1) Amount. The amount of the transfer. A transaction fee may be 
included in this amount, provided the amount of the fee is disclosed on 
the receipt and displayed on or at the terminal.
    (2) Date. The date the consumer initiates the transfer.
    (3) Type. The type of transfer and the type of the consumer's 
account(s) to or from which funds are transferred. The type of account 
may be omitted if the access device used is able to access only one 
account at that terminal.
    (4) Identification. A number or code that identifies the consumer's 
account or accounts, or the access device used to initiate the 
transfer. The number or code need not exceed four digits or letters to 
comply with the requirements of this paragraph (a)(4).
    (5) Terminal location. The location of the terminal where the 
transfer is initiated, or an identification such as a code or terminal 
number. Except in limited circumstances where all terminals are located 
in the same city or state, if the location is disclosed, it shall 
include the city and state or foreign country and one of the following:
    (i) The street address; or
    (ii) A generally accepted name for the specific location; or
    (iii) The name of the owner or operator of the terminal if other 
than the account-holding institution.
    (6) Third party transfer. The name of any third party to or from 
whom funds are transferred.
    (b) Periodic statements. For an account to or from which electronic 
fund transfers can be made, a financial institution shall send a 
periodic statement for each monthly cycle in which an electronic fund 
transfer has occurred; and shall send a periodic statement at least 
quarterly if no transfer has occurred. The statement shall set forth 
the following information, as applicable:
    (1) Transaction information. For each electronic fund transfer 
occurring during the cycle:
    (i) The amount of the transfer;
    (ii) The date the transfer was credited or debited to the 
consumer's account;

[[Page 81027]]

    (iii) The type of transfer and type of account to or from which 
funds were transferred;
    (iv) For a transfer initiated by the consumer at an electronic 
terminal (except for a deposit of cash or a check, draft, or similar 
paper instrument), the terminal location described in paragraph (a)(5) 
of this section; and
    (v) The name of any third party to or from whom funds were 
transferred.
    (2) Account number. The number of the account.
    (3) Fees. The amount of any fees assessed against the account 
during the statement period for electronic fund transfers, the right to 
make transfers, or account maintenance.
    (4) Account balances. The balance in the account at the beginning 
and at the close of the statement period.
    (5) Address and telephone number for inquiries. The address and 
telephone number to be used for inquiries or notice of errors, preceded 
by ``Direct inquiries to'' or similar language. The address and 
telephone number provided on an error resolution notice under Sec.  
1005.8(b) given on or with the statement satisfies this requirement.
    (6) Telephone number for preauthorized transfers. A telephone 
number the consumer may call to ascertain whether preauthorized 
transfers to the consumer's account have occurred, if the financial 
institution uses the telephone-notice option under Sec.  
1005.10(a)(1)(iii).
    (c) Exceptions to the periodic statement requirement for certain 
accounts. (1) Preauthorized transfers to accounts. For accounts that 
may be accessed only by preauthorized transfers to the account the 
following rules apply:
    (i) Passbook accounts. For passbook accounts, the financial 
institution need not provide a periodic statement if the institution 
updates the passbook upon presentation or enters on a separate document 
the amount and date of each electronic fund transfer since the passbook 
was last presented.
    (ii) Other accounts. For accounts other than passbook accounts, the 
financial institution must send a periodic statement at least 
quarterly.
    (2) Intra-institutional transfers. For an electronic fund transfer 
initiated by the consumer between two accounts of the consumer in the 
same institution, documenting the transfer on a periodic statement for 
one of the two accounts satisfies the periodic statement requirement.
    (3) Relationship between paragraphs (c)(1) and (2) of this section. 
An account that is accessed by preauthorized transfers to the account 
described in paragraph (c)(1) of this section and by intra-
institutional transfers described in paragraph (c)(2) of this section, 
but by no other type of electronic fund transfers, qualifies for the 
exceptions provided by paragraph (c)(1) of this section.
    (d) Documentation for foreign-initiated transfers. The failure by a 
financial institution to provide a terminal receipt for an electronic 
fund transfer or to document the transfer on a periodic statement does 
not violate this part if:
    (1) The transfer is not initiated within a state; and
    (2) The financial institution treats an inquiry for clarification 
or documentation as a notice of error in accordance with Sec.  1005.11.
    (e) Exception for receipts in small-value transfers. A financial 
institution is not subject to the requirement to make available a 
receipt under paragraph (a) of this section if the amount of the 
transfer is $15 or less.

Sec.  1005.10  Preauthorized transfers.

    (a) Preauthorized transfers to consumer's account. (1) Notice by 
financial institution. When a person initiates preauthorized electronic 
fund transfers to a consumer's account at least once every 60 days, the 
account-holding financial institution shall provide notice to the 
consumer by:
    (i) Positive notice. Providing oral or written notice of the 
transfer within two business days after the transfer occurs; or
    (ii) Negative notice. Providing oral or written notice, within two 
business days after the date on which the transfer was scheduled to 
occur, that the transfer did not occur; or
    (iii) Readily-available telephone line. Providing a readily 
available telephone line that the consumer may call to determine 
whether the transfer occurred and disclosing the telephone number on 
the initial disclosure of account terms and on each periodic statement.
    (2) Notice by payor. A financial institution need not provide 
notice of a transfer if the payor gives the consumer positive notice 
that the transfer has been initiated.
    (3) Crediting. A financial institution that receives a 
preauthorized transfer of the type described in paragraph (a)(1) of 
this section shall credit the amount of the transfer as of the date the 
funds for the transfer are received.
    (b) Written authorization for preauthorized transfers from 
consumer's account. Preauthorized electronic fund transfers from a 
consumer's account may be authorized only by a writing signed or 
similarly authenticated by the consumer. The person that obtains the 
authorization shall provide a copy to the consumer.
    (c) Consumer's right to stop payment. (1) Notice. A consumer may 
stop payment of a preauthorized electronic fund transfer from the 
consumer's account by notifying the financial institution orally or in 
writing at least three business days before the scheduled date of the 
transfer.
    (2) Written confirmation. The financial institution may require the 
consumer to give written confirmation of a stop-payment order within 14 
days of an oral notification. An institution that requires written 
confirmation shall inform the consumer of the requirement and provide 
the address where confirmation must be sent when the consumer gives the 
oral notification. An oral stop-payment order ceases to be binding 
after 14 days if the consumer fails to provide the required written 
confirmation.
    (d) Notice of transfers varying in amount. (1) Notice. When a 
preauthorized electronic fund transfer from the consumer's account will 
vary in amount from the previous transfer under the same authorization 
or from the preauthorized amount, the designated payee or the financial 
institution shall send the consumer written notice of the amount and 
date of the transfer at least 10 days before the scheduled date of 
transfer.
    (2) Range. The designated payee or the institution shall inform the 
consumer of the right to receive notice of all varying transfers, but 
may give the consumer the option of receiving notice only when a 
transfer falls outside a specified range of amounts or only when a 
transfer differs from the most recent transfer by more than an agreed-
upon amount.
    (e) Compulsory use. (1) Credit. No financial institution or other 
person may condition an extension of credit to a consumer on the 
consumer's repayment by preauthorized electronic fund transfers, except 
for credit extended under an overdraft credit plan or extended to 
maintain a specified minimum balance in the consumer's account.
    (2) Employment or government benefit. No financial institution or 
other person may require a consumer to establish an account for receipt 
of electronic fund transfers with a particular institution as a 
condition of employment or receipt of a government benefit.

Sec.  1005.11  Procedures for resolving errors.

    (a) Definition of error. (1) Types of transfers or inquiries 
covered. The term ``error'' means:

[[Page 81028]]

    (i) An unauthorized electronic fund transfer;
    (ii) An incorrect electronic fund transfer to or from the 
consumer's account;
    (iii) The omission of an electronic fund transfer from a periodic 
statement;
    (iv) A computational or bookkeeping error made by the financial 
institution relating to an electronic fund transfer;
    (v) The consumer's receipt of an incorrect amount of money from an 
electronic terminal;
    (vi) An electronic fund transfer not identified in accordance with 
Sec.  1005.9 or Sec.  1005.10(a); or
    (vii) The consumer's request for documentation required by Sec.  
1005.9 or Sec.  1005.10(a) or for additional information or 
clarification concerning an electronic fund transfer, including a 
request the consumer makes to determine whether an error exists under 
paragraphs (a)(1)(i) through (vi) of this section.
    (2) Types of inquiries not covered. The term ``error'' does not 
include:
    (i) A routine inquiry about the consumer's account balance;
    (ii) A request for information for tax or other recordkeeping 
purposes; or
    (iii) A request for duplicate copies of documentation.
    (b) Notice of error from consumer. (1) Timing; contents. A 
financial institution shall comply with the requirements of this 
section with respect to any oral or written notice of error from the 
consumer that:
    (i) Is received by the institution no later than 60 days after the 
institution sends the periodic statement or provides the passbook 
documentation, required by Sec.  1005.9, on which the alleged error is 
first reflected;
    (ii) Enables the institution to identify the consumer's name and 
account number; and
    (iii) Indicates why the consumer believes an error exists and 
includes to the extent possible the type, date, and amount of the 
error, except for requests described in paragraph (a)(1)(vii) of this 
section.
    (2) Written confirmation. A financial institution may require the 
consumer to give written confirmation of an error within 10 business 
days of an oral notice. An institution that requires written 
confirmation shall inform the consumer of the requirement and provide 
the address where confirmation must be sent when the consumer gives the 
oral notification.
    (3) Request for documentation or clarifications. When a notice of 
error is based on documentation or clarification that the consumer 
requested under paragraph (a)(1)(vii) of this section, the consumer's 
notice of error is timely if received by the financial institution no 
later than 60 days after the institution sends the information 
requested.
    (c) Time limits and extent of investigation. (1) Ten-day period. A 
financial institution shall investigate promptly and, except as 
otherwise provided in this paragraph (c), shall determine whether an 
error occurred within 10 business days of receiving a notice of error. 
The institution shall report the results to the consumer within three 
business days after completing its investigation. The institution shall 
correct the error within one business day after determining that an 
error occurred.
    (2) Forty-five day period. If the financial institution is unable 
to complete its investigation within 10 business days, the institution 
may take up to 45 days from receipt of a notice of error to investigate 
and determine whether an error occurred, provided the institution does 
the following:
    (i) Provisionally credits the consumer's account in the amount of 
the alleged error (including interest where applicable) within 10 
business days of receiving the error notice. If the financial 
institution has a reasonable basis for believing that an unauthorized 
electronic fund transfer has occurred and the institution has satisfied 
the requirements of Sec.  1005.6(a), the institution may withhold a 
maximum of $50 from the amount credited. An institution need not 
provisionally credit the consumer's account if:
    (A) The institution requires but does not receive written 
confirmation within 10 business days of an oral notice of error; or
    (B) The alleged error involves an account that is subject to 
Regulation T of the Board of Governors of the Federal Reserve System 
(Securities Credit by Brokers and Dealers, 12 CFR part 220);
    (ii) Informs the consumer, within two business days after the 
provisional crediting, of the amount and date of the provisional 
crediting and gives the consumer full use of the funds during the 
investigation;
    (iii) Corrects the error, if any, within one business day after 
determining that an error occurred; and
    (iv) Reports the results to the consumer within three business days 
after completing its investigation (including, if applicable, notice 
that a provisional credit has been made final).
    (3) Extension of time periods. The time periods in paragraphs 
(c)(1) and (c)(2) of this section are extended as follows:
    (i) The applicable time is 20 business days in place of 10 business 
days under paragraphs (c)(1) and (2) of this section if the notice of 
error involves an electronic fund transfer to or from the account 
within 30 days after the first deposit to the account was made.
    (ii) The applicable time is 90 days in place of 45 days under 
paragraph (c)(2) of this section, for completing an investigation, if a 
notice of error involves an electronic fund transfer that:
    (A) Was not initiated within a state;
    (B) Resulted from a point-of-sale debit card transaction; or
    (C) Occurred within 30 days after the first deposit to the account 
was made.
    (4) Investigation. With the exception of transfers covered by Sec.  
1005.14 of this part, a financial institution's review of its own 
records regarding an alleged error satisfies the requirements of this 
section if:
    (i) The alleged error concerns a transfer to or from a third party; 
and
    (ii) There is no agreement between the institution and the third 
party for the type of electronic fund transfer involved.
    (d) Procedures if financial institution determines no error or 
different error occurred. In addition to following the procedures 
specified in paragraph (c) of this section, the financial institution 
shall follow the procedures set forth in this paragraph (d) if it 
determines that no error occurred or that an error occurred in a manner 
or amount different from that described by the consumer:
    (1) Written explanation. The institution's report of the results of 
its investigation shall include a written explanation of the 
institution's findings and shall note the consumer's right to request 
the documents that the institution relied on in making its 
determination. Upon request, the institution shall promptly provide 
copies of the documents.
    (2) Debiting provisional credit. Upon debiting a provisionally 
credited amount, the financial institution shall:
    (i) Notify the consumer of the date and amount of the debiting;
    (ii) Notify the consumer that the institution will honor checks, 
drafts, or similar instruments payable to third parties and 
preauthorized transfers from the consumer's account (without charge to 
the consumer as a result of an overdraft) for five business days after 
the notification. The institution shall honor items as specified in the 
notice, but need honor only items that it would have paid if the 
provisionally credited funds had not been debited.
    (e) Reassertion of error. A financial institution that has fully 
complied with the error resolution requirements has no further 
responsibilities under this

[[Page 81029]]

section should the consumer later reassert the same error, except in 
the case of an error asserted by the consumer following receipt of 
information provided under paragraph (a)(1)(vii) of this section.

Sec.  1005.12  Relation to other laws.

    (a) Relation to Truth in Lending. (1) The Electronic Fund Transfer 
Act and this part govern:
    (i) The addition to an accepted credit card, as defined in 
Regulation Z (12 CFR 1026.12, comment 12-2), of the capability to 
initiate electronic fund transfers;
    (ii) The issuance of an access device that permits credit 
extensions (under a preexisting agreement between a consumer and a 
financial institution) only when the consumer's account is overdrawn or 
to maintain a specified minimum balance in the consumer's account, or 
under an overdraft service, as defined in Sec.  1005.17(a) of this 
part;
    (iii) The addition of an overdraft service, as defined in Sec.  
1005.17(a), to an accepted access device; and
    (iv) A consumer's liability for an unauthorized electronic fund 
transfer and the investigation of errors involving an extension of 
credit that occurs under an agreement between the consumer and a 
financial institution to extend credit when the consumer's account is 
overdrawn or to maintain a specified minimum balance in the consumer's 
account, or under an overdraft service, as defined in Sec.  1005.17(a).
    (2) The Truth in Lending Act and Regulation Z (12 CFR part 1026), 
which prohibit the unsolicited issuance of credit cards, govern:
    (i) The addition of a credit feature to an accepted access device; 
and
    (ii) Except as provided in paragraph (a)(1)(ii) of this section, 
the issuance of a credit card that is also an access device.
    (b) Preemption of inconsistent state laws. (1) Inconsistent 
requirements. The Bureau shall determine, upon its own motion or upon 
the request of a state, financial institution, or other interested 
party, whether the Act and this part preempt state law relating to 
electronic fund transfers, or dormancy, inactivity, or service fees, or 
expiration dates in the case of gift certificates, store gift cards, or 
general-use prepaid cards.
    (2) Standards for determination. State law is inconsistent with the 
requirements of the Act and this part if state law:
    (i) Requires or permits a practice or act prohibited by the Federal 
law;
    (ii) Provides for consumer liability for unauthorized electronic 
fund transfers that exceeds the limits imposed by the Federal law;
    (iii) Allows longer time periods than the Federal law for 
investigating and correcting alleged errors, or does not require the 
financial institution to credit the consumer's account during an error 
investigation in accordance with Sec.  1005.11(c)(2)(i) of this part; 
or
    (iv) Requires initial disclosures, periodic statements, or receipts 
that are different in content from those required by the Federal law 
except to the extent that the disclosures relate to consumer rights 
granted by the state law and not by the Federal law.
    (c) State exemptions (1) General rule. Any state may apply for an 
exemption from the requirements of the Act or this part for any class 
of electronic fund transfers within the state. The Bureau shall grant 
an exemption if it determines that:
    (i) Under state law the class of electronic fund transfers is 
subject to requirements substantially similar to those imposed by the 
Federal law; and
    (ii) There is adequate provision for state enforcement.
    (2) Exception. To assure that the Federal and state courts continue 
to have concurrent jurisdiction, and to aid in implementing the Act:
    (i) No exemption shall extend to the civil liability provisions of 
section 916 of the Act; and
    (ii) When the Bureau grants an exemption, the state law 
requirements shall constitute the requirements of the Federal law for 
purposes of section 916 of the Act, except for state law requirements 
not imposed by the Federal law.

Sec.  1005.13  Administrative enforcement; record retention.

    (a) Enforcement by Federal agencies. Compliance with this part is 
enforced in accordance with section 918 of the Act.
    (b) Record retention. (1) Any person subject to the Act and this 
part shall retain evidence of compliance with the requirements imposed 
by the Act and this part for a period of not less than two years from 
the date disclosures are required to be made or action is required to 
be taken.
    (2) Any person subject to the Act and this part having actual 
notice that it is the subject of an investigation or an enforcement 
proceeding by its enforcement agency, or having been served with notice 
of an action filed under sections 910, 916, or 917(a) of the Act, shall 
retain the records that pertain to the investigation, action, or 
proceeding until final disposition of the matter unless an earlier time 
is allowed by court or agency order.

Sec.  1005.14  Electronic fund transfer service provider not holding 
consumer's account.

    (a) Provider of electronic fund transfer service. A person that 
provides an electronic fund transfer service to a consumer but that 
does not hold the consumer's account is subject to all requirements of 
this part if the person:
    (1) Issues a debit card (or other access device) that the consumer 
can use to access the consumer's account held by a financial 
institution; and
    (2) Has no agreement with the account-holding institution regarding 
such access.
    (b) Compliance by service provider. In addition to the requirements 
generally applicable under this part, the service provider shall comply 
with the following special rules:
    (1) Disclosures and documentation. The service provider shall give 
the disclosures and documentation required by Sec. Sec.  1005.7, 
1005.8, and 1005.9 of this part that are within the purview of its 
relationship with the consumer. The service provider need not furnish 
the periodic statement required by Sec.  1005.9(b) if the following 
conditions are met:
    (i) The debit card (or other access device) issued to the consumer 
bears the service provider's name and an address or telephone number 
for making inquiries or giving notice of error;
    (ii) The consumer receives a notice concerning use of the debit 
card that is substantially similar to the notice contained in Appendix 
A of this part;
    (iii) The consumer receives, on or with the receipts required by 
Sec.  1005.9(a), the address and telephone number to be used for an 
inquiry, to give notice of an error, or to report the loss or theft of 
the debit card;
    (iv) The service provider transmits to the account-holding 
institution the information specified in Sec.  1005.9(b)(1), in the 
format prescribed by the automated clearinghouse (ACH) system used to 
clear the fund transfers;
    (v) The service provider extends the time period for notice of loss 
or theft of a debit card, set forth in Sec.  1005.6(b)(1) and (2), from 
two business days to four business days after the consumer learns of 
the loss or theft; and extends the time periods for reporting 
unauthorized transfers or errors, set forth in Sec. Sec.  1005.6(b)(3) 
and 1005.11(b)(1)(i), from 60 days to 90 days following the transmittal 
of a periodic statement by the account-holding institution.
    (2) Error resolution. (i) The service provider shall extend by a 
reasonable time the period in which notice of an error must be 
received, specified in Sec.  1005.11(b)(1)(i), if a delay resulted from 
an initial attempt by the consumer

[[Page 81030]]

to notify the account-holding institution.
    (ii) The service provider shall disclose to the consumer the date 
on which it initiates a transfer to effect a provisional credit in 
accordance with Sec.  1005.11(c)(2)(ii).
    (iii) If the service provider determines an error occurred, it 
shall transfer funds to or from the consumer's account, in the 
appropriate amount and within the applicable time period, in accordance 
with Sec.  1005.11(c)(2)(i).
    (iv) If funds were provisionally credited and the service provider 
determines no error occurred, it may reverse the credit. The service 
provider shall notify the account-holding institution of the period 
during which the account-holding institution must honor debits to the 
account in accordance with Sec.  1005.11(d)(2)(ii). If an overdraft 
results, the service provider shall promptly reimburse the account-
holding institution in the amount of the overdraft.
    (c) Compliance by account-holding institution. The account-holding 
institution need not comply with the requirements of the Act and this 
part with respect to electronic fund transfers initiated through the 
service provider except as follows:
    (1) Documentation. The account-holding institution shall provide a 
periodic statement that describes each electronic fund transfer 
initiated by the consumer with the access device issued by the service 
provider. The account-holding institution has no liability for the 
failure to comply with this requirement if the service provider did not 
provide the necessary information; and
    (2) Error resolution. Upon request, the account-holding institution 
shall provide information or copies of documents needed by the service 
provider to investigate errors or to furnish copies of documents to the 
consumer. The account-holding institution shall also honor debits to 
the account in accordance with Sec.  1005.11(d)(2)(ii).

Sec.  1005.15  Electronic fund transfer of government benefits.

    (a) Government agency subject to regulation. (1) A government 
agency is deemed to be a financial institution for purposes of the Act 
and this part if directly or indirectly it issues an access device to a 
consumer for use in initiating an electronic fund transfer of 
government benefits from an account, other than needs-tested benefits 
in a program established under state or local law or administered by a 
state or local agency. The agency shall comply with all applicable 
requirements of the Act and this part, except as provided in this 
section.
    (2) For purposes of this section, the term ``account'' means an 
account established by a government agency for distributing government 
benefits to a consumer electronically, such as through automated teller 
machines or point-of-sale terminals, but does not include an account 
for distributing needs-tested benefits in a program established under 
state or local law or administered by a state or local agency.
    (b) Issuance of access devices. For purposes of this section, a 
consumer is deemed to request an access device when the consumer 
applies for government benefits that the agency disburses or will 
disburse by means of an electronic fund transfer. The agency shall 
verify the identity of the consumer receiving the device by reasonable 
means before the device is activated.
    (c) Alternative to periodic statement. A government agency need not 
furnish the periodic statement required by Sec.  1005.9(b) if the 
agency makes available to the consumer:
    (1) The consumer's account balance, through a readily available 
telephone line and at a terminal (such as by providing balance 
information at a balance-inquiry terminal or providing it, routinely or 
upon request, on a terminal receipt at the time of an electronic fund 
transfer); and
    (2) A written history of the consumer's account transactions that 
is provided promptly in response to an oral or written request and that 
covers at least 60 days preceding the date of a request by the 
consumer.
    (d) Modified requirements. A government agency that does not 
furnish periodic statements, in accordance with paragraph (c) of this 
section, shall comply with the following special rules:
    (1) Initial disclosures. The agency shall modify the disclosures 
under Sec.  1005.7(b) by disclosing:
    (i) Account balance. The means by which the consumer may obtain 
information concerning the account balance, including a telephone 
number. The agency provides a notice substantially similar to the 
notice contained in paragraph A-5 in appendix A of this part.
    (ii) Written account history. A summary of the consumer's right to 
receive a written account history upon request, in place of the 
periodic statement required by Sec.  1005.7(b)(6), and the telephone 
number to call to request an account history. This disclosure may be 
made by providing a notice substantially similar to the notice 
contained in paragraph A-5 in appendix A of this part.
    (iii) Error resolution. A notice concerning error resolution that 
is substantially similar to the notice contained in paragraph A-5 in 
appendix A of this part, in place of the notice required by Sec.  
1005.7(b)(10).
    (2) Annual error resolution notice. The agency shall provide an 
annual notice concerning error resolution that is substantially similar 
to the notice contained in paragraph A-5 in appendix A, in place of the 
notice required by Sec.  1005.8(b).
    (3) Limitations on liability. For purposes of Sec.  1005.6(b)(3), 
regarding a 60-day period for reporting any unauthorized transfer that 
appears on a periodic statement, the 60-day period shall begin with 
transmittal of a written account history or other account information 
provided to the consumer under paragraph (c) of this section.
    (4) Error resolution. The agency shall comply with the requirements 
of Sec.  1005.11 of this part in response to an oral or written notice 
of an error from the consumer that is received no later than 60 days 
after the consumer obtains the written account history or other account 
information, under paragraph (c) of this section, in which the error is 
first reflected.

Sec.  1005.16  Disclosures at automated teller machines.

    (a) Definition. ``Automated teller machine operator'' means any 
person that operates an automated teller machine at which a consumer 
initiates an electronic fund transfer or a balance inquiry and that 
does not hold the account to or from which the transfer is made, or 
about which an inquiry is made.
    (b) General. An automated teller machine operator that imposes a 
fee on a consumer for initiating an electronic fund transfer or a 
balance inquiry shall:
    (1) Provide notice that a fee will be imposed for providing 
electronic fund transfer services or a balance inquiry; and
    (2) Disclose the amount of the fee.
    (c) Notice requirement. To meet the requirements of paragraph (b) 
of this section, an automated teller machine operator must comply with 
the following:
    (1) On the machine. Post in a prominent and conspicuous location on 
or at the automated teller machine a notice that:
    (i) A fee will be imposed for providing electronic fund transfer 
services or for a balance inquiry; or
    (ii) A fee may be imposed for providing electronic fund transfer

[[Page 81031]]

services or for a balance inquiry, but the notice in this paragraph 
(c)(1)(ii) may be substituted for the notice in paragraph (c)(1)(i) of 
this section only if there are circumstances under which a fee will not 
be imposed for such services; and
    (2) Screen or paper notice. Provide the notice required by 
paragraphs (b)(1) and (2) of this section either by showing it on the 
screen of the automated teller machine or by providing it on paper, 
before the consumer is committed to paying a fee.
    (d) Imposition of fee. An automated teller machine operator may 
impose a fee on a consumer for initiating an electronic fund transfer 
or a balance inquiry only if
    (1) The consumer is provided the notices required under paragraph 
(c) of this section, and
    (2) The consumer elects to continue the transaction or inquiry 
after receiving such notices.

Sec.  1005.17  Requirements for overdraft services.

    (a) Definition. For purposes of this section, the term ``overdraft 
service'' means a service under which a financial institution assesses 
a fee or charge on a consumer's account held by the institution for 
paying a transaction (including a check or other item) when the 
consumer has insufficient or unavailable funds in the account. The term 
``overdraft service'' does not include any payment of overdrafts 
pursuant to:
    (1) A line of credit subject to Regulation Z (12 CFR part 1026), 
including transfers from a credit card account, home equity line of 
credit, or overdraft line of credit;
    (2) A service that transfers funds from another account held 
individually or jointly by a consumer, such as a savings account; or
    (3) A line of credit or other transaction exempt from Regulation Z 
(12 CFR part 1026) pursuant to 12 CFR 1026.3(d).
    (b) Opt-in requirement. (1) General. Except as provided under 
paragraph (c) of this section, a financial institution holding a 
consumer's account shall not assess a fee or charge on a consumer's 
account for paying an ATM or one-time debit card transaction pursuant 
to the institution's overdraft service, unless the institution:
    (i) Provides the consumer with a notice in writing, or if the 
consumer agrees, electronically, segregated from all other information, 
describing the institution's overdraft service;
    (ii) Provides a reasonable opportunity for the consumer to 
affirmatively consent, or opt in, to the service for ATM and one-time 
debit card transactions;
    (iii) Obtains the consumer's affirmative consent, or opt-in, to the 
institution's payment of ATM or one-time debit card transactions; and
    (iv) Provides the consumer with confirmation of the consumer's 
consent in writing, or if the consumer agrees, electronically, which 
includes a statement informing the consumer of the right to revoke such 
consent.
    (2) Conditioning payment of other overdrafts on consumer's 
affirmative consent. A financial institution shall not:
    (i) Condition the payment of any overdrafts for checks, ACH 
transactions, and other types of transactions on the consumer 
affirmatively consenting to the institution's payment of ATM and one-
time debit card transactions pursuant to the institution's overdraft 
service; or
    (ii) Decline to pay checks, ACH transactions, and other types of 
transactions that overdraw the consumer's account because the consumer 
has not affirmatively consented to the institution's overdraft service 
for ATM and one-time debit card transactions.
    (3) Same account terms, conditions, and features. A financial 
institution shall provide to consumers who do not affirmatively consent 
to the institution's overdraft service for ATM and one-time debit card 
transactions the same account terms, conditions, and features that it 
provides to consumers who affirmatively consent, except for the 
overdraft service for ATM and one-time debit card transactions.
    (c) Timing. (1) Existing account holders. For accounts opened prior 
to July 1, 2010, the financial institution must not assess any fees or 
charges on a consumer's account on or after August 15, 2010, for paying 
an ATM or one-time debit card transaction pursuant to the overdraft 
service, unless the institution has complied with Sec.  1005.17(b)(1) 
and obtained the consumer's affirmative consent.
    (2) New account holders. For accounts opened on or after July 1, 
2010, the financial institution must comply with Sec.  1005.17(b)(1) 
and obtain the consumer's affirmative consent before the institution 
assesses any fee or charge on the consumer's account for paying an ATM 
or one-time debit card transaction pursuant to the institution's 
overdraft service.
    (d) Content and format. The notice required by paragraph (b)(1)(i) 
of this section shall be substantially similar to Model Form A-9 set 
forth in Appendix A of this part, include all applicable items in this 
paragraph, and may not contain any information not specified in or 
otherwise permitted by this paragraph.
    (1) Overdraft service. A brief description of the financial 
institution's overdraft service and the types of transactions for which 
a fee or charge for paying an overdraft may be imposed, including ATM 
and one-time debit card transactions.
    (2) Fees imposed. The dollar amount of any fees or charges assessed 
by the financial institution for paying an ATM or one-time debit card 
transaction pursuant to the institution's overdraft service, including 
any daily or other overdraft fees. If the amount of the fee is 
determined on the basis of the number of times the consumer has 
overdrawn the account, the amount of the overdraft, or other factors, 
the institution must disclose the maximum fee that may be imposed.
    (3) Limits on fees charged. The maximum number of overdraft fees or 
charges that may be assessed per day, or, if applicable, that there is 
no limit.
    (4) Disclosure of opt-in right. An explanation of the consumer's 
right to affirmatively consent to the financial institution's payment 
of overdrafts for ATM and one-time debit card transactions pursuant to 
the institution's overdraft service, including the methods by which the 
consumer may consent to the service; and
    (5) Alternative plans for covering overdrafts. If the institution 
offers a line of credit subject to Regulation Z (12 CFR part 1026) or a 
service that transfers funds from another account of the consumer held 
at the institution to cover overdrafts, the institution must state that 
fact. An institution may, but is not required to, list additional 
alternatives for the payment of overdrafts.
    (6) Permitted modifications and additional content. If applicable, 
the institution may modify the content required by Sec.  1005.17(d) to 
indicate that the consumer has the right to opt into, or opt out of, 
the payment of overdrafts under the institution's overdraft service for 
other types of transactions, such as checks, ACH transactions, or 
automatic bill payments; to provide a means for the consumer to 
exercise this choice; and to disclose the associated returned item fee 
and that additional merchant fees may apply. The institution may also 
disclose the consumer's right to revoke consent. For notices provided 
to consumers who have opened accounts prior to July 1, 2010, the 
financial institution may describe the institution's overdraft service 
with respect to ATM and one-time debit card

[[Page 81032]]

transactions with a statement such as ``After August 15, 2010, we will 
not authorize and pay overdrafts for the following types of 
transactions unless you ask us to (see below).''
    (e) Joint relationships. If two or more consumers jointly hold an 
account, the financial institution shall treat the affirmative consent 
of any of the joint consumers as affirmative consent for that account. 
Similarly, the financial institution shall treat a revocation of 
affirmative consent by any of the joint consumers as revocation of 
consent for that account.
    (f) Continuing right to opt in or to revoke the opt-in. A consumer 
may affirmatively consent to the financial institution's overdraft 
service at any time in the manner described in the notice required by 
paragraph (b)(1)(i) of this section. A consumer may also revoke consent 
at any time in the manner made available to the consumer for providing 
consent. A financial institution must implement a consumer's revocation 
of consent as soon as reasonably practicable.
    (g) Duration and revocation of opt-in. A consumer's affirmative 
consent to the institution's overdraft service is effective until 
revoked by the consumer, or unless the financial institution terminates 
the service.

Sec.  1005.18  Requirements for financial institutions offering payroll 
card accounts.

    (a) Coverage. A financial institution shall comply with all 
applicable requirements of the Act and this part with respect to 
payroll card accounts except as provided in this section.
    (b) Alternative to periodic statements. (1) A financial institution 
need not furnish periodic statements required by Sec.  1005.9(b) if the 
institution makes available to the consumer:
    (i) The consumer's account balance, through a readily available 
telephone line;
    (ii) An electronic history of the consumer's account transactions, 
such as through a Web site, that covers at least 60 days preceding the 
date the consumer electronically accesses the account; and
    (iii) A written history of the consumer's account transactions that 
is provided promptly in response to an oral or written request and that 
covers at least 60 days preceding the date the financial institution 
receives the consumer's request.
    (2) The history of account transactions provided under paragraphs 
(b)(1)(ii) and (iii) of this section must include the information set 
forth in Sec.  1005.9(b).
    (c) Modified requirements. A financial institution that provides 
information under paragraph (b) of this section, shall comply with the 
following:
    (1) Initial disclosures. The financial institution shall modify the 
disclosures under Sec.  1005.7(b) by disclosing:
    (i) Account information. A telephone number that the consumer may 
call to obtain the account balance, the means by which the consumer can 
obtain an electronic account history, such as the address of a Web 
site, and a summary of the consumer's right to receive a written 
account history upon request (in place of the summary of the right to 
receive a periodic statement required by Sec.  1005.7(b)(6)), including 
a telephone number to call to request a history. The disclosure 
required by this paragraph (c)(1)(i) may be made by providing a notice 
substantially similar to the notice contained in paragraph A-7(a) in 
appendix A of this part.
    (ii) Error resolution. A notice concerning error resolution that is 
substantially similar to the notice contained in paragraph A-7(b) in 
appendix A of this part, in place of the notice required by Sec.  
1005.7(b)(10).
    (2) Annual error resolution notice. The financial institution shall 
provide an annual notice concerning error resolution that is 
substantially similar to the notice contained in paragraph A-7(b) in 
appendix A of this part, in place of the notice required by Sec.  
1005.8(b). Alternatively, a financial institution may include on or 
with each electronic and written history provided in accordance with 
Sec.  1005.18(b)(1), a notice substantially similar to the abbreviated 
notice for periodic statements contained in paragraph A-3(b) in 
appendix A of this part, modified as necessary to reflect the error 
resolution provisions set forth in this section.
    (3) Limitations on liability. (i) For purposes of Sec.  
1005.6(b)(3), the 60-day period for reporting any unauthorized transfer 
shall begin on the earlier of:
    (A) The date the consumer electronically accesses the consumer's 
account under paragraph (b)(1)(ii) of this section, provided that the 
electronic history made available to the consumer reflects the 
transfer; or
    (B) The date the financial institution sends a written history of 
the consumer's account transactions requested by the consumer under 
paragraph (b)(1)(iii) of this section in which the unauthorized 
transfer is first reflected.
    (ii) A financial institution may comply with paragraph (c)(3)(i) of 
this section by limiting the consumer's liability for an unauthorized 
transfer as provided under Sec.  1005.6(b)(3) for any transfer reported 
by the consumer within 120 days after the transfer was credited or 
debited to the consumer's account.
    (4) Error resolution. (i) The financial institution shall comply 
with the requirements of Sec.  1005.11 in response to an oral or 
written notice of an error from the consumer that is received by the 
earlier of:
    (A) Sixty days after the date the consumer electronically accesses 
the consumer's account under paragraph (b)(1)(ii) of this section, 
provided that the electronic history made available to the consumer 
reflects the alleged error; or
    (B) Sixty days after the date the financial institution sends a 
written history of the consumer's account transactions requested by the 
consumer under paragraph (b)(1)(iii) of this section in which the 
alleged error is first reflected.
    (ii) In lieu of following the procedures in paragraph (c)(4)(i) of 
this section, a financial institution complies with the requirements 
for resolving errors in Sec.  1005.11 if it investigates any oral or 
written notice of an error from the consumer that is received by the 
institution within 120 days after the transfer allegedly in error was 
credited or debited to the consumer's account.

Sec.  1005.20  Requirements for gift cards and gift certificates.

    (a) Definitions. For purposes of this section, except as excluded 
under paragraph (b), the following definitions apply:
    (1) ``Gift certificate'' means a card, code, or other device that 
is:
    (i) Issued on a prepaid basis primarily for personal, family, or 
household purposes to a consumer in a specified amount that may not be 
increased or reloaded in exchange for payment; and
    (ii) Redeemable upon presentation at a single merchant or an 
affiliated group of merchants for goods or services.
    (2) ``Store gift card'' means a card, code, or other device that 
is:
    (i) Issued on a prepaid basis primarily for personal, family, or 
household purposes to a consumer in a specified amount, whether or not 
that amount may be increased or reloaded, in exchange for payment; and
    (ii) Redeemable upon presentation at a single merchant or an 
affiliated group of merchants for goods or services.
    (3) ``General-use prepaid card'' means a card, code, or other 
device that is:
    (i) Issued on a prepaid basis primarily for personal, family, or 
household purposes to a consumer in a specified amount, whether or not 
that amount may be increased or reloaded, in exchange for payment; and

[[Page 81033]]

    (ii) Redeemable upon presentation at multiple, unaffiliated 
merchants for goods or services, or usable at automated teller 
machines.
    (4) ``Loyalty, award, or promotional gift card'' means a card, 
code, or other device that:
    (i) Is issued on a prepaid basis primarily for personal, family, or 
household purposes to a consumer in connection with a loyalty, award, 
or promotional program;
    (ii) Is redeemable upon presentation at one or more merchants for 
goods or services, or usable at automated teller machines; and
    (iii) Sets forth the following disclosures, as applicable:
    (A) A statement indicating that the card, code, or other device is 
issued for loyalty, award, or promotional purposes, which must be 
included on the front of the card, code, or other device;
    (B) The expiration date for the underlying funds, which must be 
included on the front of the card, code, or other device;
    (C) The amount of any fees that may be imposed in connection with 
the card, code, or other device, and the conditions under which they 
may be imposed, which must be provided on or with the card, code, or 
other device; and
    (D) A toll-free telephone number and, if one is maintained, a Web 
site, that a consumer may use to obtain fee information, which must be 
included on the card, code, or other device.
    (5) Dormancy or inactivity fee. The terms ``dormancy fee'' and 
``inactivity fee'' mean a fee for non-use of or inactivity on a gift 
certificate, store gift card, or general-use prepaid card.
    (6) Service fee. The term ``service fee'' means a periodic fee for 
holding or use of a gift certificate, store gift card, or general-use 
prepaid card. A periodic fee includes any fee that may be imposed on a 
gift certificate, store gift card, or general-use prepaid card from 
time to time for holding or using the certificate or card.
    (7) Activity. The term ``activity'' means any action that results 
in an increase or decrease of the funds underlying a certificate or 
card, other than the imposition of a fee, or an adjustment due to an 
error or a reversal of a prior transaction.
    (b) Exclusions. The terms ``gift certificate,'' ``store gift 
card,'' and ``general-use prepaid card'', as defined in paragraph (a) 
of this section, do not include any card, code, or other device that 
is:
    (1) Useable solely for telephone services;
    (2) Reloadable and not marketed or labeled as a gift card or gift 
certificate. For purposes of this paragraph (b)(2), the term 
``reloadable'' includes a temporary non-reloadable card issued solely 
in connection with a reloadable card, code, or other device;
    (3) A loyalty, award, or promotional gift card;
    (4) Not marketed to the general public;
    (5) Issued in paper form only; or
    (6) Redeemable solely for admission to events or venues at a 
particular location or group of affiliated locations, or to obtain 
goods or services in conjunction with admission to such events or 
venues, either at the event or venue or at specific locations 
affiliated with and in geographic proximity to the event or venue.
    (c) Form of disclosures (1) Clear and conspicuous. Disclosures made 
under this section must be clear and conspicuous. The disclosures may 
contain commonly accepted or readily understandable abbreviations or 
symbols.
    (2) Format. Disclosures made under this section generally must be 
provided to the consumer in written or electronic form. Except for the 
disclosures in paragraphs (c)(3) and (h)(2) of this section, written 
and electronic disclosures made under this section must be in a 
retainable form. Only disclosures provided under paragraphs (c)(3) and 
(h)(2) may be given orally.
    (3) Disclosures prior to purchase. Before a gift certificate, store 
gift card, or general-use prepaid card is purchased, a person that 
issues or sells such certificate or card must disclose to the consumer 
the information required by paragraphs (d)(2), (e)(3), and (f)(1) of 
this section. The fees and terms and conditions of expiration that are 
required to be disclosed prior to purchase may not be changed after 
purchase.
    (4) Disclosures on the certificate or card. Disclosures required by 
paragraphs (a)(4)(iii), (d)(2), (e)(3), and (f)(2) of this section must 
be made on the certificate or card, or in the case of a loyalty, award, 
or promotional gift card, on the card, code, or other device. A 
disclosure made in an accompanying terms and conditions document, on 
packaging surrounding a certificate or card, or on a sticker or other 
label affixed to the certificate or card does not constitute a 
disclosure on the certificate or card. For an electronic certificate or 
card, disclosures must be provided electronically on the certificate or 
card provided to the consumer. An issuer that provides a code or 
confirmation to a consumer orally must provide to the consumer a 
written or electronic copy of the code or confirmation promptly, and 
the applicable disclosures must be provided on the written copy of the 
code or confirmation.
    (d) Prohibition on imposition of fees or charges. No person may 
impose a dormancy, inactivity, or service fee with respect to a gift 
certificate, store gift card, or general-use prepaid card, unless:
    (1) There has been no activity with respect to the certificate or 
card, in the one-year period ending on the date on which the fee is 
imposed;
    (2) The following are stated, as applicable, clearly and 
conspicuously on the gift certificate, store gift card, or general-use 
prepaid card:
    (i) The amount of any dormancy, inactivity, or service fee that may 
be charged;
    (ii) How often such fee may be assessed; and
    (iii) That such fee may be assessed for inactivity; and
    (3) Not more than one dormancy, inactivity, or service fee is 
imposed in any given calendar month.
    (e) Prohibition on sale of gift certificates or cards with 
expiration dates. No person may sell or issue a gift certificate, store 
gift card, or general-use prepaid card with an expiration date, unless:
    (1) The person has established policies and procedures to provide 
consumers with a reasonable opportunity to purchase a certificate or 
card with at least five years remaining until the certificate or card 
expiration date;
    (2) The expiration date for the underlying funds is at least the 
later of:
    (i) Five years after the date the gift certificate was initially 
issued, or the date on which funds were last loaded to a store gift 
card or general-use prepaid card; or
    (ii) The certificate or card expiration date, if any;
    (3) The following disclosures are provided on the certificate or 
card, as applicable:
    (i) The expiration date for the underlying funds or, if the 
underlying funds do not expire, that fact;
    (ii) A toll-free telephone number and, if one is maintained, a Web 
site that a consumer may use to obtain a replacement certificate or 
card after the certificate or card expires if the underlying funds may 
be available; and
    (iii) Except where a non-reloadable certificate or card bears an 
expiration date that is at least seven years from the date of 
manufacture, a statement, disclosed with equal prominence and in close 
proximity to the certificate or card expiration date, that:

[[Page 81034]]

    (A) The certificate or card expires, but the underlying funds 
either do not expire or expire later than the certificate or card, and;
    (B) The consumer may contact the issuer for a replacement card; and
    (4) No fee or charge is imposed on the cardholder for replacing the 
gift certificate, store gift card, or general-use prepaid card or for 
providing the certificate or card holder with the remaining balance in 
some other manner prior to the funds expiration date, unless such 
certificate or card has been lost or stolen.
    (f) Additional disclosure requirements for gift certificates or 
cards. The following disclosures must be provided in connection with a 
gift certificate, store gift card, or general-use prepaid card, as 
applicable:
    (1) Fee disclosures. For each type of fee that may be imposed in 
connection with the certificate or card (other than a dormancy, 
inactivity, or service fee subject to the disclosure requirements under 
paragraph (d)(2) of this section), the following information must be 
provided on or with the certificate or card:
    (i) The type of fee;
    (ii) The amount of the fee (or an explanation of how the fee will 
be determined); and
    (iii) The conditions under which the fee may be imposed.
    (2) Telephone number for fee information. A toll-free telephone 
number and, if one is maintained, a Web site, that a consumer may use 
to obtain information about fees described in paragraphs (d)(2) and 
(f)(1) of this section must be disclosed on the certificate or card.
    (g) Compliance dates. (1) Effective date for gift certificates, 
store gift cards, and general-use prepaid cards. Except as provided in 
paragraph (h) of this section, the requirements of this section apply 
to any gift certificate, store gift card, or general-use prepaid card 
sold to a consumer on or after August 22, 2010, or provided to a 
consumer as a replacement for such certificate or card.
    (2) Effective date for loyalty, award, or promotional gift cards. 
The requirements in paragraph (a)(4)(iii) of this section apply to any 
card, code, or other device provided to a consumer in connection with a 
loyalty, award, or promotional program if the period of eligibility for 
such program began on or after August 22, 2010.
    (h) Temporary exemption. (1) Delayed mandatory compliance date. For 
any gift certificate, store gift card, or general-use prepaid card 
produced prior to April 1, 2010, the mandatory compliance date of the 
requirements of paragraphs (c)(3), (d)(2), (e)(1), (e)(3), and (f) of 
this section is January 31, 2011, provided that an issuer of such 
certificate or card:
    (i) Complies with all other provisions of this section;
    (ii) Does not impose an expiration date with respect to the funds 
underlying such certificate or card;
    (iii) At the consumer's request, replaces such certificate or card 
if it has funds remaining at no cost to the consumer; and
    (iv) Satisfies the requirements of paragraph (h)(2) of this 
section.
    (2) Additional disclosures. Issuers relying on the delayed 
effective date in Sec.  1005.20(h)(1) must disclose through in-store 
signage, messages during customer service calls, Web sites, and general 
advertising, that:
    (i) The underlying funds of such certificate or card do not expire;
    (ii) Consumers holding such certificate or card have a right to a 
free replacement certificate or card, which must be accompanied by the 
packaging and materials typically associated with such certificate or 
card; and
    (iii) Any dormancy, inactivity, or service fee for such certificate 
or card that might otherwise be charged will not be charged if such 
fees do not comply with section 916 of the Act.
    (3) Expiration of additional disclosure requirements. The 
disclosures in paragraph (h)(2) of this section:
    (i) Are not required to be provided on or after January 31, 2011, 
with respect to in-store signage and general advertising.
    (ii) Are not required to be provided on or after January 31, 2013, 
with respect to messages during customer service calls and Web sites.

Appendix A to Part 1005--Model Disclosure Clauses and Forms

A-1--Model Clauses for Unsolicited Issuance (Sec.  1005.5(b)(2))
A-2--Model Clauses for Initial Disclosures (Sec.  1005.7(b))
A-3--Model Forms for Error Resolution Notice (Sec. Sec.  
1005.7(b)(10) and 1005.8(b))
A-4--Model Form for Service-Providing Institutions (Sec.  
1005.14(b)(1)(ii))
A-5--Model Forms for Government Agencies (Sec.  1005.15(d)(1) and 
(2))
A-6--Model Clauses for Authorizing One-Time Electronic Fund 
Transfers Using Information From a Check (Sec.  1005.3(b)(2))
A-7--Model Clauses for Financial Institutions Offering Payroll Card 
Accounts (Sec.  1005.18(c))
A-8--Model Clause for Electronic Collection of Returned Item Fees 
(Sec.  1005.3(b)(3))
A-9--Model Consent Form for Overdraft Services (Sec.  1005.17)

A-1--Model Clauses for Unsolicited Issuance (Sec.  1005.5(b)(2))

    (a) Accounts using cards. You cannot use the enclosed card to 
transfer money into or out of your account until we have validated 
it. If you do not want to use the card, please (destroy it at once 
by cutting it in half).
    [Financial institution may add validation instructions here.]
    (b) Accounts using codes. You cannot use the enclosed code to 
transfer money into or out of your account until we have validated 
it. If you do not want to use the code, please (destroy this notice 
at once).
    [Financial institution may add validation instructions here.]

A-2--Model Clauses for Initial Disclosures (Sec.  1005.7(b))

    (a) Consumer Liability (Sec.  1005.7(b)(1)).
    (Tell us AT ONCE if you believe your [card] [code] has been lost 
or stolen, or if you believe that an electronic fund transfer has 
been made without your permission using information from your check. 
Telephoning is the best way of keeping your possible losses down. 
You could lose all the money in your account (plus your maximum 
overdraft line of credit). If you tell us within 2 business days 
after you learn of the loss or theft of your [card] [code], you can 
lose no more than $50 if someone used your [card][code] without your 
permission.)
    If you do NOT tell us within 2 business days after you learn of 
the loss or theft of your [card] [code], and we can prove we could 
have stopped someone from using your [card] [code] without your 
permission if you had told us, you could lose as much as $500.
    Also, if your statement shows transfers that you did not make, 
including those made by card, code or other means, tell us at once. 
If you do not tell us within 60 days after the statement was mailed 
to you, you may not get back any money you lost after the 60 days if 
we can prove that we could have stopped someone from taking the 
money if you had told us in time. If a good reason (such as a long 
trip or a hospital stay) kept you from telling us, we will extend 
the time periods.
    (b) Contact in event of unauthorized transfer (Sec.  
1005.7(b)(2)). If you believe your [card] [code] has been lost or 
stolen, call: [Telephone number] or write: [Name of person or office 
to be notified] [Address].
    You should also call the number or write to the address listed 
above if you believe a transfer has been made using the information 
from your check without your permission.
    (c) Business days (Sec.  1005.7(b)(3)). For purposes of these 
disclosures, our business days are (Monday through Friday) (Monday 
through Saturday) (any day including Saturdays and Sundays). 
Holidays are (not) included.
    (d) Transfer types and limitations (Sec.  1005.7(b)(4)) (1) 
Account access. You may use your [card][code] to:
    (i) Withdraw cash from your [checking] [or] [savings] account.
    (ii) Make deposits to your [checking] [or] [savings] account.
    (iii) Transfer funds between your checking and savings accounts 
whenever you request.
    (iv) Pay for purchases at places that have agreed to accept the 
[card] [code].

[[Page 81035]]

    (v) Pay bills directly [by telephone] from your [checking] [or] 
[savings] account in the amounts and on the days you request.
    Some of these services may not be available at all terminals.
    (2) Electronic check conversion. You may authorize a merchant or 
other payee to make a one-time electronic payment from your checking 
account using information from your check to:
    (i) Pay for purchases.
    (ii) Pay bills.
    (3) Limitations on frequency of transfers.(i) You may make only 
[insert number, e.g., 3] cash withdrawals from our terminals each 
[insert time period, e.g., week].
    (ii) You can use your telephone bill-payment service to pay 
[insert number] bills each [insert time period] [telephone call].
    (iii) You can use our point-of-sale transfer service for [insert 
number] transactions each [insert time period].
    (iv) For security reasons, there are limits on the number of 
transfers you can make using our [terminals] [telephone bill-payment 
service] [point-of-sale transfer service].
    (4) Limitations on dollar amounts of transfers (i) You may 
withdraw up to [insert dollar amount] from our terminals each 
[insert time period] time you use the [card] [code].
    (ii) You may buy up to [insert dollar amount] worth of goods or 
services each [insert time period] time you use the [card] [code] in 
our point-of-sale transfer service.
    (e) Fees (Sec.  1005.7(b)(5)) (1) Per transfer charge. We will 
charge you [insert dollar amount] for each transfer you make using 
our [automated teller machines] [telephone bill-payment service] 
[point-of-sale transfer service].
    (2) Fixed charge. We will charge you [insert dollar amount] each 
[insert time period] for our [automated teller machine service] 
[telephone bill-payment service] [point-of-sale transfer service].
    (3) Average or minimum balance charge. We will only charge you 
for using our [automated teller machines] [telephone bill-payment 
service] [point-of-sale transfer service] if the [average] [minimum] 
balance in your [checking account] [savings account] [accounts] 
falls below [insert dollar amount]. If it does, we will charge you 
[insert dollar amount] each [transfer] [insert time period].
    (f) Confidentiality (Sec.  1005.7(b)(9)). We will disclose 
information to third parties about your account or the transfers you 
make:
    (i) Where it is necessary for completing transfers, or
    (ii) In order to verify the existence and condition of your 
account for a third party, such as a credit bureau or merchant, or
    (iii) In order to comply with government agency or court orders, 
or
    (iv) If you give us your written permission.
    (g) Documentation (Sec.  1005.7(b)(6)) (1) Terminal transfers. 
You can get a receipt at the time you make any transfer to or from 
your account using one of our [automated teller machines] [or] 
[point-of-sale terminals].
    (2) Preauthorized credits. If you have arranged to have direct 
deposits made to your account at least once every 60 days from the 
same person or company, (we will let you know if the deposit is 
[not] made.) [the person or company making the deposit will tell you 
every time they send us the money] [you can call us at (insert 
telephone number) to find out whether or not the deposit has been 
made].
    (3) Periodic statements. You will get a [monthly] [quarterly] 
account statement (unless there are no transfers in a particular 
month. In any case you will get the statement at least quarterly).
    (4) Passbook account where the only possible electronic fund 
transfers are preauthorized credits. If you bring your passbook to 
us, we will record any electronic deposits that were made to your 
account since the last time you brought in your passbook.
    (h) Preauthorized payments (Sec.  1005.7(b) (6), (7) and (8); 
Sec.  1005.10(d)) (1) Right to stop payment and procedure for doing 
so. If you have told us in advance to make regular payments out of 
your account, you can stop any of these payments. Here's how:
    Call us at [insert telephone number], or write us at [insert 
address], in time for us to receive your request 3 business days or 
more before the payment is scheduled to be made. If you call, we may 
also require you to put your request in writing and get it to us 
within 14 days after you call. (We will charge you [insert amount] 
for each stop-payment order you give.)
    (2) Notice of varying amounts. If these regular payments may 
vary in amount, [we] [the person you are going to pay] will tell 
you, 10 days before each payment, when it will be made and how much 
it will be. (You may choose instead to get this notice only when the 
payment would differ by more than a certain amount from the previous 
payment, or when the amount would fall outside certain limits that 
you set.)
    (3) Liability for failure to stop payment of preauthorized 
transfer. If you order us to stop one of these payments 3 business 
days or more before the transfer is scheduled, and we do not do so, 
we will be liable for your losses or damages.
    (i) Financial institution's liability (Sec.  1005.7(b)(8)). If 
we do not complete a transfer to or from your account on time or in 
the correct amount according to our agreement with you, we will be 
liable for your losses or damages. However, there are some 
exceptions. We will not be liable, for instance:
    (1) If, through no fault of ours, you do not have enough money 
in your account to make the transfer.
    (2) If the transfer would go over the credit limit on your 
overdraft line.
    (3) If the automated teller machine where you are making the 
transfer does not have enough cash.
    (4) If the [terminal] [system] was not working properly and you 
knew about the breakdown when you started the transfer.
    (5) If circumstances beyond our control (such as fire or flood) 
prevent the transfer, despite reasonable precautions that we have 
taken.
    (6) There may be other exceptions stated in our agreement with 
you.
    (j) ATM fees (Sec.  1005.7(b)(11)). When you use an ATM not 
owned by us, you may be charged a fee by the ATM operator [or any 
network used] (and you may be charged a fee for a balance inquiry 
even if you do not complete a fund transfer).

A-3--Model Forms for Error Resolution Notice (Sec. Sec.  1005.7(b)(10) 
and 1005.8(b))

    (a) Initial and annual error resolution notice (Sec. Sec.  
1005.7(b)(10) and 1005.8(b)).
    In Case of Errors or Questions About Your Electronic Transfers 
Telephone us at [insert telephone number] Write us at [insert 
address] [or email us at [insert email address]] as soon as you can, 
if you think your statement or receipt is wrong or if you need more 
information about a transfer listed on the statement or receipt. We 
must hear from you no later than 60 days after we sent the FIRST 
statement on which the problem or error appeared.
    (1) Tell us your name and account number (if any).
    (2) Describe the error or the transfer you are unsure about, and 
explain as clearly as you can why you believe it is an error or why 
you need more information.
    (3) Tell us the dollar amount of the suspected error.
    If you tell us orally, we may require that you send us your 
complaint or question in writing within 10 business days.
    We will determine whether an error occurred within 10 business 
days after we hear from you and will correct any error promptly. If 
we need more time, however, we may take up to 45 days to investigate 
your complaint or question. If we decide to do this, we will credit 
your account within 10 business days for the amount you think is in 
error, so that you will have the use of the money during the time it 
takes us to complete our investigation. If we ask you to put your 
complaint or question in writing and we do not receive it within 10 
business days, we may not credit your account.
    For errors involving new accounts, point-of-sale, or foreign-
initiated transactions, we may take up to 90 days to investigate 
your complaint or question. For new accounts, we may take up to 20 
business days to credit your account for the amount you think is in 
error.
    We will tell you the results within three business days after 
completing our investigation. If we decide that there was no error, 
we will send you a written explanation. You may ask for copies of 
the documents that we used in our investigation.
    (b) Error resolution notice on periodic statements (Sec.  
1005.8(b)).
    In Case of Errors or Questions About Your Electronic Transfers 
Telephone us at [insert telephone number] or Write us at [insert 
address] as soon as you can, if you think your statement or receipt 
is wrong or if you need more information about a transfer on the 
statement or receipt. We must hear from you no later than 60 days 
after we sent you the FIRST statement on which the error or problem 
appeared.
    (1) Tell us your name and account number (if any).
    (2) Describe the error or the transfer you are unsure about, and 
explain as clearly as you can why you believe it is an error or why 
you need more information.
    (3) Tell us the dollar amount of the suspected error.

[[Page 81036]]

    We will investigate your complaint and will correct any error 
promptly. If we take more than 10 business days to do this, we will 
credit your account for the amount you think is in error, so that 
you will have the use of the money during the time it takes us to 
complete our investigation.

A-4--Model Form for Service-Providing Institutions (Sec.  
1005.14(b)(1)(ii))

    ALL QUESTIONS ABOUT TRANSACTIONS MADE WITH YOUR (NAME OF CARD) 
CARD MUST BE DIRECTED TO US (NAME OF SERVICE PROVIDER), AND NOT TO 
THE BANK OR OTHER FINANCIAL INSTITUTION WHERE YOU HAVE YOUR ACCOUNT. 
We are responsible for the [name of service] service and for 
resolving any errors in transactions made with your [name of card] 
card.
    We will not send you a periodic statement listing transactions 
that you make using your [name of card] card. The transactions will 
appear only on the statement issued by your bank or other financial 
institution. SAVE THE RECEIPTS YOU ARE GIVEN WHEN YOU USE YOUR [NAME 
OF CARD] CARD, AND CHECK THEM AGAINST THE ACCOUNT STATEMENT YOU 
RECEIVE FROM YOUR BANK OR OTHER FINANCIAL INSTITUTION. If you have 
any questions about one of these transactions, call or write us at 
[telephone number and address] [the telephone number and address 
indicated below].
    IF YOUR [NAME OF CARD] CARD IS LOST OR STOLEN, NOTIFY US AT ONCE 
by calling or writing to us at [telephone number and address].

A-5--Model Forms for Government Agencies (Sec.  1005.15(d)(1) and (2))

    (a) Disclosure by government agencies of information about 
obtaining account balances and account histories (Sec.  
1005.15(d)(1)(i) and (ii)).
    You may obtain information about the amount of benefits you have 
remaining by calling [telephone number]. That information is also 
available [on the receipt you get when you make a transfer with your 
card at (an ATM)(a POS terminal)][when you make a balance inquiry at 
an ATM][when you make a balance inquiry at specified locations].
    You also have the right to receive a written summary of 
transactions for the 60 days preceding your request by calling 
[telephone number]. [Optional: Or you may request the summary by 
contacting your caseworker.]
    (b) Disclosure of error resolution procedures for government 
agencies that do not provide periodic statements (Sec.  
1005.15(d)(1)(iii) and (d)(2)).
    In Case of Errors or Questions About Your Electronic Transfers 
Telephone us at [telephone number] Write us at [insert address] [or 
email us at [insert email address]] as soon as you can, if you think 
an error has occurred in your [EBT][agency's name for program] 
account. We must hear from you no later than 60 days after you learn 
of the error. You will need to tell us:
     Your name and [case] [file] number.
     Why you believe there is an error, and the dollar 
amount involved.
     Approximately when the error took place.
    If you tell us orally, we may require that you send us your 
complaint or question in writing within 10 business days.
    We will determine whether an error occurred within 10 business 
days after we hear from you and will correct any error promptly. If 
we need more time, however, we may take up to 45 days to investigate 
your complaint or question. If we decide to do this, we will credit 
your account within 10 business days for the amount you think is in 
error, so that you will have the use of the money during the time it 
takes us to complete our investigation. If we ask you to put your 
complaint or question in writing and we do not receive it within 10 
business days, we may not credit your account.
    For errors involving new accounts, point-of-sale, or foreign-
initiated transactions, we may take up to 90 days to investigate 
your complaint or question. For new accounts, we may take up to 20 
business days to credit your account for the amount you think is in 
error.
    We will tell you the results within three business days after 
completing our investigation. If we decide that there was no error, 
we will send you a written explanation. You may ask for copies of 
the documents that we used in our investigation.
    If you need more information about our error resolution 
procedures, call us at [telephone number][the telephone number shown 
above].

A-6--Model Clauses for Authorizing One-Time Electronic Fund Transfers 
Using Information From a Check (Sec.  1005.3(b)(2))

    (a) Notice About Electronic Check Conversion.
    When you provide a check as payment, you authorize us either to 
use information from your check to make a one-time electronic fund 
transfer from your account or to process the payment as a check 
transaction.
    (b) Alternative Notice About Electronic Check Conversion 
(Optional).
    When you provide a check as payment, you authorize us to use 
information from your check to make a one-time electronic fund 
transfer from your account. In certain circumstances, such as for 
technical or processing reasons, we may process your payment as a 
check transaction.
    [Specify other circumstances (at payee's option).]
    (c) Notice For Providing Additional Information About Electronic 
Check Conversion.
    When we use information from your check to make an electronic 
fund transfer, funds may be withdrawn from your account as soon as 
the same day [you make] [we receive] your payment[, and you will not 
receive your check back from your financial institution].

A-7--Model Clauses for Financial Institutions Offering Payroll Card 
Accounts (Sec.  1005.18(c))

    (a) Disclosure by financial institutions of information about 
obtaining account information for payroll card accounts. Sec.  
1005.18(c)(1).
    You may obtain information about the amount of money you have 
remaining in your payroll card account by calling [telephone 
number]. This information, along with a 60-day history of account 
transactions, is also available online at [internet address].
    You also have the right to obtain a 60-day written history of 
account transactions by calling [telephone number], or by writing us 
at [address].
    (b) Disclosure of error-resolution procedures for financial 
institutions that provide alternative means of obtaining payroll 
card account information (Sec.  1005.18(c)(1)(ii) and (c)(2)).
    In Case of Errors or Questions About Your Payroll Card Account 
Telephone us at [telephone number] or Write us at [address] [or 
email us at [email address]] as soon as you can, if you think an 
error has occurred in your payroll card account. We must allow you 
to report an error until 60 days after the earlier of the date you 
electronically access your account, if the error could be viewed in 
your electronic history, or the date we sent the FIRST written 
history on which the error appeared. You may request a written 
history of your transactions at any time by calling us at [telephone 
number] or writing us at [address]. You will need to tell us:
    Your name and [payroll card account] number.
    Why you believe there is an error, and the dollar amount 
involved.
    Approximately when the error took place.
    If you tell us orally, we may require that you send us your 
complaint or question in writing within 10 business days.
    We will determine whether an error occurred within 10 business 
days after we hear from you and will correct any error promptly. If 
we need more time, however, we may take up to 45 days to investigate 
your complaint or question. If we decide to do this, we will credit 
your account within 10 business days for the amount you think is in 
error, so that you will have the money during the time it takes us 
to complete our investigation. If we ask you to put your complaint 
or question in writing and we do not receive it within 10 business 
days, we may not credit your account.
    For errors involving new accounts, point-of-sale, or foreign-
initiated transactions, we may take up to 90 days to investigate 
your complaint or question. For new accounts, we may take up to 20 
business days to credit your account for the amount you think is in 
error.
    We will tell you the results within three business days after 
completing our investigation. If we decide that there was no error, 
we will send you a written explanation.
    You may ask for copies of the documents that we used in our 
investigation.
    If you need more information about our error-resolution 
procedures, call us at [telephone number] [the telephone number 
shown above] [or visit [internet address]].

A-8--Model Clause for Electronic Collection of Returned Item Fees 
(Sec.  1005.3(b)(3))

    If your payment is returned unpaid, you authorize [us/name of 
person collecting the fee electronically] to make a one-time 
electronic fund transfer from your account to collect a fee of [$--
------]. [If your payment

[[Page 81037]]

is returned unpaid, you authorize [us/name of person collecting the 
fee electronically] to make a one-time electronic fund transfer from 
your account to collect a fee. The fee will be determined [by]/[as 
follows]: [--------].]
[GRAPHIC] [TIFF OMITTED] TR27DE11.000

Appendix B to Part 1005--[Reserved]

Appendix C to Part 1005--Issuance of Official Interpretations

Official Interpretations

    Pursuant to section 916(d) of the Act, the Bureau has designated 
the Associate Director and other officials of the Division of 
Research, Markets, and Regulations as officials ``duly authorized'' 
to issue, at their discretion, official interpretations of this 
part. Except in unusual circumstances, such interpretations will not 
be issued separately but will be incorporated in an official 
commentary to this part, which will be amended periodically.

Requests for Issuance of Official Interpretations

    A request for an official interpretation shall be in writing and 
addressed to the Bureau of Consumer Financial Protection, 1700 G 
Street NW., Washington, DC 20006. The request shall contain a 
complete statement of all relevant facts concerning the issue, 
including copies of all pertinent documents.

Scope of Interpretations

    No interpretations will be issued approving financial 
institutions' forms or statements. This restriction does not apply 
to forms or statements whose use is required or sanctioned by a 
government agency.

Supplement I to Part 1005--Official Interpretations

Section 1005.2 Definitions

2(a) Access Device

    1. Examples. The term ``access device'' includes debit cards, 
personal identification numbers (PINs), telephone transfer and 
telephone bill payment codes, and other means that may be used by a 
consumer to initiate an electronic fund transfer (EFT) to

[[Page 81038]]

or from a consumer account. The term does not include magnetic tape 
or other devices used internally by a financial institution to 
initiate electronic transfers.
    2. Checks used to capture information. The term ``access 
device'' does not include a check or draft used to capture the 
Magnetic Ink Character Recognition (MICR) encoding to initiate a 
one-time automated clearinghouse (ACH) debit. For example, if a 
consumer authorizes a one-time ACH debit from the consumer's account 
using a blank, partially completed, or fully completed and signed 
check for the merchant to capture the routing, account, and serial 
numbers to initiate the debit, the check is not an access device. 
(Although the check is not an access device under Regulation E, the 
transaction is nonetheless covered by the regulation. See comment 
3(b)(1)-1.v.)

2(b) Account

    1. Consumer asset account. The term ``consumer asset account'' 
includes:
    i. Club accounts, such as vacation clubs. In many cases, 
however, these accounts are exempt from the regulation under Sec.  
1005.3(c)(5) because all electronic transfers to or from the account 
have been preauthorized by the consumer and involve another account 
of the consumer at the same institution.
    ii. A retail repurchase agreement (repo), which is a loan made 
to a financial institution by a consumer that is collateralized by 
government or government-insured securities.
    2. Certain employment-related cards not covered. The term 
``payroll card account'' does not include a card used solely to 
disburse incentive-based payments (other than commissions which can 
represent the primary means through which a consumer is paid), such 
as bonuses, which are unlikely to be a consumer's primary source of 
salary or other compensation. The term also does not include a card 
used solely to make disbursements unrelated to compensation, such as 
petty cash reimbursements or travel per diem payments. Similarly, a 
payroll card account does not include a card that is used in 
isolated instances to which an employer typically does not make 
recurring payments, such as when providing final payments or in 
emergency situations when other payment methods are unavailable. 
However, all transactions involving the transfer of funds to or from 
a payroll card account are covered by the regulation, even if a 
particular transaction involves payment of a bonus, other incentive-
based payment, or reimbursement, or the transaction does not 
represent a transfer of wages, salary, or other employee 
compensation.
    3. Examples of accounts not covered by Regulation E (12 CFR Part 
1005) include:
    i. Profit-sharing and pension accounts established under a trust 
agreement, which are exempt under Sec.  1005.2(b)(2).
    ii. Escrow accounts, such as those established to ensure payment 
of items such as real estate taxes, insurance premiums, or 
completion of repairs or improvements.
    iii. Accounts for accumulating funds to purchase U.S. savings 
bonds.

Paragraph 2(b)(2)

    1. Bona fide trust agreements. The term ``bona fide trust 
agreement'' is not defined by the Act or regulation; therefore, 
financial institutions must look to state or other applicable law 
for interpretation.
    2. Custodial agreements. An account held under a custodial 
agreement that qualifies as a trust under the Internal Revenue Code, 
such as an individual retirement account, is considered to be held 
under a trust agreement for purposes of Regulation E.

2(d) Business Day

    1. Duration. A business day includes the entire 24-hour period 
ending at midnight, and a notice required by the regulation is 
effective even if given outside normal business hours. The 
regulation does not require, however, that a financial institution 
make telephone lines available on a 24-hour basis.
    2. Substantially all business functions. Substantially all 
business functions include both the public and the back-office 
operations of the institution. For example, if the offices of an 
institution are open on Saturdays for handling some consumer 
transactions (such as deposits, withdrawals, and other teller 
transactions), but not for performing internal functions (such as 
investigating account errors), then Saturday is not a business day 
for that institution. In this case, Saturday does not count toward 
the business-day standard set by the regulation for reporting lost 
or stolen access devices, resolving errors, etc.
    3. Short hours. A financial institution may determine, at its 
election, whether an abbreviated day is a business day. For example, 
if an institution engages in substantially all business functions 
until noon on Saturdays instead of its usual 3 p.m. closing, it may 
consider Saturday a business day.
    4. Telephone line. If a financial institution makes a telephone 
line available on Sundays for reporting the loss or theft of an 
access device, but performs no other business functions, Sunday is 
not a business day under the substantially all business functions 
standard.

2(h) Electronic Terminal

    1. Point-of-sale (POS) payments initiated by telephone. Because 
the term ``electronic terminal'' excludes a telephone operated by a 
consumer, a financial institution need not provide a terminal 
receipt when:
    i. A consumer uses a debit card at a public telephone to pay for 
the call.
    ii. A consumer initiates a transfer by a means analogous in 
function to a telephone, such as by home banking equipment or a 
facsimile machine.
    2. POS terminals. A POS terminal that captures data 
electronically, for debiting or crediting to a consumer's asset 
account, is an electronic terminal for purposes of Regulation E even 
if no access device is used to initiate the transaction. See Sec.  
1005.9 for receipt requirements.
    3. Teller-operated terminals. A terminal or other computer 
equipment operated by an employee of a financial institution is not 
an electronic terminal for purposes of the regulation. However, 
transfers initiated at such terminals by means of a consumer's 
access device (using the consumer's PIN, for example) are EFTs and 
are subject to other requirements of the regulation. If an access 
device is used only for identification purposes or for determining 
the account balance, the transfers are not EFTs for purposes of the 
regulation.

2(k) Preauthorized Electronic Fund Transfer

    1. Advance authorization. A preauthorized electronic fund 
transfer under Regulation E is one authorized by the consumer in 
advance of a transfer that will take place on a recurring basis, at 
substantially regular intervals, and will require no further action 
by the consumer to initiate the transfer. In a bill-payment system, 
for example, if the consumer authorizes a financial institution to 
make monthly payments to a payee by means of EFTs, and the payments 
take place without further action by the consumer, the payments are 
preauthorized EFTs. In contrast, if the consumer must take action 
each month to initiate a payment (such as by entering instructions 
on a touch-tone telephone or home computer), the payments are not 
preauthorized EFTs.

2(m) Unauthorized Electronic Fund Transfer

    1. Transfer by institution's employee. A consumer has no 
liability for erroneous or fraudulent transfers initiated by an 
employee of a financial institution.
    2. Authority. If a consumer furnishes an access device and 
grants authority to make transfers to a person (such as a family 
member or co-worker) who exceeds the authority given, the consumer 
is fully liable for the transfers unless the consumer has notified 
the financial institution that transfers by that person are no 
longer authorized.
    3. Access device obtained through robbery or fraud. An 
unauthorized EFT includes a transfer initiated by a person who 
obtained the access device from the consumer through fraud or 
robbery.
    4. Forced initiation. An EFT at an ATM is an unauthorized 
transfer if the consumer has been induced by force to initiate the 
transfer.
    5. Reversal of direct deposits. The reversal of a direct deposit 
made in error is not an unauthorized EFT when it involves:
    i. A credit made to the wrong consumer's account;
    ii. A duplicate credit made to a consumer's account; or
    iii. A credit in the wrong amount (for example, when the amount 
credited to the consumer's account differs from the amount in the 
transmittal instructions).

Section 1005.3 Coverage

3(a) General

    1. Accounts covered. The requirements of the regulation apply 
only to an account for which an agreement for EFT services to or 
from the account has been entered into between:
    i. The consumer and the financial institution (including an 
account for which an access device has been issued to the consumer, 
for example);
    ii. The consumer and a third party (for preauthorized debits or 
credits, for example),

[[Page 81039]]

when the account-holding institution has received notice of the 
agreement and the fund transfers have begun.
    2. Automated clearing house (ACH) membership. The fact that 
membership in an ACH requires a financial institution to accept EFTs 
to accounts at the institution does not make every account of that 
institution subject to the regulation.
    3. Foreign applicability. Regulation E applies to all persons 
(including branches and other offices of foreign banks located in 
the United States) that offer EFT services to residents of any 
state, including resident aliens. It covers any account located in 
the United States through which EFTs are offered to a resident of a 
state. This is the case whether or not a particular transfer takes 
place in the United States and whether or not the financial 
institution is chartered in the United States or a foreign country. 
The regulation does not apply to a foreign branch of a U.S. bank 
unless the EFT services are offered in connection with an account in 
a state as defined in Sec.  1005.2(l).

3(b) Electronic Fund Transfer

3(b)(1) Definition

    1. Fund transfers covered. The term ``electronic fund transfer'' 
includes:
    i. A deposit made at an ATM or other electronic terminal 
(including a deposit in cash or by check) provided a specific 
agreement exists between the financial institution and the consumer 
for EFTs to or from the account to which the deposit is made.
    ii. A transfer sent via ACH. For example, social security 
benefits under the U.S. Treasury's direct-deposit program are 
covered, even if the listing of payees and payment amounts reaches 
the account-holding institution by means of a computer printout from 
a correspondent bank.
    iii. A preauthorized transfer credited or debited to an account 
in accordance with instructions contained on magnetic tape, even if 
the financial institution holding the account sends or receives a 
composite check.
    iv. A transfer from the consumer's account resulting from a 
debit-card transaction at a merchant location, even if no electronic 
terminal is involved at the time of the transaction, if the 
consumer's asset account is subsequently debited for the amount of 
the transfer.
    v. A transfer via ACH where a consumer has provided a check to 
enable the merchant or other payee to capture the routing, account, 
and serial numbers to initiate the transfer, whether the check is 
blank, partially completed, or fully completed and signed; whether 
the check is presented at POS or is mailed to a merchant or other 
payee or lockbox and later converted to an EFT; or whether the check 
is retained by the consumer, the merchant or other payee, or the 
payee's financial institution.
    vi. A payment made by a bill payer under a bill-payment service 
available to a consumer via computer or other electronic means, 
unless the terms of the bill-payment service explicitly state that 
all payments, or all payments to a particular payee or payees, will 
be solely by check, draft, or similar paper instrument drawn on the 
consumer's account, and the payee or payees that will be paid in 
this manner are identified to the consumer.
    2. Fund transfers not covered. The term ``electronic fund 
transfer'' does not include:
    i. A payment that does not debit or credit a consumer asset 
account, such as a payroll allotment to a creditor to repay a credit 
extension (which is deducted from salary).
    ii. A payment made in currency by a consumer to another person 
at an electronic terminal.
    iii. A preauthorized check drawn by the financial institution on 
the consumer's account (such as an interest or other recurring 
payment to the consumer or another party), even if the check is 
computer-generated.
    iv. Transactions arising from the electronic collection, 
presentment, or return of checks through the check collection 
system, such as through transmission of electronic check images.

3(b)(2) Electronic Fund Transfer Using Information From a Check

    1. Notice at POS not furnished due to inadvertent error. If the 
copy of the notice under section 1005.3(b)(2)(ii) for electronic 
check conversion (ECK) transactions is not provided to the consumer 
at POS because of a bona fide unintentional error, such as when a 
terminal printing mechanism jams, no violation results if the payee 
maintains procedures reasonably adapted to avoid such occurrences.
    2. Authorization to process a transaction as an EFT or as a 
check. In order to process a transaction as an EFT, or alternatively 
as a check, the payee must obtain the consumer's authorization to do 
so. A payee may, at its option, specify the circumstances under 
which a check may not be converted to an EFT. See model clauses in 
Appendix A-6.
    3. Notice for each transfer. Generally, a notice to authorize an 
electronic check conversion transaction must be provided for each 
transaction. For example, a consumer must receive a notice that the 
transaction will be processed as an EFT for each transaction at POS 
or each time a consumer mails a check in an accounts receivable 
(ARC) transaction to pay a bill, such as a utility bill, if the 
payee intends to convert a check received as payment. Similarly, the 
consumer must receive notice if the payee intends to collect a 
service fee for insufficient or uncollected funds via an EFT for 
each transaction whether at POS or if the consumer mails a check to 
pay a bill. The notice about when funds may be debited from a 
consumer's account and the non-return of consumer checks by the 
consumer's financial institution must also be provided for each 
transaction. However, if in an ARC transaction, a payee provides a 
coupon book to a consumer, for example, for mortgage loan payments, 
and the payment dates and amounts are set out in the coupon book, 
the payee may provide a single notice on the coupon book stating all 
of the required disclosures under paragraph (b)(2) of this section 
in order to obtain authorization for each conversion of a check and 
any debits via EFT to the consumer's account to collect any service 
fees imposed by the payee for insufficient or uncollected funds in 
the consumer's account. The notice must be placed on a conspicuous 
location of the coupon book that a consumer can retain--for example, 
on the first page, or inside the front cover.
    4. Multiple payments/multiple consumers. If a merchant or other 
payee will use information from a consumer's check to initiate an 
EFT from the consumer's account, notice to a consumer listed on the 
billing account that a check provided as payment during a single 
billing cycle or after receiving an invoice or statement will be 
processed as a one-time EFT or as a check transaction constitutes 
notice for all checks provided in payment for the billing cycle or 
the invoice for which notice has been provided, whether the check(s) 
is submitted by the consumer or someone else. The notice applies to 
all checks provided in payment for the billing cycle or invoice 
until the provision of notice on or with the next invoice or 
statement. Thus, if a merchant or other payee receives a check as 
payment for the consumer listed on the billing account after 
providing notice that the check will be processed as a one-time EFT, 
the authorization from that consumer constitutes authorization to 
convert any other checks provided for that invoice or statement. 
Other notices required under this paragraph (b)(2) (for example, to 
collect a service fee for insufficient or uncollected funds via an 
EFT) provided to the consumer listed on the billing account also 
constitutes notice to any other consumer who may provide a check for 
the billing cycle or invoice.
    5. Additional disclosures about ECK transactions at POS. When a 
payee initiates an EFT at POS using information from the consumer's 
check, and returns the check to the consumer at POS, the payee need 
not provide a notice to the consumer that the check will not be 
returned by the consumer's financial institution.

3(b)(3) Collection of Returned Item Fees via Electronic Fund 
Transfer

    1. Fees imposed by account-holding institution. The requirement 
to obtain a consumer's authorization to collect a fee via EFT for 
the return of an EFT or check unpaid applies only to the person that 
intends to initiate an EFT to collect the returned item fee from the 
consumer's account. The authorization requirement does not apply to 
any fees assessed by the consumer's account-holding financial 
institution when it returns the unpaid underlying EFT or check or 
pays the amount of an overdraft.
    2. Accounts receivable transactions. In an ARC transaction where 
a consumer sends in a payment for amounts owed (or makes an in-
person payment at a biller's physical location, such as when a 
consumer makes a loan payment at a bank branch or places a payment 
in a drop box), a person seeking to electronically collect a fee for 
items returned unpaid must obtain the consumer's authorization to 
collect the fee in this manner. A consumer authorizes a person to 
electronically collect a returned item fee when the consumer 
receives notice, typically on an invoice or statement, that the 
person may collect the fee through an EFT to the

[[Page 81040]]

consumer's account, and the consumer goes forward with the 
underlying transaction by providing payment. The notice must also 
state the dollar amount of the fee. However, an explanation of how 
that fee will be determined may be provided in place of the dollar 
amount of the fee if the fee may vary due to the amount of the 
transaction or due to other factors, such as the number of days the 
underlying transaction is left outstanding. For example, if a state 
law permits a maximum fee of $30 or 10% of the underlying 
transaction, whichever is greater, the person collecting the fee may 
explain how the fee is determined, rather than state a specific 
dollar amount for the fee.
    3. Disclosure of dollar amount of fee for POS transactions. The 
notice provided to the consumer in connection with a POS transaction 
under Sec.  1005.3(b)(3)(ii) must state the amount of the fee for a 
returned item if the dollar amount of the fee can be calculated at 
the time the notice is provided or mailed. For example, if notice is 
provided to the consumer at the time of the transaction, if the 
applicable state law sets a maximum fee that may be collected for a 
returned item based on the amount of the underlying transaction 
(such as where the amount of the fee is expressed as a percentage of 
the underlying transaction), the person collecting the fee must 
state the actual dollar amount of the fee on the notice provided to 
the consumer. Alternatively, if the amount of the fee to be 
collected cannot be calculated at the time of the transaction (for 
example, where the amount of the fee will depend on the number of 
days a debt continues to be owed), the person collecting the fee may 
provide a description of how the fee will be determined on both the 
posted notice as well as on the notice provided at the time of the 
transaction. However, if the person collecting the fee elects to 
send the consumer notice after the person has initiated an EFT to 
collect the fee, that notice must state the amount of the fee to be 
collected.
    4. Third party providing notice. The person initiating an EFT to 
a consumer's account to electronically collect a fee for an item 
returned unpaid may obtain the authorization and provide the notices 
required under Sec.  1005.3(b)(3) through third parties, such as 
merchants.

3(c) Exclusions From Coverage

3(c)(1) Checks

    1. Re-presented checks. The electronic re-presentment of a 
returned check is not covered by Regulation E because the 
transaction originated by check. Regulation E does apply, however, 
to any fee debited via an EFT from a consumer's account by the payee 
because the check was returned for insufficient or uncollected 
funds. The person debiting the fee electronically must obtain the 
consumer's authorization.
    2. Check used to capture information for a one-time EFT. See 
comment 3(b)(1)-1.v.

3(c)(2) Check Guarantee or Authorization

    1. Memo posting. Under a check guarantee or check authorization 
service, debiting of the consumer's account occurs when the check or 
draft is presented for payment. These services are exempt from 
coverage, even when a temporary hold on the account is memo-posted 
electronically at the time of authorization.

3(c)(3) Wire or Other Similar Transfers

    1. Fedwire and ACH. If a financial institution makes a fund 
transfer to a consumer's account after receiving funds through 
Fedwire or a similar network, the transfer by ACH is covered by the 
regulation even though the Fedwire or network transfer is exempt.
    2. Article 4A. Financial institutions that offer telephone-
initiated Fedwire payments are subject to the requirements of UCC 
section 4A-202, which encourages verification of Fedwire payment 
orders pursuant to a security procedure established by agreement 
between the consumer and the receiving bank. These transfers are not 
subject to Regulation E and the agreement is not considered a 
telephone plan if the service is offered separately from a telephone 
bill-payment or other prearranged plan subject to Regulation E. 
Regulation J of the Board of Governors of the Federal Reserve System 
(12 CFR part 210) specifies the rules applicable to funds handled by 
Federal Reserve Banks. To ensure that the rules for all fund 
transfers through Fedwire are consistent, the Board of Governors 
used its preemptive authority under UCC section 4A-107 to determine 
that subpart B of the Board's Regulation J, including the provisions 
of Article 4A, applies to all fund transfers through Fedwire, even 
if a portion of the fund transfer is governed by the EFTA. The 
portion of the fund transfer that is governed by the EFTA is not 
governed by subpart B of the Board's Regulation J.
    3. Similar fund transfer systems. Fund transfer systems that are 
similar to Fedwire include the Clearing House Interbank Payments 
System (CHIPS), Society for Worldwide Interbank Financial 
Telecommunication (SWIFT), Telex, and transfers made on the books of 
correspondent banks.

3(c)(4) Securities and Commodities Transfers

    1. Coverage. The securities exemption applies to securities and 
commodities that may be sold by a registered broker-dealer or 
futures commission merchant, even when the security or commodity 
itself is not regulated by the Securities and Exchange Commission or 
the Commodity Futures Trading Commission.
    2. Example of exempt transfer. The exemption applies to a 
transfer involving a transfer initiated by a telephone order to a 
stockbroker to buy or sell securities or to exercise a margin call.
    3. Examples of nonexempt transfers. The exemption does not apply 
to a transfer involving:
    i. A debit card or other access device that accesses a 
securities or commodities account such as a money market mutual fund 
and that the consumer uses for purchasing goods or services or for 
obtaining cash.
    ii. A payment of interest or dividends into the consumer's 
account (for example, from a brokerage firm or from a Federal 
Reserve Bank for government securities).

3(c)(5) Automatic Transfers by Account-Holding Institution

    1. Automatic transfers exempted. The exemption applies to:
    i. Electronic debits or credits to consumer accounts for check 
charges, stop-payment charges, non-sufficient funds (NSF) charges, 
overdraft charges, provisional credits, error adjustments, and 
similar items that are initiated automatically on the occurrence of 
certain events.
    ii. Debits to consumer accounts for group insurance available 
only through the financial institution and payable only by means of 
an aggregate payment from the institution to the insurer.
    iii. EFTs between a thrift institution and its paired commercial 
bank in the state of Rhode Island, which are deemed under state law 
to be intra-institutional.
    iv. Automatic transfers between a consumer's accounts within the 
same financial institution, even if the account holders on the two 
accounts are not identical.
    2. Automatic transfers not exempted. Transfers between accounts 
of the consumer at affiliated institutions (such as between a bank 
and its subsidiary or within a holding company) are not intra-
institutional transfers, and thus do not qualify for the exemption.

3(c)(6) Telephone-Initiated Transfers

    1. Written plan or agreement. A transfer that the consumer 
initiates by telephone is covered by Regulation E if the transfer is 
made under a written plan or agreement between the consumer and the 
financial institution making the transfer. A written statement 
available to the public or to account holders that describes a 
service allowing a consumer to initiate transfers by telephone 
constitutes a plan; for example, a brochure, or material included 
with periodic statements. The following, however, do not by 
themselves constitute a written plan or agreement:
    i. A hold-harmless agreement on a signature card that protects 
the institution if the consumer requests a transfer.
    ii. A legend on a signature card, periodic statement, or 
passbook that limits the number of telephone-initiated transfers the 
consumer can make from a savings account because of reserve 
requirements under Regulation D of the Board of Governors of the 
Federal Reserve System (12 CFR part 204).
    iii. An agreement permitting the consumer to approve by 
telephone the rollover of funds at the maturity of an instrument.
    2. Examples of covered transfers. When a written plan or 
agreement has been entered into, a transfer initiated by a telephone 
call from a consumer is covered even though:
    i. An employee of the financial institution completes the 
transfer manually (for example, by means of a debit memo or deposit 
slip).
    ii. The consumer is required to make a separate request for each 
transfer.
    iii. The consumer uses the plan infrequently.
    iv. The consumer initiates the transfer via a facsimile machine.
    v. The consumer initiates the transfer using a financial 
institution's audio-response or voice-response telephone system.

[[Page 81041]]

3(c)(7) Small Institutions

    1. Coverage. This exemption is limited to preauthorized 
transfers; institutions that offer other EFTs must comply with the 
applicable sections of the regulation as to such services. The 
preauthorized transfers remain subject to sections 913, 916, and 917 
of the Act and Sec.  1005.10(e), and are therefore exempt from UCC 
Article 4A.

Section 1005.4 General Disclosure Requirements; Jointly Offered 
Services

4(a) Form of Disclosures

    1. General. Although no particular rules govern type size, 
number of pages, or the relative conspicuousness of various terms, 
the disclosures must be in a clear and readily understandable 
written form that the consumer may retain. Numbers or codes are 
considered readily understandable if explained elsewhere on the 
disclosure form.
    2. Foreign language disclosures. Disclosures may be made in 
languages other than English, provided they are available in English 
upon request.

Section 1005.5 Issuance of Access Devices

    1. Coverage. The provisions of this section limit the 
circumstances under which a financial institution may issue an 
access device to a consumer. Making an additional account accessible 
through an existing access device is equivalent to issuing an access 
device and is subject to the limitations of this section.

5(a) Solicited Issuance

Paragraph 5(a)(1)

    1. Joint account. For a joint account, a financial institution 
may issue an access device to each account holder if the requesting 
holder specifically authorizes the issuance.
    2. Permissible forms of request. The request for an access 
device may be written or oral (for example, in response to a 
telephone solicitation by a card issuer).

Paragraph 5(a)(2)

    1. One-for-one rule. In issuing a renewal or substitute access 
device, only one renewal or substitute device may replace a 
previously issued device. For example, only one new card and PIN may 
replace a card and PIN previously issued. A financial institution 
may provide additional devices at the time it issues the renewal or 
substitute access device, however, provided the institution complies 
with Sec.  1005.5(b). See comment 5(b)-5. If the replacement device 
or the additional device permits either fewer or additional types of 
electronic fund transfer services, a change-in-terms notice or new 
disclosures are required.
    2. Renewal or substitution by a successor institution. A 
successor institution is an entity that replaces the original 
financial institution (for example, following a corporate merger or 
acquisition) or that acquires accounts or assumes the operation of 
an EFT system.

5(b) Unsolicited Issuance

    1. Compliance. A financial institution may issue an unsolicited 
access device (such as the combination of a debit card and PIN) if 
the institution's ATM system has been programmed not to accept the 
access device until after the consumer requests and the institution 
validates the device. Merely instructing a consumer not to use an 
unsolicited debit card and PIN until after the institution verifies 
the consumer's identity does not comply with the regulation.
    2. PINs. A financial institution may impose no liability on a 
consumer for unauthorized transfers involving an unsolicited access 
device until the device becomes an ``accepted access device'' under 
the regulation. A card and PIN combination may be treated as an 
accepted access device once the consumer has used it to make a 
transfer.
    3. Functions of PIN. If an institution issues a PIN at the 
consumer's request, the issuance may constitute both a way of 
validating the debit card and the means to identify the consumer 
(required as a condition of imposing liability for unauthorized 
transfers).
    4. Verification of identity. To verify the consumer's identity, 
a financial institution may use any reasonable means, such as a 
photograph, fingerprint, personal visit, signature comparison, or 
personal information about the consumer. However, even if reasonable 
means were used, if an institution fails to verify correctly the 
consumer's identity and an imposter succeeds in having the device 
validated, the consumer is not liable for any unauthorized transfers 
from the account.
    5. Additional access devices in a renewal or substitution. A 
financial institution may issue more than one access device in 
connection with the renewal or substitution of a previously issued 
accepted access device, provided that any additional access device 
(beyond the device replacing the accepted access device) is not 
validated at the time it is issued, and the institution complies 
with the other requirements of Sec.  1005.5(b). The institution may, 
if it chooses, set up the validation procedure such that both the 
device replacing the previously issued device and the additional 
device are not validated at the time they are issued, and validation 
will apply to both devices. If the institution sets up the 
validation procedure in this way, the institution should provide a 
clear and readily understandable disclosure to the consumer that 
both devices are unvalidated and that validation will apply to both 
devices.

Section 1005.6 Liability of Consumer for Unauthorized Transfers

6(a) Conditions for Liability

    1. Means of identification. A financial institution may use 
various means for identifying the consumer to whom the access device 
is issued, including but not limited to:
    i. Electronic or mechanical confirmation (such as a PIN).
    ii. Comparison of the consumer's signature, fingerprint, or 
photograph.
    2. Multiple users. When more than one access device is issued 
for an account, the financial institution may, but need not, provide 
a separate means to identify each user of the account.

6(b) Limitations on Amount of Liability

    1. Application of liability provisions. There are three possible 
tiers of consumer liability for unauthorized EFTs depending on the 
situation. A consumer may be liable for: (1) up to $50; (2) up to 
$500; or (3) an unlimited amount depending on when the unauthorized 
EFT occurs. More than one tier may apply to a given situation 
because each corresponds to a different (sometimes overlapping) time 
period or set of conditions.
    2. Consumer negligence. Negligence by the consumer cannot be 
used as the basis for imposing greater liability than is permissible 
under Regulation E. Thus, consumer behavior that may constitute 
negligence under state law, such as writing the PIN on a debit card 
or on a piece of paper kept with the card, does not affect the 
consumer's liability for unauthorized transfers. (However, refer to 
comment 2(m)-2 regarding termination of the authority of given by 
the consumer to another person.)
    3. Limits on liability. The extent of the consumer's liability 
is determined solely by the consumer's promptness in reporting the 
loss or theft of an access device. Similarly, no agreement between 
the consumer and an institution may impose greater liability on the 
consumer for an unauthorized transfer than the limits provided in 
Regulation E.

6(b)(1) Timely Notice Given

    1. $50 limit applies. The basic liability limit is $50. For 
example, the consumer's card is lost or stolen on Monday and the 
consumer learns of the loss or theft on Wednesday. If the consumer 
notifies the financial institution within two business days of 
learning of the loss or theft (by midnight Friday), the consumer's 
liability is limited to $50 or the amount of the unauthorized 
transfers that occurred before notification, whichever is less.
    2. Knowledge of loss or theft of access device. The fact that a 
consumer has received a periodic statement that reflects 
unauthorized transfers may be a factor in determining whether the 
consumer had knowledge of the loss or theft, but cannot be deemed to 
represent conclusive evidence that the consumer had such knowledge.
    3. Two business day rule. The two business day period does not 
include the day the consumer learns of the loss or theft or any day 
that is not a business day. The rule is calculated based on two 24-
hour periods, without regard to the financial institution's business 
hours or the time of day that the consumer learns of the loss or 
theft. For example, a consumer learns of the loss or theft at 6 p.m. 
on Friday. Assuming that Saturday is a business day and Sunday is 
not, the two business day period begins on Saturday and expires at 
11:59 p.m. on Monday, not at the end of the financial institution's 
business day on Monday.

6(b)(2) Timely Notice Not Given

    1. $500 limit applies. The second tier of liability is $500. For 
example, the consumer's card is stolen on Monday and the consumer 
learns of the theft that same day. The consumer reports the theft on 
Friday. The $500 limit applies because the consumer failed to notify 
the financial institution

[[Page 81042]]

within two business days of learning of the theft (which would have 
been by midnight Wednesday). How much the consumer is actually 
liable for, however, depends on when the unauthorized transfers take 
place. In this example, assume a $100 unauthorized transfer was made 
on Tuesday and a $600 unauthorized transfer on Thursday. Because the 
consumer is liable for the amount of the loss that occurs within the 
first two business days (but no more than $50), plus the amount of 
the unauthorized transfers that occurs after the first two business 
days and before the consumer gives notice, the consumer's total 
liability is $500 ($50 of the $100 transfer plus $450 of the $600 
transfer, in this example). But if $600 was taken on Tuesday and 
$100 on Thursday, the consumer's maximum liability would be $150 
($50 of the $600 plus $100).

6(b)(3) Periodic Statement; Timely Notice Not Given

    1. Unlimited liability applies. The standard of unlimited 
liability applies if unauthorized transfers appear on a periodic 
statement, and may apply in conjunction with the first two tiers of 
liability. If a periodic statement shows an unauthorized transfer 
made with a lost or stolen debit card, the consumer must notify the 
financial institution within 60 calendar days after the periodic 
statement was sent; otherwise, the consumer faces unlimited 
liability for all unauthorized transfers made after the 60-day 
period. The consumer's liability for unauthorized transfers before 
the statement is sent, and up to 60 days following, is determined 
based on the first two tiers of liability: up to $50 if the consumer 
notifies the financial institution within two business days of 
learning of the loss or theft of the card and up to $500 if the 
consumer notifies the institution after two business days of 
learning of the loss or theft.
    2. Transfers not involving access device. The first two tiers of 
liability do not apply to unauthorized transfers from a consumer's 
account made without an access device. If, however, the consumer 
fails to report such unauthorized transfers within 60 calendar days 
of the financial institution's transmittal of the periodic 
statement, the consumer may be liable for any transfers occurring 
after the close of the 60 days and before notice is given to the 
institution. For example, a consumer's account is electronically 
debited for $200 without the consumer's authorization and by means 
other than the consumer's access device. If the consumer notifies 
the institution within 60 days of the transmittal of the periodic 
statement that shows the unauthorized transfer, the consumer has no 
liability. However, if in addition to the $200, the consumer's 
account is debited for a $400 unauthorized transfer on the 61st day 
and the consumer fails to notify the institution of the first 
unauthorized transfer until the 62nd day, the consumer may be liable 
for the full $400.

6(b)(4) Extension of Time Limits

    1. Extenuating circumstances. Examples of circumstances that 
require extension of the notification periods under this section 
include the consumer's extended travel or hospitalization.

6(b)(5) Notice to Financial Institution

    1. Receipt of notice. A financial institution is considered to 
have received notice for purposes of limiting the consumer's 
liability if notice is given in a reasonable manner, even if the 
consumer notifies the institution but uses an address or telephone 
number other than the one specified by the institution.
    2. Notice by third party. Notice to a financial institution by a 
person acting on the consumer's behalf is considered valid under 
this section. For example, if a consumer is hospitalized and unable 
to report the loss or theft of an access device, notice is 
considered given when someone acting on the consumer's behalf 
notifies the bank of the loss or theft. A financial institution may 
require appropriate documentation from the person representing the 
consumer to establish that the person is acting on the consumer's 
behalf.
    3. Content of notice. Notice to a financial institution is 
considered given when a consumer takes reasonable steps to provide 
the institution with the pertinent account information. Even when 
the consumer is unable to provide the account number or the card 
number in reporting a lost or stolen access device or an 
unauthorized transfer, the notice effectively limits the consumer's 
liability if the consumer otherwise identifies sufficiently the 
account in question. For example, the consumer may identify the 
account by the name on the account and the type of account in 
question.

Section 1005.7 Initial Disclosures

7(a) Timing of Disclosures

    1. Early disclosures. Disclosures given by a financial 
institution earlier than the regulation requires (for example, when 
the consumer opens a checking account) need not be repeated when the 
consumer later enters into an agreement with a third party to 
initiate preauthorized transfers to or from the consumer's account, 
unless the terms and conditions differ from those that the 
institution previously disclosed. This interpretation also applies 
to any notice provided about one-time EFTs from a consumer's account 
initiated using information from the consumer's check. On the other 
hand, if an agreement for EFT services to be provided by an account-
holding institution is directly between the consumer and the 
account-holding institution, disclosures must be given in close 
proximity to the event requiring disclosure, for example, when the 
consumer contracts for a new service.
    2. Lack of advance notice of a transfer. Where a consumer 
authorizes a third party to debit or credit the consumer's account, 
an account-holding institution that has not received advance notice 
of the transfer or transfers must provide the required disclosures 
as soon as reasonably possible after the first debit or credit is 
made, unless the institution has previously given the disclosures.
    3. Addition of new accounts. If a consumer opens a new account 
permitting EFTs at a financial institution, and the consumer already 
has received Regulation E disclosures for another account at that 
institution, the institution need only disclose terms and conditions 
that differ from those previously given.
    4. Addition of service in interchange systems. If a financial 
institution joins an interchange or shared network system (which 
provides access to terminals operated by other institutions), 
disclosures are required for additional EFT services not previously 
available to consumers if the terms and conditions differ from those 
previously disclosed.
    5. Disclosures covering all EFT services offered. An institution 
may provide disclosures covering all EFT services that it offers, 
even if some consumers have not arranged to use all services.

7(b) Content of Disclosures

7(b)(1) Liability of Consumer

    1. No liability imposed by financial institution. If a financial 
institution chooses to impose zero liability for unauthorized EFTs, 
it need not provide the liability disclosures. If the institution 
later decides to impose liability, however, it must first provide 
the disclosures.
    2. Preauthorized transfers. If the only EFTs from an account are 
preauthorized transfers, liability could arise if the consumer fails 
to report unauthorized transfers reflected on a periodic statement. 
To impose such liability on the consumer, the institution must have 
disclosed the potential liability and the telephone number and 
address for reporting unauthorized transfers.
    3. Additional information. At the institution's option, the 
summary of the consumer's liability may include advice on promptly 
reporting unauthorized transfers or the loss or theft of the access 
device.

7(b)(2) Telephone Number and Address

    1. Disclosure of telephone numbers. An institution may use the 
same or different telephone numbers in the disclosures for the 
purpose of:
    i. Reporting the loss or theft of an access device or possible 
unauthorized transfers;
    ii. Inquiring about the receipt of a preauthorized credit;
    iii. Stopping payment of a preauthorized debit;
    iv. Giving notice of an error.
    2. Location of telephone number. The telephone number need not 
be incorporated into the text of the disclosure; for example, the 
institution may instead insert a reference to a telephone number 
that is readily available to the consumer, such as ``Call your 
branch office. The number is shown on your periodic statement.'' 
However, an institution must provide a specific telephone number and 
address, on or with the disclosure statement, for reporting a lost 
or stolen access device or a possible unauthorized transfer.

7(b)(4) Types of Transfers; Limitations

    1. Security limitations. Information about limitations on the 
frequency and dollar amount of transfers generally must be disclosed 
in detail, even if related to security aspects of the system. If the 
confidentiality of certain details is essential to the security of 
an account or system, these details may be

[[Page 81043]]

withheld (but the fact that limitations exist must still be 
disclosed). For example, an institution limits cash ATM withdrawals 
to $100 per day. The institution may disclose that daily withdrawal 
limitations apply and need not disclose that the limitations may not 
always be in force (such as during periods when its ATMs are off-
line).
    2. Restrictions on certain deposit accounts. A limitation on 
account activity that restricts the consumer's ability to make EFTs 
must be disclosed even if the restriction also applies to transfers 
made by non-electronic means. For example, Regulation D of the Board 
of Governors of the Federal Reserve System (12 CFR Part 204) 
restricts the number of payments to third parties that may be made 
from a money market deposit account; an institution that does not 
execute fund transfers in excess of those limits must disclose the 
restriction as a limitation on the frequency of EFTs.
    3. Preauthorized transfers. Financial institutions are not 
required to list preauthorized transfers among the types of 
transfers that a consumer can make.
    4. One-time EFTs initiated using information from a check. 
Financial institutions must disclose the fact that one-time EFTs 
initiated using information from a consumer's check are among the 
types of transfers that a consumer can make. See Appendix A-2.

7(b)(5) Fees

    1. Disclosure of EFT fees. An institution is required to 
disclose all fees for EFTs or the right to make them. Others fees 
(for example, minimum-balance fees, stop-payment fees, or account 
overdrafts) may, but need not, be disclosed. But see Regulation DD, 
12 CFR Part 1030. An institution is not required to disclose fees 
for inquiries made at an ATM since no transfer of funds is involved.
    2. Fees also applicable to non-EFT. A per-item fee for EFTs must 
be disclosed even if the same fee is imposed on non-electronic 
transfers. If a per-item fee is imposed only under certain 
conditions, such as when the transactions in the cycle exceed a 
certain number, those conditions must be disclosed. Itemization of 
the various fees may be provided on the disclosure statement or on 
an accompanying document that is referenced in the statement.
    3. Interchange system fees. Fees paid by the account-holding 
institution to the operator of a shared or interchange ATM system 
need not be disclosed, unless they are imposed on the consumer by 
the account-holding institution. Fees for use of an ATM that are 
debited directly from the consumer's account by an institution other 
than the account-holding institution (for example, fees included in 
the transfer amount) need not be disclosed. See Sec.  1005.7(b)(11) 
for the general notice requirement regarding fees that may be 
imposed by ATM operators and by a network used to complete the 
transfer.

7(b)(9) Confidentiality

    1. Information provided to third parties. An institution must 
describe the circumstances under which any information relating to 
an account to or from which EFTs are permitted will be made 
available to third parties, not just information concerning those 
EFTs. The term ``third parties'' includes affiliates such as other 
subsidiaries of the same holding company.

7(b)(10) Error Resolution

    1. Substantially similar. The error resolution notice must be 
substantially similar to the model form in Appendix A of part 1005. 
An institution may use different wording so long as the substance of 
the notice remains the same, may delete inapplicable provisions (for 
example, the requirement for written confirmation of an oral 
notification), and may substitute substantive state law requirements 
affording greater consumer protection than Regulation E.
    2. Extended time-period for certain transactions. To take 
advantage of the longer time periods for resolving errors under 
Sec.  1005.11(c)(3) (for new accounts as defined in Regulation CC of 
the Board of Governors of the Federal Reserve System (12 CFR part 
229), transfers initiated outside the United States, or transfers 
resulting from POS debit-card transactions), a financial institution 
must have disclosed these longer time periods. Similarly, an 
institution that relies on the exception from provisional crediting 
in Sec.  1005.11(c)(2) for accounts subject to Regulation T of the 
Board of Governors of the Federal Reserve System (12 CFR part 220) 
must have disclosed accordingly.

7(c) Addition of Electronic Fund Transfer Services

    1. Addition of electronic check conversion services. One-time 
EFTs initiated using information from a consumer's check are a new 
type of transfer requiring new disclosures, as applicable. See 
Appendix A-2.

Section 1005.8 Change-in-Terms Notice; Error Resolution Notice

8(a) Change-in-Terms Notice

    1. Form of notice. No specific form or wording is required for a 
change-in-terms notice. The notice may appear on a periodic 
statement, or may be given by sending a copy of a revised disclosure 
statement, provided attention is directed to the change (for 
example, in a cover letter referencing the changed term).
    2. Changes not requiring notice. The following changes do not 
require disclosure:
    i. Closing some of an institution's ATMs;
    ii. Cancellation of an access device.
    3. Limitations on transfers. When the initial disclosures omit 
details about limitations because secrecy is essential to the 
security of the account or system, a subsequent increase in those 
limitations need not be disclosed if secrecy is still essential. If, 
however, an institution had no limits in place when the initial 
disclosures were given and now wishes to impose limits for the first 
time, it must disclose at least the fact that limits have been 
adopted. See also Sec.  1005.7(b)(4) and the related commentary.
    4. Change in telephone number or address. When a financial 
institution changes the telephone number or address used for 
reporting possible unauthorized transfers, a change-in-terms notice 
is required only if the institution will impose liability on the 
consumer for unauthorized transfers under Sec.  1005.6. See also 
Sec.  1005.6(a) and the related commentary.

8(b) Error Resolution Notice

    1. Change between annual and periodic notice. If an institution 
switches from an annual to a periodic notice, or vice versa, the 
first notice under the new method must be sent no later than 12 
months after the last notice sent under the old method.
    2. Exception for new accounts. For new accounts, disclosure of 
the longer error resolution time periods under Sec.  1005.11(c)(3) 
is not required in the annual error resolution notice or in the 
notice that may be provided with each periodic statement as an 
alternative to the annual notice.

Section 1005.9 Receipts at Electronic Terminals; Periodic Statements

9(a) Receipts at Electronic Terminals

    1. Receipts furnished only on request. The regulation requires 
that a receipt be ``made available.'' A financial institution may 
program its electronic terminals to provide a receipt only to 
consumers who elect to receive one.
    2. Third party providing receipt. An account-holding institution 
may make terminal receipts available through third parties such as 
merchants or other financial institutions.
    3. Inclusion of promotional material. A financial institution 
may include promotional material on receipts if the required 
information is set forth clearly (for example, by separating it from 
the promotional material). In addition, a consumer may not be 
required to surrender the receipt or that portion containing the 
required disclosures in order to take advantage of a promotion.
    4. Transfer not completed. The receipt requirement does not 
apply to a transfer that is initiated but not completed (for 
example, if the ATM is out of currency or the consumer decides not 
to complete the transfer).
    5. Receipts not furnished due to inadvertent error. If a receipt 
is not provided to the consumer because of a bona fide unintentional 
error, such as when a terminal runs out of paper or the mechanism 
jams, no violation results if the financial institution maintains 
procedures reasonably adapted to avoid such occurrences.
    6. Multiple transfers. If the consumer makes multiple transfers 
at the same time, the financial institution may document them on a 
single or on separate receipts.

9(a)(1) Amount

    1. Disclosure of transaction fee. The required display of a fee 
amount on or at the terminal may be accomplished by displaying the 
fee on a sign at the terminal or on the terminal screen for a 
reasonable duration. Displaying the fee on a screen provides 
adequate notice, as long as a consumer is given the option to cancel 
the transaction after receiving notice of a fee. See Sec.  1005.16 
for the notice requirements applicable to ATM operators that impose 
a fee for providing EFT services.

[[Page 81044]]

    2. Relationship between Sec.  1005.9(a)(1) and Sec.  1005.16. 
The requirements of Sec. Sec.  1005.9(a)(1) and 1005.16 are similar 
but not identical.
    i. Section 1005.9(a)(1) requires that if the amount of the 
transfer as shown on the receipt will include the fee, then the fee 
must be disclosed either on a sign on or at the terminal, or on the 
terminal screen. Section 1005.16 requires disclosure both on a sign 
on or at the terminal (in a prominent and conspicuous location) and 
on the terminal screen. Section 1005.16 permits disclosure on a 
paper notice as an alternative to the on-screen disclosure.
    ii. The disclosure of the fee on the receipt under Sec.  
1005.9(a)(1) cannot be used to comply with the alternative paper 
disclosure procedure under Sec.  1005.16, if the receipt is provided 
at the completion of the transaction because, pursuant to the 
statute, the paper notice must be provided before the consumer is 
committed to paying the fee.
    iii. Section 1005.9(a)(1) applies to any type of electronic 
terminal as defined in Regulation E (for example, to POS terminals 
as well as to ATMs), while Sec.  1005.16 applies only to ATMs.

9(a)(2) Date

    1. Calendar date. The receipt must disclose the calendar date on 
which the consumer uses the electronic terminal. An accounting or 
business date may be disclosed in addition if the dates are clearly 
distinguished.

9(a)(3) Type

    1. Identifying transfer and account. Examples identifying the 
type of transfer and the type of the consumer's account include 
``withdrawal from checking,'' ``transfer from savings to checking,'' 
or ``payment from savings.''
    2. Exception. Identification of an account is not required when 
the consumer can access only one asset account at a particular time 
or terminal, even if the access device can normally be used to 
access more than one account. For example, the consumer may be able 
to access only one particular account at terminals not operated by 
the account-holding institution, or may be able to access only one 
particular account when the terminal is off-line. The exception is 
available even if, in addition to accessing one asset account, the 
consumer also can access a credit line.
    3. Access to multiple accounts. If the consumer can use an 
access device to make transfers to or from different accounts of the 
same type, the terminal receipt must specify which account was 
accessed, such as ``withdrawal from checking I'' or ``withdrawal 
from checking II.'' If only one account besides the primary checking 
account can be debited, the receipt can identify the account as 
``withdrawal from other account.''
    4. Generic descriptions. Generic descriptions may be used for 
accounts that are similar in function, such as share draft or NOW 
accounts and checking accounts. In a shared system, for example, 
when a credit union member initiates transfers to or from a share 
draft account at a terminal owned or operated by a bank, the receipt 
may identify a withdrawal from the account as a ``withdrawal from 
checking.''
    5. Point-of-sale transactions. There is no prescribed 
terminology for identifying a transfer at a merchant's POS terminal. 
A transfer may be identified, for example, as a purchase, a sale of 
goods or services, or a payment to a third party. When a consumer 
obtains cash from a POS terminal in addition to purchasing goods, or 
obtains cash only, the documentation need not differentiate the 
transaction from one involving the purchase of goods.

9(a)(5) Terminal Location

    1. Options for identifying terminal. The institution may provide 
either:
    i. The city, state or foreign country, and the information in 
Sec.  1005.9(a)(5) (i), (ii), or (iii), or
    ii. A number or a code identifying the terminal. If the 
institution chooses the second option, the code or terminal number 
identifying the terminal where the transfer is initiated may be 
given as part of a transaction code.
    2. Omission of city name. The city may be omitted if the 
generally accepted name (such as a branch name) contains the city 
name.
    3. Omission of a state. A state may be omitted from the location 
information on the receipt if:
    i. All the terminals owned or operated by the financial 
institution providing the statement (or by the system in which it 
participates) are located in that state, or
    ii. All transfers occur at terminals located within 50 miles of 
the financial institution's main office.
    4. Omission of a city and state. A city and state may be omitted 
if all the terminals owned or operated by the financial institution 
providing the statement (or by the system in which it participates) 
are located in the same city.

Paragraph 9(a)(5)(i)

    1. Street address. The address should include number and street 
(or intersection); the number (or intersecting street) may be 
omitted if the street alone uniquely identifies the terminal 
location.

Paragraph 9(a)(5)(ii)

    1. Generally accepted name. Examples of a generally accepted 
name for a specific location include a branch of the financial 
institution, a shopping center, or an airport.

Paragraph 9(a)(5)(iii)

    1. Name of owner or operator of terminal. Examples of an owner 
or operator of a terminal are a financial institution or a retail 
merchant.

9(a)(6) Third Party Transfer

    1. Omission of third-party name. The receipt need not disclose 
the third-party name if the name is provided by the consumer in a 
form that is not machine readable (for example, if the consumer 
indicates the payee by depositing a payment stub into the ATM). If, 
on the other hand, the consumer keys in the identity of the payee, 
the receipt must identify the payee by name or by using a code that 
is explained elsewhere on the receipt.
    2. Receipt as proof of payment. Documentation required under the 
regulation constitutes prima facie proof of a payment to another 
person, except in the case of a terminal receipt documenting a 
deposit.

9(b) Periodic Statements

    1. Periodic cycles. Periodic statements may be sent on a cycle 
that is shorter than monthly. The statements must correspond to 
periodic cycles that are reasonably equal, that is, do not vary by 
more than four days from the regular cycle. The requirement of 
reasonably equal cycles does not apply when an institution changes 
cycles for operational or other reasons, such as to establish a new 
statement day or date.
    2. Interim statements. Generally, a financial institution must 
provide periodic statements for each monthly cycle in which an EFT 
occurs, and at least quarterly if a transfer has not occurred. Where 
EFTs occur between regularly-scheduled cycles, interim statements 
must be provided. For example, if an institution issues quarterly 
statements at the end of March, June, September and December, and 
the consumer initiates an EFT in February, an interim statement for 
February must be provided. If an interim statement contains interest 
or rate information, the institution must comply with Regulation DD, 
12 CFR 1030.6.
    3. Inactive accounts. A financial institution need not send 
statements to consumers whose accounts are inactive as defined by 
the institution.
    4. Statement pickup. A financial institution may permit, but may 
not require, consumers to pick up their periodic statements at the 
financial institution.
    5. Periodic statements limited to EFT activity. A financial 
institution that uses a passbook as the primary means for displaying 
account activity, but also allows the account to be debited 
electronically, may provide a periodic statement requirement that 
reflects only the EFTs and other required disclosures (such as 
charges, account balances, and address and telephone number for 
inquiries). See Sec.  1005.9(c)(1)(i) for the exception applicable 
to preauthorized transfers for passbook accounts.
    6. Codes and accompanying documents. To meet the documentation 
requirements for periodic statements, a financial institution may:
    i. Include copies of terminal receipts to reflect transfers 
initiated by the consumer at electronic terminals;
    ii. Enclose posting memos, deposit slips, and other documents 
that, together with the statement, disclose all the required 
information;
    iii. Use codes for names of third parties or terminal locations 
and explain the information to which the codes relate on an 
accompanying document.

9(b)(1) Transaction Information

    1. Information obtained from others. While financial 
institutions must maintain reasonable procedures to ensure the 
integrity of data obtained from another institution, a merchant, or 
other third parties, verification of each transfer that appears on 
the periodic statement is not required.

[[Page 81045]]

Paragraph 9(b)(1)(i)

    1. Incorrect deposit amount. If a financial institution 
determines that the amount actually deposited at an ATM is different 
from the amount entered by the consumer, the institution need not 
immediately notify the consumer of the discrepancy. The periodic 
statement reflecting the deposit may show either the correct amount 
of the deposit or the amount entered by the consumer along with the 
institution's adjustment.

Paragraph 9(b)(1)(iii)

    1. Type of transfer. There is no prescribed terminology for 
describing a type of transfer. Placement of the amount of the 
transfer in the debit or the credit column is sufficient if other 
information on the statement, such as a terminal location or third-
party name, enables the consumer to identify the type of transfer.

Paragraph 9(b)(1)(iv)

    1. Nonproprietary terminal in network. An institution need not 
reflect on the periodic statement the street addresses, 
identification codes, or terminal numbers for transfers initiated in 
a shared or interchange system at a terminal operated by an 
institution other than the account-holding institution. The 
statement must, however, specify the entity that owns or operates 
the terminal, plus the city and state.

Paragraph 9(b)(1)(v)

    1. Recurring payments by government agency. The third-party name 
for recurring payments from Federal, state, or local governments 
need not list the particular agency. For example, ``U.S. gov't'' or 
``N.Y. sal'' will suffice.
    2. Consumer as third-party payee. If a consumer makes an 
electronic fund transfer to another consumer, the financial 
institution must identify the recipient by name (not just by an 
account number, for example).
    3. Terminal location/third party. A single entry may be used to 
identify both the terminal location and the name of the third party 
to or from whom funds are transferred. For example, if a consumer 
purchases goods from a merchant, the name of the party to whom funds 
are transferred (the merchant) and the location of the terminal 
where the transfer is initiated will be satisfied by a disclosure 
such as ``XYZ Store, Anytown, Ohio.''
    4. Account-holding institution as third party. Transfers to the 
account-holding institution (by ATM, for example) must show the 
institution as the recipient, unless other information on the 
statement (such as, ``loan payment from checking'') clearly 
indicates that the payment was to the account-holding institution.
    5. Consistency in third-party identity. The periodic statement 
must disclose a third-party name as it appeared on the receipt, 
whether it was, for example, the ``dba'' (doing business as) name of 
the third party or the parent corporation's name.
    6. Third-party identity on deposits at electronic terminal. A 
financial institution need not identify third parties whose names 
appear on checks, drafts, or similar paper instruments deposited to 
the consumer's account at an electronic terminal.

9(b)(3) Fees

    1. Disclosure of fees. The fees disclosed may include fees for 
EFTs and for other non-electronic services, and both fixed fees and 
per-item fees; they may be given as a total or may be itemized in 
part or in full.
    2. Fees in interchange system. An account-holding institution 
must disclose any fees it imposes on the consumer for EFTs, 
including fees for ATM transactions in an interchange or shared ATM 
system. Fees for use of an ATM imposed on the consumer by an 
institution other than the account-holding institution and included 
in the amount of the transfer by the terminal-operating institution 
need not be separately disclosed on the periodic statement.
    3. Finance charges. The requirement to disclose any fees 
assessed against the account does not include a finance charge 
imposed on the account during the statement period.

9(b)(4) Account Balances

    1. Opening and closing balances. The opening and closing 
balances must reflect both EFTs and other account activity.

9(b)(5) Address and Telephone Number for Inquiries

    1. Telephone number. A single telephone number, preceded by the 
``direct inquiries to'' language, will satisfy the requirements of 
Sec. Sec.  1005.9(b)(5) and (6).

9(b)(6) Telephone Number for Preauthorized Transfers

    1. Telephone number. See comment 9(b)(5)-1.

9(c) Exceptions to the Periodic Statement Requirements for Certain 
Accounts

    1. Transfers between accounts. The regulation provides an 
exception from the periodic statement requirement for certain intra-
institutional transfers between a consumer's accounts. The financial 
institution must still comply with the applicable periodic statement 
requirements for any other EFTs to or from the account. For example, 
a Regulation E statement must be provided quarterly for an account 
that also receives payroll deposits electronically, or for any month 
in which an account is also accessed by a withdrawal at an ATM.

9(c)(1) Preauthorized Transfers to Accounts

    1. Accounts that may be accessed only by preauthorized transfers 
to the account. The exception for ``accounts that may be accessed 
only by preauthorized transfers to the account'' includes accounts 
that can be accessed by means other than EFTs, such as checks. If, 
however, an account may be accessed by any EFT other than 
preauthorized credits to the account, such as preauthorized debits 
or ATM transactions, the account does not qualify for the exception.
    2. Reversal of direct deposits. For direct-deposit-only 
accounts, a financial institution must send a periodic statement at 
least quarterly. A reversal of a direct deposit to correct an error 
does not trigger the monthly statement requirement when the error 
represented a credit to the wrong consumer's account, a duplicate 
credit, or a credit in the wrong amount. See also comment 2(m)-5.

9(d) Documentation for Foreign-Initiated Transfers

    1. Foreign-initiated transfers. An institution must make a good 
faith effort to provide all required information for foreign-
initiated transfers. For example, even if the institution is not 
able to provide a specific terminal location, it should identify the 
country and city in which the transfer was initiated.

Section 1005.10 Preauthorized Transfers

10(a) Preauthorized Transfers to Consumer's Account

10(a)(1) Notice by Financial Institution

    1. Content. No specific language is required for notice 
regarding receipt of a preauthorized transfer. Identifying the 
deposit is sufficient; however, simply providing the current account 
balance is not.
    2. Notice of credit. A financial institution may use different 
methods of notice for various types or series of preauthorized 
transfers, and the institution need not offer consumers a choice of 
notice methods.
    3. Positive notice. A periodic statement sent within two 
business days of the scheduled transfer, showing the transfer, can 
serve as notice of receipt.
    4. Negative notice. The absence of a deposit entry (on a 
periodic statement sent within two business days of the scheduled 
transfer date) will serve as negative notice.
    5. Telephone notice. If a financial institution uses the 
telephone notice option, the institution should be able in most 
instances to verify during a consumer's initial call whether a 
transfer was received. The institution must respond within two 
business days to any inquiry not answered immediately.
    6. Phone number for passbook accounts. The financial institution 
may use any reasonable means necessary to provide the telephone 
number to consumers with passbook accounts that can only be accessed 
by preauthorized credits and that do not receive periodic 
statements. For example, it may print the telephone number in the 
passbook, or include the number with the annual error resolution 
notice.
    7. Telephone line availability. To satisfy the readily-available 
standard, the financial institution must provide enough telephone 
lines so that consumers get a reasonably prompt response. The 
institution need only provide telephone service during normal 
business hours. Within its primary service area, an institution must 
provide a local or toll-free telephone number. It need not provide a 
toll-free number or accept collect long-distance calls from outside 
the area where it normally conducts business.

10(b) Written Authorization for Preauthorized Transfers From 
Consumer's Account

    1. Preexisting authorizations. The financial institution need 
not require a new authorization before changing from paper-based to 
electronic debiting when the existing authorization does not specify 
that debiting is to occur electronically or specifies that the 
debiting will occur by paper means. A new authorization also is not 
required

[[Page 81046]]

when a successor institution begins collecting payments.
    2. Authorization obtained by third party. The account-holding 
financial institution does not violate the regulation when a third-
party payee fails to obtain the authorization in writing or fails to 
give a copy to the consumer; rather, it is the third-party payee 
that is in violation of the regulation.
    3. Written authorization for preauthorized transfers. The 
requirement that preauthorized EFTs be authorized by the consumer 
``only by a writing'' cannot be met by a payee's signing a written 
authorization on the consumer's behalf with only an oral 
authorization from the consumer.
    4. Use of a confirmation form. A financial institution or 
designated payee may comply with the requirements of this section in 
various ways. For example, a payee may provide the consumer with two 
copies of a preauthorization form, and ask the consumer to sign and 
return one and to retain the second copy.
    5. Similarly authenticated. The similarly authenticated standard 
permits signed, written authorizations to be provided 
electronically. The writing and signature requirements of this 
section are satisfied by complying with the Electronic Signatures in 
Global and National Commerce Act, 15 U.S.C. 7001 et seq., which 
defines electronic records and electronic signatures. Examples of 
electronic signatures include, but are not limited to, digital 
signatures and security codes. A security code need not originate 
with the account-holding institution. The authorization process 
should evidence the consumer's identity and assent to the 
authorization. The person that obtains the authorization must 
provide a copy of the terms of the authorization to the consumer 
either electronically or in paper form. Only the consumer may 
authorize the transfer and not, for example, a third-party merchant 
on behalf of the consumer.
    6. Requirements of an authorization. An authorization is valid 
if it is readily identifiable as such and the terms of the 
preauthorized transfer are clear and readily understandable.
    7. Bona fide error. Consumers sometimes authorize third-party 
payees, by telephone or online, to submit recurring charges against 
a credit card account. If the consumer indicates use of a credit 
card account when in fact a debit card is being used, the payee does 
not violate the requirement to obtain a written authorization if the 
failure to obtain written authorization was not intentional and 
resulted from a bona fide error, and if the payee maintains 
procedures reasonably adapted to avoid any such error. Procedures 
reasonably adapted to avoid error will depend upon the 
circumstances. Generally, requesting the consumer to specify whether 
the card to be used for the authorization is a debit (or check) card 
or a credit card is a reasonable procedure. Where the consumer has 
indicated that the card is a credit card (or that the card is not a 
debit or check card), the payee may rely on the consumer's statement 
without seeking further information about the type of card. If the 
payee believes, at the time of the authorization, that a credit card 
is involved, and later finds that the card used is a debit card (for 
example, because the consumer later brings the matter to the payee's 
attention), the payee must obtain a written and signed or (where 
appropriate) a similarly authenticated authorization as soon as 
reasonably possible, or cease debiting the consumer's account.

10(c) Consumer's Right to Stop Payment

    1. Stop-payment order. The financial institution must honor an 
oral stop-payment order made at least three business days before a 
scheduled debit. If the debit item is resubmitted, the institution 
must continue to honor the stop-payment order (for example, by 
suspending all subsequent payments to the payee-originator until the 
consumer notifies the institution that payments should resume).
    2. Revocation of authorization. Once a financial institution has 
been notified that the consumer's authorization is no longer valid, 
it must block all future payments for the particular debit 
transmitted by the designated payee-originator. But see comment 
10(c)-3. The institution may not wait for the payee-originator to 
terminate the automatic debits. The institution may confirm that the 
consumer has informed the payee-originator of the revocation (for 
example, by requiring a copy of the consumer's revocation as written 
confirmation to be provided within 14 days of an oral notification). 
If the institution does not receive the required written 
confirmation within the 14-day period, it may honor subsequent 
debits to the account.
    3. Alternative procedure for processing a stop-payment request. 
If an institution does not have the capability to block a 
preauthorized debit from being posted to the consumer's account--as 
in the case of a preauthorized debit made through a debit card 
network or other system, for example--the institution may instead 
comply with the stop-payment requirements by using a third party to 
block the transfer(s), as long as the consumer's account is not 
debited for the payment.

10(d) Notice of Transfers Varying in Amount

10(d)(1) Notice

    1. Preexisting authorizations. A financial institution holding 
the consumer's account does not violate the regulation if the 
designated payee fails to provide notice of varying amounts.

10(d)(2) Range

    1. Range. A financial institution or designated payee that 
elects to offer the consumer a specified range of amounts for 
debiting (in lieu of providing the notice of transfers varying in 
amount) must provide an acceptable range that could be anticipated 
by the consumer. For example, if the transfer is for payment of a 
gas bill, an appropriate range might be based on the highest bill in 
winter and the lowest bill in summer.
    2. Transfers to an account of the consumer held at another 
institution. A financial institution need not provide a consumer the 
option of receiving notice with each varying transfer, and may 
instead provide notice only when a debit to an account of the 
consumer falls outside a specified range or differs by more than a 
specified amount from the most recent transfer, if the funds are 
transferred and credited to an account of the consumer held at 
another financial institution. The specified range or amount, 
however, must be one that reasonably could be anticipated by the 
consumer, and the institution must notify the consumer of the range 
or amount at the time the consumer provides authorization for the 
preauthorized transfers. For example, if the transfer is for payment 
of interest for a fixed-rate certificate of deposit account, an 
appropriate range might be based on a month containing 28 days and a 
month containing 31 days.

10(e) Compulsory Use

10(e)(1) Credit

    1. Loan payments. Creditors may not require repayment of loans 
by electronic means on a preauthorized, recurring basis. A creditor 
may offer a program with a reduced annual percentage rate or other 
cost-related incentive for an automatic repayment feature, provided 
the program with the automatic payment feature is not the only loan 
program offered by the creditor for the type of credit involved. 
Examples include:
    i. Mortgages with graduated payments in which a pledged savings 
account is automatically debited during an initial period to 
supplement the monthly payments made by the borrower.
    ii. Mortgage plans calling for preauthorized biweekly payments 
that are debited electronically to the consumer's account and 
produce a lower total finance charge.
    2. Overdraft. A financial institution may require the automatic 
repayment of an overdraft credit plan even if the overdraft 
extension is charged to an open-end account that may be accessed by 
the consumer in ways other than by overdrafts.

10(e)(2) Employment or Government Benefit

    1. Payroll. An employer (including a financial institution) may 
not require its employees to receive their salary by direct deposit 
to any particular institution. An employer may require direct 
deposit of salary by electronic means if employees are allowed to 
choose the institution that will receive the direct deposit. 
Alternatively, an employer may give employees the choice of having 
their salary deposited at a particular institution (designated by 
the employer) or receiving their salary by another means, such as by 
check or cash.

Section 1005.11 Procedures for Resolving Errors

11(a) Definition of Error

    1. Terminal location. With regard to deposits at an ATM, a 
consumer's request for the terminal location or other information 
triggers the error resolution procedures, but the financial 
institution need only provide the ATM location if it has captured 
that information.
    2. Verifying an account debit or credit. If the consumer 
contacts the financial institution to ascertain whether a payment 
(for example, in a home-banking or bill-payment program) or any 
other type of EFT

[[Page 81047]]

was debited to the account, or whether a deposit made via ATM, 
preauthorized transfer, or any other type of EFT was credited to the 
account, without asserting an error, the error resolution procedures 
do not apply.
    3. Loss or theft of access device. A financial institution is 
required to comply with the error resolution procedures when a 
consumer reports the loss or theft of an access device if the 
consumer also alleges possible unauthorized use as a consequence of 
the loss or theft.
    4. Error asserted after account closed. The financial 
institution must comply with the error resolution procedures when a 
consumer properly asserts an error, even if the account has been 
closed.
    5. Request for documentation or information. A request for 
documentation or other information must be treated as an error 
unless it is clear that the consumer is requesting a duplicate copy 
for tax or other record-keeping purposes.
    6. Terminal receipts for transfers of $15 or less. The fact that 
an institution does not make a terminal receipt available for a 
transfer of $15 or less in accordance with Sec.  1005.9(e) is not an 
error for purposes of Sec.  1005.11(a)(1)(vi) or (vii).

11(b) Notice of Error From Consumer

11(b)(1) Timing; Contents

    1. Content of error notice. The notice of error is effective 
even if it does not contain the consumer's account number, so long 
as the financial institution is able to identify the account in 
question. For example, the consumer could provide a Social Security 
number or other unique means of identification.
    2. Investigation pending receipt of information. While a 
financial institution may request a written, signed statement from 
the consumer relating to a notice of error, it may not delay 
initiating or completing an investigation pending receipt of the 
statement.
    3. Statement held for consumer. When a consumer has arranged for 
periodic statements to be held until picked up, the statement for a 
particular cycle is deemed to have been transmitted on the date the 
financial institution first makes the statement available to the 
consumer.
    4. Failure to provide statement. When a financial institution 
fails to provide the consumer with a periodic statement, a request 
for a copy is governed by this section if the consumer gives notice 
within 60 days from the date on which the statement should have been 
transmitted.
    5. Discovery of error by institution. The error resolution 
procedures of this section apply when a notice of error is received 
from the consumer, and not when the financial institution itself 
discovers and corrects an error.
    6. Notice at particular phone number or address. A financial 
institution may require the consumer to give notice only at the 
telephone number or address disclosed by the institution, provided 
the institution maintains reasonable procedures to refer the 
consumer to the specified telephone number or address if the 
consumer attempts to give notice to the institution in a different 
manner.
    7. Effect of late notice. An institution is not required to 
comply with the requirements of this section for any notice of error 
from the consumer that is received by the institution later than 60 
days from the date on which the periodic statement first reflecting 
the error is sent. Where the consumer's assertion of error involves 
an unauthorized EFT, however, the institution must comply with Sec.  
1005.6 before it may impose any liability on the consumer.

11(b)(2) Written Confirmation

    1. Written confirmation-of-error notice. If the consumer sends a 
written confirmation of error to the wrong address, the financial 
institution must process the confirmation through normal procedures. 
But the institution need not provisionally credit the consumer's 
account if the written confirmation is delayed beyond 10 business 
days in getting to the right place because it was sent to the wrong 
address.

11(c) Time Limits and Extent of Investigation

    1. Notice to consumer. Unless otherwise indicated in this 
section, the financial institution may provide the required notices 
to the consumer either orally or in writing.
    2. Written confirmation of oral notice. A financial institution 
must begin its investigation promptly upon receipt of an oral 
notice. It may not delay until it has received a written 
confirmation.
    3. Charges for error resolution. If a billing error occurred, 
whether as alleged or in a different amount or manner, the financial 
institution may not impose a charge related to any aspect of the 
error-resolution process (including charges for documentation or 
investigation). Since the Act grants the consumer error-resolution 
rights, the institution should avoid any chilling effect on the 
good-faith assertion of errors that might result if charges are 
assessed when no billing error has occurred.
    4. Correction without investigation. A financial institution may 
make, without investigation, a final correction to a consumer's 
account in the amount or manner alleged by the consumer to be in 
error, but must comply with all other applicable requirements of 
Sec.  1005.11.
    5. Correction notice. A financial institution may include the 
notice of correction on a periodic statement that is mailed or 
delivered within the 10-business-day or 45-calendar-day time limits 
and that clearly identifies the correction to the consumer's 
account. The institution must determine whether such a mailing will 
be prompt enough to satisfy the requirements of this section, taking 
into account the specific facts involved.
    6. Correction of an error. If the financial institution 
determines an error occurred, within either the 10-day or 45-day 
period, it must correct the error (subject to the liability 
provisions of Sec. Sec.  1005.6(a) and (b)) including, where 
applicable, the crediting of interest and the refunding of any fees 
imposed by the institution. In a combined credit/EFT transaction, 
for example, the institution must refund any finance charges 
incurred as a result of the error. The institution need not refund 
fees that would have been imposed whether or not the error occurred.
    7. Extent of required investigation. A financial institution 
complies with its duty to investigate, correct, and report its 
determination regarding an error described in Sec.  
1005.11(a)(1)(vii) by transmitting the requested information, 
clarification, or documentation within the time limits set forth in 
Sec.  1005.11(c). If the institution has provisionally credited the 
consumer's account in accordance with Sec.  1005.11(c)(2), it may 
debit the amount upon transmitting the requested information, 
clarification, or documentation.

Paragraph 11(c)(2)(i)

    1. Compliance with all requirements. Financial institutions 
exempted from provisionally crediting a consumer's account under 
Sec. Sec.  1005.11(c)(2)(i)(A) and (B) must still comply with all 
other requirements of Sec.  1005.11.

11(c)(3) Extension of Time Periods

    1. POS debit card transactions. The extended deadlines for 
investigating errors resulting from POS debit card transactions 
apply to all debit card transactions, including those for cash only, 
at merchants' POS terminals, and also including mail and telephone 
orders. The deadlines do not apply to transactions at an ATM, 
however, even though the ATM may be in a merchant location.

11(c)(4) Investigation

    1. Third parties. When information or documentation requested by 
the consumer is in the possession of a third party with whom the 
financial institution does not have an agreement, the institution 
satisfies the error resolution requirement by so advising the 
consumer within the specified time period.
    2. Scope of investigation. When an alleged error involves a 
payment to a third party under the financial institution's telephone 
bill-payment plan, a review of the institution's own records is 
sufficient, assuming no agreement exists between the institution and 
the third party concerning the bill-payment service.
    3. POS transfers. When a consumer alleges an error involving a 
transfer to a merchant via a POS terminal, the institution must 
verify the information previously transmitted when executing the 
transfer. For example, the financial institution may request a copy 
of the sales receipt to verify that the amount of the transfer 
correctly corresponds to the amount of the consumer's purchase.
    4. Agreement. An agreement that a third party will honor an 
access device is an agreement for purposes of this paragraph. A 
financial institution does not have an agreement for purposes of 
Sec.  1005.11(c)(4)(ii) solely because it participates in 
transactions that occur under the Federal recurring payments 
programs, or that are cleared through an ACH or similar arrangement 
for the clearing and settlement of fund transfers generally, or 
because the institution agrees to be bound by the rules of such an 
arrangement.
    5. No EFT agreement. When there is no agreement between the 
institution and the third party for the type of EFT involved, the 
financial institution must review any relevant information within 
the institution's

[[Page 81048]]

own records for the particular account to resolve the consumer's 
claim. The extent of the investigation required may vary depending 
on the facts and circumstances. However, a financial institution may 
not limit its investigation solely to the payment instructions where 
additional information within its own records pertaining to the 
particular account in question could help to resolve a consumer's 
claim. Information that may be reviewed as part of an investigation 
might include:
    i. The ACH transaction records for the transfer;
    ii. The transaction history of the particular account for a 
reasonable period of time immediately preceding the allegation of 
error;
    iii. Whether the check number of the transaction in question is 
notably out-of-sequence;
    iv. The location of either the transaction or the payee in 
question relative to the consumer's place of residence and habitual 
transaction area;
    v. Information relative to the account in question within the 
control of the institution's third-party service providers if the 
financial institution reasonably believes that it may have records 
or other information that could be dispositive; or
    vi. Any other information appropriate to resolve the claim.

11(d) Procedures if Financial Institution Determines No Error or 
Different Error Occurred

    1. Error different from that alleged. When a financial 
institution determines that an error occurred in a manner or amount 
different from that described by the consumer, it must comply with 
the requirements of both Sec. Sec.  1005.11(c) and (d), as relevant. 
The institution may give the notice of correction and the 
explanation separately or in a combined form.

11(d)(1) Written Explanation

    1. Request for documentation. When a consumer requests copies of 
documents, the financial institution must provide the copies in an 
understandable form. If an institution relied on magnetic tape, it 
must convert the applicable data into readable form, for example, by 
printing it and explaining any codes.

11(d)(2) Debiting Provisional Credit

    1. Alternative procedure for debiting of credited funds. The 
financial institution may comply with the requirements of this 
section by notifying the consumer that the consumer's account will 
be debited five business days from the transmittal of the 
notification, specifying the calendar date on which the debiting 
will occur.
    2. Fees for overdrafts. The financial institution may not impose 
fees for items it is required to honor under Sec.  1005.11. It may, 
however, impose any normal transaction or item fee that is unrelated 
to an overdraft resulting from the debiting. If the account is still 
overdrawn after five business days, the institution may impose the 
fees or finance charges to which it is entitled, if any, under an 
overdraft credit plan.

11(e) Reassertion of Error

    1. Withdrawal of error; right to reassert. The financial 
institution has no further error resolution responsibilities if the 
consumer voluntarily withdraws the notice alleging an error. A 
consumer who has withdrawn an allegation of error has the right to 
reassert the allegation unless the financial institution had already 
complied with all of the error resolution requirements before the 
allegation was withdrawn. The consumer must do so, however, within 
the original 60-day period.

Section 1005.12 Relation to Other Laws

12(a) Relation to Truth in Lending

    1. Determining applicable regulation. i. For transactions 
involving access devices that also function as credit cards, whether 
Regulation E or Regulation Z (12 CFR part 1026) applies depends on 
the nature of the transaction. For example, if the transaction 
solely involves an extension of credit, and does not include a debit 
to a checking account (or other consumer asset account), the 
liability limitations and error resolution requirements of 
Regulation Z apply. If the transaction debits a checking account 
only (with no credit extended), the provisions of Regulation E 
apply. If the transaction debits a checking account but also draws 
on an overdraft line of credit attached to the account, Regulation 
E's liability limitations apply, in addition to Sec. Sec.  
1026.13(d) and (g) of Regulation Z (which apply because of the 
extension of credit associated with the overdraft feature on the 
checking account). If a consumer's access device is also a credit 
card and the device is used to make unauthorized withdrawals from a 
checking account, but also is used to obtain unauthorized cash 
advances directly from a line of credit that is separate from the 
checking account, both Regulation E and Regulation Z apply.
    ii. The following examples illustrate these principles:
    A. A consumer has a card that can be used either as a credit 
card or a debit card. When used as a debit card, the card draws on 
the consumer's checking account. When used as a credit card, the 
card draws only on a separate line of credit. If the card is stolen 
and used as a credit card to make purchases or to get cash advances 
at an ATM from the line of credit, the liability limits and error 
resolution provisions of Regulation Z apply; Regulation E does not 
apply.
    B. In the same situation, if the card is stolen and is used as a 
debit card to make purchases or to get cash withdrawals at an ATM 
from the checking account, the liability limits and error resolution 
provisions of Regulation E apply; Regulation Z does not apply.
    C. In the same situation, assume the card is stolen and used 
both as a debit card and as a credit card; for example, the thief 
makes some purchases using the card as a debit card, and other 
purchases using the card as a credit card. Here, the liability 
limits and error resolution provisions of Regulation E apply to the 
unauthorized transactions in which the card was used as a debit 
card, and the corresponding provisions of Regulation Z apply to the 
unauthorized transactions in which the card was used as a credit 
card.
    D. Assume a somewhat different type of card, one that draws on 
the consumer's checking account and can also draw on an overdraft 
line of credit attached to the checking account. There is no 
separate line of credit, only the overdraft line, associated with 
the card. In this situation, if the card is stolen and used, the 
liability limits and the error resolution provisions of Regulation E 
apply. In addition, if the use of the card has resulted in accessing 
the overdraft line of credit, the error resolution provisions of 
Sec. Sec.  1026.13(d) and (g) of Regulation Z also apply, but not 
the other error resolution provisions of Regulation Z.
    2. Issuance rules. For access devices that also constitute 
credit cards, the issuance rules of Regulation E apply if the only 
credit feature is a preexisting credit line attached to the asset 
account to cover overdrafts (or to maintain a specified minimum 
balance) or an overdraft service, as defined in Sec.  1005.17(a). 
Regulation Z (12 CFR part 1026) rules apply if there is another type 
of credit feature; for example, one permitting direct extensions of 
credit that do not involve the asset account.
    3. Overdraft service. The addition of an overdraft service, as 
that term is defined in Sec.  1005.17(a), to an accepted access 
device does not constitute the addition of a credit feature subject 
to Regulation Z. Instead, the provisions of Regulation E apply, 
including the liability limitations (Sec.  1005.6) and the 
requirement to obtain consumer consent to the service before any 
fees or charges for paying an overdraft may be assessed on the 
account (Sec.  1005.17).

12(b) Preemption of Inconsistent State Laws

    1. Specific determinations. The regulation prescribes standards 
for determining whether state laws that govern EFTs, and state laws 
regarding gift certificates, store gift cards, or general-use 
prepaid cards that govern dormancy, inactivity, or service fees, or 
expiration dates, are preempted by the Act and the regulation. A 
state law that is inconsistent may be preempted even if the Bureau 
has not issued a determination. However, nothing in Sec.  1005.12(b) 
provides a financial institution with immunity for violations of 
state law if the institution chooses not to make state disclosures 
and the Bureau later determines that the state law is not preempted.
    2. Preemption determination. The Bureau recognizes state law 
preemption determinations made by the Board of Governors of the 
Federal Reserve System prior to July 21, 2011, until and unless the 
Bureau makes and publishes any contrary determination. The Board of 
Governors determined that certain provisions in the state law of 
Michigan are preempted by the Federal law, effective March 30, 1981:
    i. Definition of unauthorized use. Section 5(4) is preempted to 
the extent that it relates to the section of state law governing 
consumer liability for unauthorized use of an access device.
    ii. Consumer liability for unauthorized use of an account. 
Section 14 is inconsistent with Sec.  1005.6 and is less protective 
of the consumer than the Federal law. The state law places liability 
on the consumer for the unauthorized use of an account in cases

[[Page 81049]]

involving the consumer's negligence. Under the Federal law, a 
consumer's liability for unauthorized use is not related to the 
consumer's negligence and depends instead on the consumer's 
promptness in reporting the loss or theft of the access device.
    iii. Error resolution. Section 15 is preempted because it is 
inconsistent with Sec.  1005.11 and is less protective of the 
consumer than the Federal law. The state law allows financial 
institutions up to 70 days to resolve errors, whereas the Federal 
law generally requires errors to be resolved within 45 days.
    iv. Receipts and periodic statements. Sections 17 and 18 are 
preempted because they are inconsistent with Sec.  1005.9. The state 
provisions require a different disclosure of information than does 
the Federal law. The receipt provision is also preempted because it 
allows the consumer to be charged for receiving a receipt if a 
machine cannot furnish one at the time of a transfer.

Section 1005.13 Administrative Enforcement; Record Retention

13(b) Record Retention

    1. Requirements. A financial institution need not retain records 
that it has given disclosures and documentation to each consumer; it 
need only retain evidence demonstrating that its procedures 
reasonably ensure the consumers' receipt of required disclosures and 
documentation.

Section 1005.14 Electronic Fund Transfer Service Provider Not Holding 
Consumer's Account

14(a) Electronic Fund Transfer Service Providers Subject to 
Regulation

    1. Applicability. This section applies only when a service 
provider issues an access device to a consumer for initiating 
transfers to or from the consumer's account at a financial 
institution and the two entities have no agreement regarding this 
EFT service. If the service provider does not issue an access device 
to the consumer for accessing an account held by another 
institution, it does not qualify for the treatment accorded by Sec.  
1005.14. For example, this section does not apply to an institution 
that initiates preauthorized payroll deposits to consumer accounts 
on behalf of an employer. By contrast, Sec.  1005.14 can apply to an 
institution that issues a code for initiating telephone transfers to 
be carried out through the ACH from a consumer's account at another 
institution. This is the case even if the consumer has accounts at 
both institutions.
    2. ACH agreements. The ACH rules generally do not constitute an 
agreement for purposes of this section. However, an ACH agreement 
under which members specifically agree to honor each other's debit 
cards is an ``agreement,'' and thus this section does not apply.

14(b) Compliance by Electronic Fund Transfer Service Provider

    1. Liability. The service provider is liable for unauthorized 
EFTs that exceed limits on the consumer's liability under Sec.  
1005.6.

14(b)(1) Disclosures and Documentation

    1. Periodic statements from electronic fund transfer service 
provider. A service provider that meets the conditions set forth in 
this paragraph does not have to issue periodic statements. A service 
provider that does not meet the conditions need only include on 
periodic statements information about transfers initiated with the 
access device it has issued.

14(b)(2) Error Resolution

    1. Error resolution. When a consumer notifies the service 
provider of an error, the EFT service provider must investigate and 
resolve the error in compliance with Sec.  1005.11 as modified by 
Sec.  1005.14(b)(2). If an error occurred, any fees or charges 
imposed as a result of the error, either by the service provider or 
by the account-holding institution (for example, overdraft or 
dishonor fees) must be reimbursed to the consumer by the service 
provider.

14(c) Compliance by Account-Holding Institution

14(c)(1) Documentation

    1. Periodic statements from account-holding institution. The 
periodic statement provided by the account-holding institution need 
only contain the information required by Sec.  1005.9(b)(1).

Section 1005.16 Disclosures at Automated Teller Machines

16(b) General

Paragraph 16(b)(1)

    1. Specific notices. An ATM operator that imposes a fee for a 
specific type of transaction--such as for a cash withdrawal, but not 
for a balance inquiry, or for some cash withdrawals, but not for 
others (such as where the card was issued by a foreign bank or by a 
card issuer that has entered into a special contractual relationship 
with the ATM operator regarding surcharges)--may provide a notice on 
or at the ATM that a fee will be imposed or a notice that a fee may 
be imposed for providing EFT services or may specify the type of EFT 
for which a fee is imposed. If, however, a fee will be imposed in 
all instances, the notice must state that a fee will be imposed.

Section 1005.17 Requirements for Overdraft Services

17(a) Definition

    1. Exempt securities- and commodities-related lines of credit. 
The definition of ``overdraft service'' does not include the payment 
of transactions in a securities or commodities account pursuant to 
which credit is extended by a broker-dealer registered with the 
Securities and Exchange Commission or the Commodity Futures Trading 
Commission.

17(b) Opt-In Requirement

    1. Scope. i. Account-holding institutions. Section 1005.17(b) 
applies to ATM and one-time debit card transactions made with a 
debit card issued by or on behalf of the account-holding 
institution. Section 1005.17(b) does not apply to ATM and one-time 
debit card transactions made with a debit card issued by or through 
a third party unless the debit card is issued on behalf of the 
account-holding institution.
    ii. Coding of transactions. A financial institution complies 
with the rule if it adapts its systems to identify debit card 
transactions as either one-time or recurring. If it does so, the 
financial institution may rely on the transaction's coding by 
merchants, other institutions, and other third parties as a one-time 
or a preauthorized or recurring debit card transaction.
    iii. One-time debit card transactions. The opt-in applies to any 
one-time debit card transaction, whether the card is used, for 
example, at a point-of-sale, in an online transaction, or in a 
telephone transaction.
    iv. Application of fee prohibition. The prohibition on assessing 
overdraft fees under Sec.  1005.17(b)(1) applies to all 
institutions. For example, the prohibition applies to an institution 
that has a policy and practice of declining to authorize and pay any 
ATM or one-time debit card transactions when the institution has a 
reasonable belief at the time of the authorization request that the 
consumer does not have sufficient funds available to cover the 
transaction. However, the institution is not required to comply with 
Sec. Sec.  1005.17(b)(1)(i)-(iv), including the notice and opt-in 
requirements, if it does not assess overdraft fees for paying ATM or 
one-time debit card transactions that overdraw the consumer's 
account. Assume an institution does not provide an opt-in notice, 
but authorizes an ATM or one-time debit card transaction on the 
reasonable belief that the consumer has sufficient funds in the 
account to cover the transaction. If, at settlement, the consumer 
has insufficient funds in the account (for example, due to 
intervening transactions that post to the consumer's account), the 
institution is not permitted to assess an overdraft fee or charge 
for paying that transaction.
    2. No affirmative consent. A financial institution may pay 
overdrafts for ATM and one-time debit card transactions even if a 
consumer has not affirmatively consented or opted in to the 
institution's overdraft service. If the institution pays such an 
overdraft without the consumer's affirmative consent, however, it 
may not impose a fee or charge for doing so. These provisions do not 
limit the institution's ability to debit the consumer's account for 
the amount overdrawn if the institution is permitted to do so under 
applicable law.
    3. Overdraft transactions not required to be authorized or paid. 
Section 1005.17 does not require a financial institution to 
authorize or pay an overdraft on an ATM or one-time debit card 
transaction even if the consumer has affirmatively consented to an 
institution's overdraft service for such transactions.
    4. Reasonable opportunity to provide affirmative consent. A 
financial institution provides a consumer with a reasonable 
opportunity to provide affirmative consent when, among other things, 
it provides reasonable methods by which the consumer may 
affirmatively consent. A financial institution provides such 
reasonable methods, if:

[[Page 81050]]

    i. By mail. The institution provides a form for the consumer to 
fill out and mail to affirmatively consent to the service.
    ii. By telephone. The institution provides a readily-available 
telephone line that consumers may call to provide affirmative 
consent.
    iii. By electronic means. The institution provides an electronic 
means for the consumer to affirmatively consent. For example, the 
institution could provide a form that can be accessed and processed 
at its Web site, where the consumer may click on a check box to 
provide consent and confirm that choice by clicking on a button that 
affirms the consumer's consent.
    iv. In person. The institution provides a form for the consumer 
to complete and present at a branch or office to affirmatively 
consent to the service.
    5. Implementing opt-in at account-opening. A financial 
institution may provide notice regarding the institution's overdraft 
service prior to or at account-opening. A financial institution may 
require a consumer, as a necessary step to opening an account, to 
choose whether or not to opt into the payment of ATM or one-time 
debit card transactions pursuant to the institution's overdraft 
service. For example, the institution could require the consumer, at 
account opening, to sign a signature line or check a box on a form 
(consistent with comment 17(b)-6) indicating whether or not the 
consumer affirmatively consents at account opening. If the consumer 
does not check any box or provide a signature, the institution must 
assume that the consumer does not opt in. Or, the institution could 
require the consumer to choose between an account that does not 
permit the payment of ATM or one-time debit card transactions 
pursuant to the institution's overdraft service and an account that 
permits the payment of such overdrafts, provided that the accounts 
comply with Sec.  1005.17(b)(2) and Sec.  1005.17(b)(3).
    6. Affirmative consent required. A consumer's affirmative 
consent, or opt-in, to a financial institution's overdraft service 
must be obtained separately from other consents or acknowledgements 
obtained by the institution, including a consent to receive 
disclosures electronically. An institution may obtain a consumer's 
affirmative consent by providing a blank signature line or check box 
that the consumer could sign or select to affirmatively consent, 
provided that the signature line or check box is used solely for 
purposes of evidencing the consumer's choice whether or not to opt 
into the overdraft service and not for other purposes. An 
institution does not obtain a consumer's affirmative consent by 
including preprinted language about the overdraft service in an 
account disclosure provided with a signature card or contract that 
the consumer must sign to open the account and that acknowledges the 
consumer's acceptance of the account terms. Nor does an institution 
obtain a consumer's affirmative consent by providing a signature 
card that contains a pre-selected check box indicating that the 
consumer is requesting the service.
    7. Confirmation. A financial institution may comply with the 
requirement in Sec.  1005.17(b)(1)(iv) to provide confirmation of 
the consumer's affirmative consent by mailing or delivering to the 
consumer a copy of the consumer's completed opt-in notice, or by 
mailing or delivering a letter or notice to the consumer 
acknowledging that the consumer has elected to opt into the 
institution's service. The confirmation, which must be provided in 
writing, or electronically if the consumer agrees, must include a 
statement informing the consumer of the right to revoke the opt-in 
at any time. See Sec.  1005.17(d)(6), which permits institutions to 
include the revocation statement on the initial opt-in notice. An 
institution complies with the confirmation requirement if it has 
adopted reasonable procedures designed to ensure that overdraft fees 
are assessed only in connection with transactions paid after the 
confirmation has been mailed or delivered to the consumer.
    8. Outstanding Negative Balance. If a fee or charge is based on 
the amount of the outstanding negative balance, an institution is 
prohibited from assessing any such fee if the negative balance is 
solely attributable to an ATM or one-time debit card transaction, 
unless the consumer has opted into the institution's overdraft 
service for ATM or one-time debit card transactions. However, the 
rule does not prohibit an institution from assessing such a fee if 
the negative balance is attributable in whole or in part to a check, 
ACH, or other type of transaction not subject to the prohibition on 
assessing overdraft fees in Sec.  1005.17(b)(1).
    9. Daily or Sustained Overdraft, Negative Balance, or Similar 
Fee or Charge i. Daily or sustained overdraft, negative balance, or 
similar fees or charges. If a consumer has not opted into the 
institution's overdraft service for ATM or one-time debit card 
transactions, the fee prohibition in Sec.  1005.17(b)(1) applies to 
all overdraft fees or charges for paying those transactions, 
including but not limited to daily or sustained overdraft, negative 
balance, or similar fees or charges. Thus, where a consumer's 
negative balance is solely attributable to an ATM or one-time debit 
card transaction, the rule prohibits the assessment of such fees 
unless the consumer has opted in. However, the rule does not 
prohibit an institution from assessing daily or sustained overdraft, 
negative balance, or similar fees or charges if a negative balance 
is attributable in whole or in part to a check, ACH, or other type 
of transaction not subject to the fee prohibition. When the negative 
balance is attributable in part to an ATM or one-time debit card 
transaction, and in part to a check, ACH, or other type of 
transaction not subject to the fee prohibition, the date on which 
such a fee may be assessed is based on the date on which the check, 
ACH, or other type of transaction is paid into overdraft.
    ii. Examples. The following examples illustrate how an 
institution complies with the fee prohibition. For each example, 
assume the following: (a) The consumer has not opted into the 
payment of ATM or one-time debit card overdrafts; (b) these 
transactions are paid into overdraft because the amount of the 
transaction at settlement exceeded the amount authorized or the 
amount was not submitted for authorization; (c) under the account 
agreement, the institution may charge a per-item fee of $20 for each 
overdraft, and a one-time sustained overdraft fee of $20 on the 
fifth consecutive day the consumer's account remains overdrawn; (d) 
the institution posts ATM and debit card transactions before other 
transactions; and (e) the institution allocates deposits to account 
debits in the same order in which it posts debits.
    A. Assume that a consumer has a $50 account balance on March 1. 
That day, the institution posts a one-time debit card transaction of 
$60 and a check transaction of $40. The institution charges an 
overdraft fee of $20 for the check overdraft but cannot assess an 
overdraft fee for the debit card transaction. At the end of the day, 
the consumer has an account balance of negative $70. The consumer 
does not make any deposits to the account, and no other transactions 
occur between March 2 and March 6. Because the consumer's negative 
balance is attributable in part to the $40 check (and associated 
overdraft fee), the institution may charge a sustained overdraft fee 
on March 6 in connection with the check.
    B. Same facts as in A., except that on March 3, the consumer 
deposits $40 in the account. The institution allocates the $40 to 
the debit card transaction first, consistent with its posting order 
policy. At the end of the day on March 3, the consumer has an 
account balance of negative $30, which is attributable to the check 
transaction (and associated overdraft fee). The consumer does not 
make any further deposits to the account, and no other transactions 
occur between March 4 and March 6. Because the remaining negative 
balance is attributable to the March 1 check transaction, the 
institution may charge a sustained overdraft fee on March 6 in 
connection with the check.
    C. Assume that a consumer has a $50 account balance on March 1. 
That day, the institution posts a one-time debit card transaction of 
$60. At the end of that day, the consumer has an account balance of 
negative $10. The institution may not assess an overdraft fee for 
the debit card transaction. On March 3, the institution pays a check 
transaction of $100 and charges an overdraft fee of $20. At the end 
of that day, the consumer has an account balance of negative $130. 
The consumer does not make any deposits to the account, and no other 
transactions occur between March 4 and March 8. Because the 
consumer's negative balance is attributable in part to the check, 
the institution may assess a $20 sustained overdraft fee. However, 
because the check was paid on March 3, the institution must use 
March 3 as the start date for determining the date on which the 
sustained overdraft fee may be assessed. Thus, the institution may 
charge a $20 sustained overdraft fee on March 8.
    iii. Alternative approach. For a consumer who does not opt into 
the institution's overdraft service for ATM and one-time debit card 
transactions, an institution may also comply with the fee 
prohibition in Sec.  1005.17(b)(1) by not assessing daily or 
sustained overdraft, negative balance, or similar fees or charges 
unless a consumer's negative balance is attributable solely to

[[Page 81051]]

check, ACH or other types of transactions not subject to the fee 
prohibition while that negative balance remains outstanding. In such 
case, the institution would not have to determine how to allocate 
subsequent deposits that reduce but do not eliminate the negative 
balance. For example, if a consumer has a negative balance of $30, 
of which $10 is attributable to a one-time debit card transaction, 
an institution complies with the fee prohibition if it does not 
assess a sustained overdraft fee while that negative balance remains 
outstanding.

17(b)(2) Conditioning Payment of Other Overdrafts on Consumer's 
Affirmative Consent

    1. Application of the same criteria. The prohibitions on 
conditioning in Sec.  1005.17(b)(2) generally require an institution 
to apply the same criteria for deciding when to pay overdrafts for 
checks, ACH transactions, and other types of transactions, whether 
or not the consumer has affirmatively consented to the institution's 
overdraft service with respect to ATM and one-time debit card 
overdrafts. For example, if an institution's internal criteria would 
lead the institution to pay a check overdraft if the consumer had 
affirmatively consented to the institution's overdraft service for 
ATM and one-time debit card transactions, it must also apply the 
same criteria in a consistent manner in determining whether to pay 
the check overdraft if the consumer has not opted in.
    2. No requirement to pay overdrafts on checks, ACH transactions, 
or other types of transactions. The prohibition on conditioning in 
Sec.  1005.17(b)(2) does not require an institution to pay 
overdrafts on checks, ACH transactions, or other types of 
transactions in all circumstances. Rather, the rule simply prohibits 
institutions from considering the consumer's decision not to opt in 
when deciding whether to pay overdrafts for checks, ACH 
transactions, or other types of transactions.

17(b)(3) Same Account Terms, Conditions, and Features

    1. Variations in terms, conditions, or features. A financial 
institution may not vary the terms, conditions, or features of an 
account provided to a consumer who does not affirmatively consent to 
the payment of ATM or one-time debit card transactions pursuant to 
the institution's overdraft service. This includes, but is not 
limited to:
    i. Interest rates paid and fees assessed;
    ii. The type of ATM or debit card provided to the consumer. For 
instance, an institution may not provide consumers who do not opt in 
a PIN-only card while providing a debit card with both PIN and 
signature-debit functionality to consumers who opt in;
    iii. Minimum balance requirements; or
    iv. Account features such as online bill payment services.
    2. Limited-feature bank accounts. Section 1005.17(b)(3) does not 
prohibit institutions from offering deposit account products with 
limited features, provided that a consumer is not required to open 
such an account because the consumer did not opt in. For example, 
Sec.  1005.17(b)(3) does not prohibit an institution from offering a 
checking account designed to comply with state basic banking laws, 
or designed for consumers who are not eligible for a checking 
account because of their credit or checking account history, which 
may include features limiting the payment of overdrafts. However, a 
consumer who applies, and is otherwise eligible, for a full-service 
or other particular deposit account product may not be provided 
instead with the account with more limited features because the 
consumer has declined to opt in.

17(c) Timing

    1. Permitted fees or charges. Fees or charges for ATM and one-
time debit card overdrafts may be assessed only for overdrafts paid 
on or after the date the financial institution receives the 
consumer's affirmative consent to the institution's overdraft 
service. See also comment 17(b)-7.

17(d) Content and Format

    1. Overdraft service. The description of the institution's 
overdraft service should indicate that the consumer has the right to 
affirmatively consent, or opt into payment of overdrafts for ATM and 
one-time debit card transactions. The description should also 
disclose the institution's policies regarding the payment of 
overdrafts for other transactions, including checks, ACH 
transactions, and automatic bill payments, provided that this 
content is not more prominent than the description of the consumer's 
right to opt into payment of overdrafts for ATM and one-time debit 
card transactions. As applicable, the institution also should 
indicate that it pays overdrafts at its discretion, and should 
briefly explain that if the institution does not authorize and pay 
an overdraft, it may decline the transaction.
    2. Maximum fee. If the amount of a fee may vary from transaction 
to transaction, the financial institution may indicate that the 
consumer may be assessed a fee ``up to'' the maximum fee. The 
financial institution must disclose all applicable overdraft fees, 
including but not limited to:
    i. Per item or per transaction fees;
    ii. Daily overdraft fees;
    iii. Sustained overdraft fees, where fees are assessed when the 
consumer has not repaid the amount of the overdraft after some 
period of time (for example, if an account remains overdrawn for 
five or more business days); or
    iv. Negative balance fees.
    3. Opt-in methods. The opt-in notice must include the methods by 
which the consumer may consent to the overdraft service for ATM and 
one-time debit card transactions. Institutions may tailor Model Form 
A-9 to the methods offered to consumers for affirmatively consenting 
to the service. For example, an institution need not provide the 
tear-off portion of Model Form A-9 if it is only permitting 
consumers to opt-in telephonically or electronically. Institutions 
may, but are not required, to provide a signature line or check box 
where the consumer can indicate that he or she declines to opt in.
    4. Identification of consumer's account. An institution may use 
any reasonable method to identify the account for which the consumer 
submits the opt-in notice. For example, the institution may include 
a line for a printed name and an account number, as shown in Model 
Form A-9. Or, the institution may print a bar code or use other 
tracking information. See also comment 17(b)-6, which describes how 
an institution obtains a consumer's affirmative consent.
    5. Alternative plans for covering overdrafts. If the institution 
offers both a line of credit subject to Regulation Z (12 CFR part 
1026) and a service that transfers funds from another account of the 
consumer held at the institution to cover overdrafts, the 
institution must state in its opt-in notice that both alternative 
plans are offered. For example, the notice might state ``We also 
offer overdraft protection plans, such as a link to a savings 
account or to an overdraft line of credit, which may be less 
expensive than our standard overdraft practices.'' If the 
institution offers one, but not the other, it must state in its opt-
in notice the alternative plan that it offers. If the institution 
does not offer either plan, it should omit the reference to the 
alternative plans.

17(f) Continuing Right To Opt-In or To Revoke the Opt-In

    1. Fees or charges for overdrafts incurred prior to revocation. 
Section 1005.17(f)(1) provides that a consumer may revoke his or her 
prior consent at any time. If a consumer does so, this provision 
does not require the financial institution to waive or reverse any 
overdraft fees assessed on the consumer's account prior to the 
institution's implementation of the consumer's revocation request.

17(g) Duration of Opt-In

    1. Termination of overdraft service. A financial institution 
may, for example, terminate the overdraft service when the consumer 
makes excessive use of the service.

Section 1005.18 Requirements for Financial Institutions Offering 
Payroll Card Accounts

18(a) Coverage

    1. Issuance of access device. Consistent with Sec.  1005.5(a), a 
financial institution may issue an access device only in response to 
an oral or written request for the device, or as a renewal or 
substitute for an accepted access device. A consumer is deemed to 
request an access device for a payroll card account when the 
consumer chooses to receive salary or other compensation through a 
payroll card account.
    2. Application to employers and service providers. Typically, 
employers and third-party service providers do not meet the 
definition of a ``financial institution'' subject to the regulation 
because they neither hold payroll card accounts nor issue payroll 
cards and agree with consumers to provide EFT services in connection 
with payroll card accounts. However, to the extent an employer or a 
service provider undertakes either of these functions, it would be 
deemed a financial institution under the regulation.

18(b) Alternative to Periodic Statements

    1. Posted transactions. A history of transactions provided under 
Sec. Sec.  1005.18(b)(1)(ii) and (iii) shall reflect

[[Page 81052]]

transfers once they have been posted to the account. Thus, an 
institution does not need to include transactions that have been 
authorized, but that have not yet posted to the account.
    2. Electronic history. The electronic history required under 
Sec.  1005.18(b)(1)(ii) must be provided in a form that the consumer 
may keep, as required under Sec.  1005.4(a)(1). Financial 
institutions may satisfy this requirement if they make the 
electronic history available in a format that is capable of being 
retained. For example, an institution satisfies the requirement if 
it provides a history at a Web site in a format that is capable of 
being printed or stored electronically using a web browser.

18(c) Modified Requirements

    1. Error resolution safe harbor provision. Institutions that 
choose to investigate notices of error provided up to 120 days from 
the date a transaction has posted to a consumer's account may still 
disclose the error resolution time period required by the regulation 
(as set forth in the Model Form in Appendix A-7). Specifically, an 
institution may disclose to payroll card account holders that the 
institution will investigate any notice of error provided within 60 
days of the consumer electronically accessing an account or 
receiving a written history upon request that reflects the error, 
even if, for some or all transactions, the institution investigates 
any notice of error provided up to 120 days from the date that the 
transaction alleged to be in error has posted to the consumer's 
account. Similarly, an institution's summary of the consumer's 
liability (as required under Sec.  1005.7(b)(1)) may disclose that 
liability is based on the consumer providing notice of error within 
60 days of the consumer electronically accessing an account or 
receiving a written history reflecting the error, even if, for some 
or all transactions, the institution allows a consumer to assert a 
notice of error up to 120 days from the date of posting of the 
alleged error.
    2. Electronic access. A consumer is deemed to have accessed a 
payroll card account electronically when the consumer enters a user 
identification code or password or otherwise complies with a 
security procedure used by an institution to verify the consumer's 
identity. An institution is not required to determine whether a 
consumer has in fact accessed information about specific 
transactions to trigger the beginning of the 60-day periods for 
liability limits and error resolution under Sec. Sec.  1005.6 and 
1005.11.
    3. Untimely notice of error. An institution that provides a 
transaction history under Sec.  1005.18(b)(1) is not required to 
comply with the requirements of Sec.  1005.11 for any notice of 
error from the consumer pertaining to a transfer that occurred more 
than 60 days prior to the earlier of the date the consumer 
electronically accesses the account or the date the financial 
institution sends a written history upon the consumer's request. 
(Alternatively, as provided in Sec.  1005.18(c)(4)(ii), an 
institution need not comply with the requirements of Sec.  1005.11 
with respect to any notice of error received from the consumer more 
than 120 days after the date of posting of the transfer allegedly in 
error.) Where the consumer's assertion of error involves an 
unauthorized EFT, however, the institution must comply with Sec.  
1005.6 before it may impose any liability on the consumer.

Section 1005.20 Requirements for Gift Cards and Gift Certificates

20(a) Definitions

    1. Form of card, code, or device. Section 1005.20 applies to any 
card, code, or other device that meets one of the definitions in 
Sec. Sec.  1005.20(a)(1) through (a)(3) (and is not otherwise 
excluded by Sec.  1005.20(b)), even if it is not issued in card 
form. Section 1005.20 applies, for example, to an account number or 
bar code that can be used to access underlying funds. Similarly, 
Sec.  1005.20 applies to a device with a chip or other embedded 
mechanism that links the device to stored funds, such as a mobile 
phone or sticker containing a contactless chip that enables the 
consumer to access the stored funds. A card, code, or other device 
that meets the definition in Sec. Sec.  1005.20(a)(1) through (a)(3) 
includes an electronic promise (see comment 20(a)-2) as well as a 
promise that is not electronic. See, however, Sec.  1005.20(b)(5). 
In addition, Sec.  1005.20 applies if a merchant issues a code that 
entitles a consumer to redeem the code for goods or services, 
regardless of the medium in which the code is issued (see, however, 
Sec.  1005.20(b)(5)), and whether or not it may be redeemed 
electronically or in the merchant's store. Thus, for example, if a 
merchant emails a code that a consumer may redeem in a specified 
amount either online or in the merchant's store, that code is 
covered under Sec.  1005.20, unless one of the exclusions in Sec.  
1005.20(b) apply.
    2. Electronic promise. The term ``electronic promise'' as used 
in EFTA sections 915(a)(2)(B), (a)(2)(C), and (a)(2)(D) means a 
person's commitment or obligation communicated or stored in 
electronic form made to a consumer to provide payment for goods or 
services for transactions initiated by the consumer. The electronic 
promise is itself represented by a card, code or other device that 
is issued or honored by the person, reflecting the person's 
commitment or obligation to pay. For example, if a merchant issues a 
code that can be given as a gift and that entitles the recipient to 
redeem the code in an online transaction for goods or services, that 
code represents an electronic promise by the merchant and is a card, 
code, or other device covered by Sec.  1005.20.
    3. Cards, codes, or other devices redeemable for specific goods 
or services. Certain cards, codes, or other devices may be 
redeemable upon presentation for a specific good or service, or 
``experience,'' such as a spa treatment, hotel stay, or airline 
flight. In other cases, a card, code, or other device may entitle 
the consumer to a certain percentage off the purchase of a good or 
service, such as 20% off of any purchase in a store. Such cards, 
codes, or other devices generally are not subject to the 
requirements of this section because they are not issued to a 
consumer ``in a specified amount'' as required under the definitions 
of ``gift certificate,'' ``store gift card,'' or ``general-use 
prepaid card.'' However, if the card, code, or other device is 
issued in a specified or denominated amount that can be applied 
toward the purchase of a specific good or service, such as a 
certificate or card redeemable for a spa treatment up to $50, the 
card, code, or other device is subject to this section, unless one 
of the exceptions in Sec.  1005.20(b) apply. See, e.g., Sec.  
1005.20(b)(3). Similarly, if the card, code, or other device states 
a specific monetary value, such as ``a $50 value,'' the card, code, 
or other device is subject to this section, unless an exclusion in 
Sec.  1005.20(b) applies.
    4. Issued primarily for personal, family, or household purposes. 
Section 1005.20 only applies to cards, codes, or other devices that 
are sold or issued to a consumer primarily for personal, family, or 
household purposes. A card, code, or other device initially 
purchased by a business is subject to this section if the card, 
code, or other device is purchased for redistribution or resale to 
consumers primarily for personal, family, or household purposes. 
Moreover, the fact that a card, code, or other device may be 
primarily funded by a business, for example, in the case of certain 
rewards or incentive cards, does not mean the card, code, or other 
device is outside the scope of Sec.  1005.20, if the card, code, or 
other device will be provided to a consumer primarily for personal, 
family, or household purposes. But see Sec.  1005.20(b)(3). Whether 
a card, code, or other device is issued to a consumer primarily for 
personal, family, or household purposes will depend on the facts and 
circumstances. For example, if a program manager purchases store 
gift cards directly from an issuing merchant and sells those cards 
through the program manager's retail outlets, such gift cards are 
subject to the requirements of Sec.  1005.20 because the store gift 
cards are sold to consumers primarily for personal, family, or 
household purposes. In contrast, a card, code, or other device 
generally would not be issued to consumers primarily for personal, 
family, or household purposes, and therefore would fall outside the 
scope of Sec.  1005.20, if the purchaser of the card, code, or 
device is contractually prohibited from reselling or redistributing 
the card, code, or device to consumers primarily for personal, 
family, or household purposes, and reasonable policies and 
procedures are maintained to avoid such sale or distribution for 
such purposes. However, if an entity that has purchased cards, 
codes, or other devices for business purposes sells or distributes 
such cards, codes, or other devices to consumers primarily for 
personal, family, or household purposes, that entity does not comply 
with Sec.  1005.20 if it has not otherwise met the substantive and 
disclosure requirements of the rule or unless an exclusion in Sec.  
1005.20(b) applies.
    5. Examples of cards, codes, or other devices issued for 
business purposes. Examples of cards, codes, or other devices that 
are issued and used for business purposes and therefore excluded 
from the definitions of ``gift certificate,'' ``store gift card,'' 
or ``general-use prepaid card'' include:
    i. Cards, codes, or other devices to reimburse employees for 
travel or moving expenses.

[[Page 81053]]

    ii. Cards, codes, or other devices for employees to use to 
purchase office supplies and other business-related items.

20(a)(2) Store Gift Card

    1. Relationship between ``gift certificate'' and ``store gift 
card.'' The term ``store gift card'' in Sec.  1005.20(a)(2) includes 
``gift certificate'' as defined in Sec.  1005.20(a)(1). For example, 
a numeric or alphanumeric code representing a specified dollar 
amount or value that is electronically sent to a consumer as a gift 
which can be redeemed or exchanged by the recipient to obtain goods 
or services may be both a ``gift certificate'' and a ``store gift 
card'' if the specified amount or value cannot be increased.
    2. Affiliated group of merchants. The term ``affiliated group of 
merchants'' means two or more affiliated merchants or other persons 
that are related by common ownership or common corporate control 
(see, e.g., 12 CFR 227.3(b) and 12 CFR 223.2) and that share the 
same name, mark, or logo. For example, the term includes franchisees 
that are subject to a common set of corporate policies or practices 
under the terms of their franchise licenses. The term also applies 
to two or more merchants or other persons that agree among 
themselves, by contract or otherwise, to redeem cards, codes, or 
other devices bearing the same name, mark, or logo (other than the 
mark, logo, or brand of a payment network), for the purchase of 
goods or services solely at such merchants or persons. For example, 
assume a movie theatre chain and a restaurant chain jointly agree to 
issue cards that share the same ``Flix and Food'' logo that can be 
redeemed solely towards the purchase of movie tickets or concessions 
at any of the participating movie theatres, or towards the purchase 
of food or beverages at any of the participating restaurants. For 
purposes of Sec.  1005.20, the movie theatre chain and the 
restaurant chain would be considered to be an affiliated group of 
merchants, and the cards are considered to be ``store gift cards.'' 
However, merchants or other persons are not considered to be 
affiliated merely because they agree to accept a card that bears the 
mark, logo, or brand of a payment network.
    3. Mall gift cards. See comment 20(a)(3)-2.

20(a)(3) General-Use Prepaid Card

    1. Redeemable upon presentation at multiple, unaffiliated 
merchants. A card, code, or other device is redeemable upon 
presentation at multiple, unaffiliated merchants if, for example, 
such merchants agree to honor the card, code, or device if it bears 
the mark, logo, or brand of a payment network, pursuant to the rules 
of the payment network.
    2. Mall gift cards. Mall gift cards that are intended to be used 
or redeemed for goods or services at participating retailers within 
a shopping mall may be considered store gift cards or general-use 
prepaid cards depending on the merchants with which the cards may be 
redeemed. For example, if a mall card may only be redeemed at 
merchants within the mall itself, the card is more likely to be 
redeemable at an affiliated group of merchants and considered a 
store gift card. However, certain mall cards also carry the brand of 
a payment network and can be used at any retailer that accepts that 
card brand, including retailers located outside of the mall. Such 
cards are considered general-use prepaid cards.

20(a)(4) Loyalty, Award, or Promotional Gift Card

    1. Examples of loyalty, award, or promotional programs. Examples 
of loyalty, award, or promotional programs under Sec.  1005.20(a)(4) 
include, but are not limited to:
    i. Consumer retention programs operated or administered by a 
merchant or other person that provide to consumers cards or coupons 
redeemable for or towards goods or services or other monetary value 
as a reward for purchases made or for visits to the participating 
merchant.
    ii. Sales promotions operated or administered by a merchant or 
product manufacturer that provide coupons or discounts redeemable 
for or towards goods or services or other monetary value.
    iii. Rebate programs operated or administered by a merchant or 
product manufacturer that provide cards redeemable for or towards 
goods or services or other monetary value to consumers in connection 
with the consumer's purchase of a product or service and the 
consumer's completion of the rebate submission process.
    iv. Sweepstakes or contests that distribute cards redeemable for 
or towards goods or services or other monetary value to consumers as 
an invitation to enter into the promotion for a chance to win a 
prize.
    v. Referral programs that provide cards redeemable for or 
towards goods or services or other monetary value to consumers in 
exchange for referring other potential consumers to a merchant.
    vi. Incentive programs through which an employer provides cards 
redeemable for or towards goods or services or other monetary value 
to employees, for example, to recognize job performance, such as 
increased sales, or to encourage employee wellness and safety.
    vii. Charitable or community relations programs through which a 
company provides cards redeemable for or towards goods or services 
or other monetary value to a charity or community group for their 
fundraising purposes, for example, as a reward for a donation or as 
a prize in a charitable event.
    2. Issued for loyalty, award, or promotional purposes. To 
indicate that a card, code, or other device is issued for loyalty, 
award, or promotional purposes as required by Sec.  
1005.20(a)(4)(iii), it is sufficient for the card, code, or other 
device to state on the front, for example, ``Reward'' or 
``Promotional.''
    3. Reference to toll-free number and Web site. If a card, code, 
or other device issued in connection with a loyalty, award, or 
promotional program does not have any fees, the disclosure under 
Sec.  1005.20(a)(4)(iii)(D) is not required on the card, code, or 
other device.

20(a)(6) Service Fee

    1. Service fees. Under Sec.  1005.20(a)(6), a service fee 
includes a periodic fee for holding or use of a gift certificate, 
store gift card, or general-use prepaid card. A periodic fee 
includes any fee that may be imposed on a gift certificate, store 
gift card, or general-use prepaid card from time to time for holding 
or using the certificate or card, such as a monthly maintenance fee, 
a transaction fee, an ATM fee, a reload fee, a foreign currency 
transaction fee, or a balance inquiry fee, whether or not the fee is 
waived for a certain period of time or is only imposed after a 
certain period of time. A service fee does not include a one-time 
fee or a fee that is unlikely to be imposed more than once while the 
underlying funds are still valid, such as an initial issuance fee, a 
cash-out fee, a supplemental card fee, or a lost or stolen 
certificate or card replacement fee.

20(a)(7) Activity

    1. Activity. Under Sec.  1005.20(a)(7), any action that results 
in an increase or decrease of the funds underlying a gift 
certificate, store gift card, or general-use prepaid card, other 
than the imposition of a fee, or an adjustment due to an error or a 
reversal of a prior transaction, constitutes activity for purposes 
of Sec.  1005.20. For example, the purchase and activation of a 
certificate or card, the use of the certificate or card to purchase 
a good or service, or the reloading of funds onto a store gift card 
or general-use prepaid card constitutes activity. However, the 
imposition of a fee, the replacement of an expired, lost, or stolen 
certificate or card, and a balance inquiry do not constitute 
activity. In addition, if a consumer attempts to engage in a 
transaction with a gift certificate, store gift card, or general-use 
prepaid card, but the transaction cannot be completed due to 
technical or other reasons, such attempt does not constitute 
activity. Furthermore, if the funds underlying a gift certificate, 
store gift card, or general-use prepaid card are adjusted because 
there was an error or the consumer has returned a previously 
purchased good, the adjustment also does not constitute activity 
with respect to the certificate or card.

20(b) Exclusions

    1. Application of exclusion. A card, code, or other device is 
excluded from the definition of ``gift certificate,'' ``store gift 
card,'' or ``general-use prepaid card'' if it meets any of the 
exclusions in Sec.  1005.20(b). An excluded card, code, or other 
device generally is not subject to any of the requirements of this 
section. See, however, Sec.  1005.20(a)(4)(iii), requiring certain 
disclosures for loyalty, award, or promotional gift cards.
    2. Eligibility for multiple exclusions. A card, code, or other 
device may qualify for one or more exclusions. For example, a 
corporation may give its employees a gift card that is marketed 
solely to businesses for incentive-related purposes, such as to 
reward job performance or promote employee safety. In this case, the 
card may qualify for the exclusion for loyalty, award, or 
promotional gift cards under Sec.  1005.20(b)(3), or for the 
exclusion for cards, codes, or other devices not marketed to the 
general public under Sec.  1005.20(b)(4). In addition, as long as 
any one of the exclusions applies, a card, code, or other device is 
not covered by Sec.  1005.20,

[[Page 81054]]

even if other exclusions do not apply. In the above example, the 
corporation may give its employees a type of gift card that can also 
be purchased by a consumer directly from a merchant. Under these 
circumstances, while the card does not qualify for the exclusion for 
cards, codes, or other devices not marketed to the general public 
under Sec.  1005.20(b)(4) because the card can also be obtained 
through retail channels, it is nevertheless exempt from the 
substantive requirements of Sec.  1005.20 because it is a loyalty, 
award, or promotional gift card. See, however, Sec.  
1005.20(a)(4)(iii), requiring certain disclosures for loyalty, 
award, or promotional gift cards. Similarly, a person may market a 
reloadable card to teenagers for occasional expenses that enables 
parents to monitor spending. Although the card does not qualify for 
the exclusion for cards, codes, or other devices not marketed to the 
general public under Sec.  1005.20(b)(4), it may nevertheless be 
exempt from the requirements of Sec.  1005.20 under Sec.  
1005.20(b)(2) if it is reloadable and not marketed or labeled as a 
gift card or gift certificate.

Paragraph 20(b)(1)

    1. Examples of excluded products. The exclusion for products 
usable solely for telephone services applies to prepaid cards for 
long-distance telephone service, prepaid cards for wireless 
telephone service and prepaid cards for other services that function 
similar to telephone services, such as prepaid cards for voice over 
Internet protocol (VoIP) access time.

Paragraph 20(b)(2)

    1. Reloadable. A card, code, or other device is ``reloadable'' 
if the terms and conditions of the agreement permit funds to be 
added to the card, code, or other device after the initial purchase 
or issuance. A card, code, or other device is not ``reloadable'' 
merely because the issuer or processor is technically able to add 
functionality that would otherwise enable the card, code, or other 
device to be reloaded.
    2. Marketed or labeled as a gift card or gift certificate. The 
term ``marketed or labeled as a gift card or gift certificate'' 
means directly or indirectly offering, advertising, or otherwise 
suggesting the potential use of a card, code or other device, as a 
gift for another person. Whether the exclusion applies generally 
does not depend on the type of entity that makes the promotional 
message. For example, a card may be marketed or labeled as a gift 
card or gift certificate if anyone (other than the purchaser of the 
card), including the issuer, the retailer, the program manager that 
may distribute the card, or the payment network on which a card is 
used, promotes the use of the card as a gift card or gift 
certificate. A card, code, or other device, including a general-
purpose reloadable card, is marketed or labeled as a gift card or 
gift certificate even if it is only occasionally marketed as a gift 
card or gift certificate. For example, a network-branded general 
purpose reloadable card would be marketed or labeled as a gift card 
or gift certificate if the issuer principally advertises the card as 
a less costly alternative to a bank account but promotes the card in 
a television, radio, newspaper, or Internet advertisement, or on 
signage as ``the perfect gift'' during the holiday season. However, 
the mere mention of the availability of gift cards or gift 
certificates in an advertisement or on a sign that also indicates 
the availability of other excluded prepaid cards does not by itself 
cause the excluded prepaid cards to be marketed as a gift card or a 
gift certificate. For example, the posting of a sign in a store that 
refers to the availability of gift cards does not by itself 
constitute the marketing of otherwise excluded prepaid cards that 
may also be sold in the store as gift cards or gift certificates, 
provided that a consumer acting reasonably under the circumstances 
would not be led to believe that the sign applies to all prepaid 
cards sold in the store. See, however, comment 20(b)(2)-4.ii.
    3. Examples of marketed or labeled as a gift card or gift 
certificate. i. Examples of marketed or labeled as a gift card or 
gift certificate include:
    A. Using the word ``gift'' or ``present'' on a card, 
certificate, or accompanying material, including documentation, 
packaging and promotional displays.
    B. Representing or suggesting that a certificate or card can be 
given to another person, for example, as a ``token of appreciation'' 
or a ``stocking stuffer,'' or displaying a congratulatory message on 
the card, certificate or accompanying material.
    C. Incorporating gift-giving or celebratory imagery or motifs, 
such as a bow, ribbon, wrapped present, candle, or congratulatory 
message, on a card, certificate, accompanying documentation, or 
promotional material.
    ii. The term does not include:
    A. Representing that a card or certificate can be used as a 
substitute for a checking, savings, or deposit account.
    B. Representing that a card or certificate can be used to pay 
for a consumer's health-related expenses--for example, a card tied 
to a health savings account.
    C. Representing that a card or certificate can be used as a 
substitute for traveler's checks or cash.
    D. Representing that a card or certificate can be used as a 
budgetary tool, for example, by teenagers, or to cover emergency 
expenses.
    4. Reasonable policies and procedures to avoid marketing as a 
gift card. The exclusion for a card, code, or other device that is 
reloadable and not marketed or labeled as a gift card or gift 
certificate in Sec.  1005.20(b)(2) applies if a reloadable card, 
code, or other device is not marketed or labeled as a gift card or 
gift certificate and if persons subject to the rule, including 
issuers, program managers, and retailers, maintain policies and 
procedures reasonably designed to avoid such marketing. Such 
policies and procedures may include contractual provisions 
prohibiting a reloadable card, code, or other device from being 
marketed or labeled as a gift card or gift certificate, 
merchandising guidelines or plans regarding how the product must be 
displayed in a retail outlet, and controls to regularly monitor or 
otherwise verify that the card, code or other device is not being 
marketed as a gift card. Whether a reloadable card, code, or other 
device has been marketed as a gift card or gift certificate will 
depend on the facts and circumstances, including whether a 
reasonable consumer would be led to believe that the card, code, or 
other device is a gift card or gift certificate. The following 
examples illustrate the application of Sec.  1005.20(b)(2):
    i. An issuer or program manager of prepaid cards agrees to sell 
general-purpose reloadable cards through a retailer. The contract 
between the issuer or program manager and the retailer establishes 
the terms and conditions under which the cards may be sold and 
marketed at the retailer. The terms and conditions prohibit the 
general-purpose reloadable cards from being marketed as a gift card 
or gift certificate, and require policies and procedures to 
regularly monitor or otherwise verify that the cards are not being 
marketed as such. The issuer or program manager sets up one 
promotional display at the retailer for gift cards and another 
physically separated display for excluded products under Sec.  
1005.20(b), including general-purpose reloadable cards and wireless 
telephone cards, such that a reasonable consumer would not believe 
that the excluded cards are gift cards. The exclusion in Sec.  
1005.20(b)(2) applies because policies and procedures reasonably 
designed to avoid the marketing of the general-purpose reloadable 
cards as gift cards or gift certificates are maintained, even if a 
retail clerk inadvertently stocks or a consumer inadvertently places 
a general-purpose reloadable card on the gift card display.
    ii. Same facts as in i., except that the issuer or program 
manager sets up a single promotional display at the retailer on 
which a variety of prepaid cards are sold, including store gift 
cards and general-purpose reloadable cards. A sign stating ``Gift 
Cards'' appears prominently at the top of the display. The exclusion 
in Sec.  1005.20(b)(2) does not apply with respect to the general-
purpose reloadable cards because policies and procedures reasonably 
designed to avoid the marketing of excluded cards as gift cards or 
gift certificates are not maintained.
    iii. Same facts as in i., except that the issuer or program 
manager sets up a single promotional multi-sided display at the 
retailer on which a variety of prepaid card products, including 
store gift cards and general-purpose reloadable cards are sold. Gift 
cards are segregated from excluded cards, with gift cards on one 
side of the display and excluded cards on a different side of a 
display. Signs of equal prominence at the top of each side of the 
display clearly differentiate between gift cards and the other types 
of prepaid cards that are available for sale. The retailer does not 
use any more conspicuous signage suggesting the general availability 
of gift cards, such as a large sign stating ``Gift Cards'' at the 
top of the display or located near the display. The exclusion in 
Sec.  1005.20(b)(2) applies because policies and procedures 
reasonably designed to avoid the marketing of the general-purpose 
reloadable cards as gift cards or gift certificates are maintained, 
even if a retail clerk inadvertently stocks or a consumer 
inadvertently places a general-purpose reloadable card on the gift 
card display.
    iv. Same facts as in i., except that the retailer sells a 
variety of prepaid card

[[Page 81055]]

products, including store gift cards and general-purpose reloadable 
cards, arranged side-by-side in the same checkout lane. The retailer 
does not affirmatively indicate or represent that gift cards are 
available, such as by displaying any signage or other indicia at the 
checkout lane suggesting the general availability of gift cards. The 
exclusion in Sec.  1005.20(b)(2) applies because policies and 
procedures reasonably designed to avoid marketing the general-
purpose reloadable cards as gift cards or gift certificates are 
maintained.
    5. Online sales of prepaid cards. Some Web sites may prominently 
advertise or promote the availability of gift cards or gift 
certificates in a manner that suggests to a consumer that the Web 
site exclusively sells gift cards or gift certificates. For example, 
a Web site may display a banner advertisement or a graphic on the 
home page that prominently states ``Gift Cards,'' ``Gift Giving,'' 
or similar language without mention of other available products, or 
use a web address that includes only a reference to gift cards or 
gift certificates in the address. In such a case, a consumer acting 
reasonably under the circumstances could be led to believe that all 
prepaid products sold on the Web site are gift cards or gift 
certificates. Under these facts, the Web site has marketed all such 
products, including general-purpose reloadable cards, as gift cards 
or gift certificates, and the exclusion in Sec.  1005.20(b)(2) does 
not apply.
    6. Temporary non-reloadable cards issued in connection with a 
general-purpose reloadable card. Certain general-purpose reloadable 
cards that are typically marketed as an account substitute initially 
may be sold or issued in the form of a temporary non-reloadable 
card. After the card is purchased, the cardholder is typically 
required to call the issuer to register the card and to provide 
identifying information in order to obtain a reloadable replacement 
card. In most cases, the temporary non-reloadable card can be used 
for purchases until the replacement reloadable card arrives and is 
activated by the cardholder. Because the temporary non-reloadable 
card may only be obtained in connection with the general-purpose 
reloadable card, the exclusion in Sec.  1005.20(b)(2) applies so 
long as the card is not marketed as a gift card or gift certificate.

Paragraph 20(b)(4)

    1. Marketed to the general public. A card, code, or other device 
is marketed to the general public if the potential use of the card, 
code, or other device is directly or indirectly offered, advertised, 
or otherwise promoted to the general public. A card, code, or other 
device may be marketed to the general public through any advertising 
medium, including television, radio, newspaper, the Internet, or 
signage. However, the posting of a company policy that funds may be 
disbursed by prepaid card (such as a sign posted at a cash register 
or customer service center stating that store credit will be issued 
by prepaid card) does not constitute the marketing of a card, code, 
or other device to the general public. In addition, the method of 
distribution by itself is not dispositive in determining whether a 
card, code, or other device is marketed to the general public. 
Factors that may be considered in determining whether the exclusion 
applies to a particular card, code, or other device include the 
means or channel through which the card, code, or device may be 
obtained by a consumer, the subset of consumers that are eligible to 
obtain the card, code, or device, and whether the availability of 
the card, code, or device is advertised or otherwise promoted in the 
marketplace.
    2. Examples. The following examples illustrate the application 
of the exclusion in Sec.  1005.20(b)(4):
    i. A merchant sells its gift cards at a discount to a business 
which may give them to employees or loyal consumers as incentives or 
rewards. In determining whether the gift card falls within the 
exclusion in Sec.  1005.20(b)(4), the merchant must consider whether 
the card is of a type that is advertised or made available to 
consumers generally or can be obtained elsewhere. If the card can 
also be purchased through retail channels, the exclusion in Sec.  
1005.20(b)(4) does not apply, even if the consumer obtained the card 
from the business as an incentive or reward. See, however, Sec.  
1005.20(b)(3).
    ii. A national retail chain decides to market its gift cards 
only to members of its frequent buyer program. Similarly, a bank may 
decide to sell gift cards only to its customers. If a member of the 
general public may become a member of the program or a customer of 
the bank, the card does not fall within the exclusion in Sec.  
1005.20(b)(4) because the general public has the ability to obtain 
the cards. See, however, Sec.  1005.20(b)(3).
    iii. A card issuer advertises a reloadable card to teenagers and 
their parents promoting the card for use by teenagers for occasional 
expenses, schoolbooks and emergencies and by parents to monitor 
spending. Because the card is marketed to and may be sold to any 
member of the general public, the exclusion in Sec.  1005.20(b)(4) 
does not apply. See, however, Sec.  1005.20(b)(2).
    iv. An insurance company settles a policyholder's claim and 
distributes the insurance proceeds to the consumer by means of a 
prepaid card. Because the prepaid card is simply the means for 
providing the insurance proceeds to the consumer and the 
availability of the card is not advertised to the general public, 
the exclusion in Sec.  1005.20(b)(4) applies.
    v. A merchant provides store credit to a consumer following a 
merchandise return by issuing a prepaid card that clearly indicates 
that the card contains funds for store credit. Because the prepaid 
card is issued for the stated purpose of providing store credit to 
the consumer and the ability to receive refunds by a prepaid card is 
not advertised to the general public, the exclusion in Sec.  
1005.20(b)(4) applies.
    vi. A tax preparation company elects to distribute tax refunds 
to its clients by issuing prepaid cards, but does not advertise or 
otherwise promote the ability to receive proceeds in this manner. 
Because the prepaid card is simply the mechanism for providing the 
tax refund to the consumer, and the tax preparer does not advertise 
the ability to obtain tax refunds by a prepaid card, the exclusion 
in Sec.  1005.20(b)(4) applies. However, if the tax preparer 
promotes the ability to receive tax refund proceeds through a 
prepaid card as a way to obtain ``faster'' access to the proceeds, 
the exclusion in Sec.  1005.20(b)(4) does not apply.

Paragraph 20(b)(5)

    1. Exclusion explained. To qualify for the exclusion in Sec.  
1005.20(b)(5), the sole means of issuing the card, code, or other 
device must be in a paper form. Thus, the exclusion generally 
applies to certificates issued in paper form where solely the paper 
itself may be used to purchase goods or services. A card, code or 
other device is not issued solely in paper form simply because it 
may be reproduced or printed on paper. For example, a bar code, card 
or certificate number, or certificate or coupon electronically 
provided to a consumer and redeemable for goods and services is not 
issued in paper form, even if it may be reproduced or otherwise 
printed on paper by the consumer. In this circumstance, although the 
consumer might hold a paper facsimile of the card, code, or other 
device, the exclusion does not apply because the information 
necessary to redeem the value was initially issued in electronic 
form. A paper certificate is within the exclusion regardless of 
whether it may be redeemed electronically. For example, a paper 
certificate or receipt that bears a bar code, code, or account 
number falls within the exclusion in Sec.  1005.20(b)(5) if the bar 
code, code, or account number is not issued in any form other than 
on the paper. In addition, the exclusion in Sec.  1005.20(b)(5) 
continues to apply in circumstances where an issuer replaces a gift 
certificate that was initially issued in paper form with a card or 
electronic code (for example, to replace a lost paper certificate).
    2. Examples. The following examples illustrate the application 
of the exclusion in Sec.  1005.20(b)(5):
    i. A merchant issues a paper gift certificate that entitles the 
bearer to a specified dollar amount that can be applied towards a 
future meal. The merchant fills in the certificate with the name of 
the certificate holder and the amount of the certificate. The 
certificate falls within the exclusion in Sec.  1005.20(b)(5) 
because it is issued in paper form only.
    ii. A merchant allows a consumer to prepay for a good or 
service, such as a car wash or time at a parking meter, and issues a 
paper receipt bearing a numerical or bar code that the consumer may 
redeem to obtain the good or service. The exclusion in Sec.  
1005.20(b)(5) applies because the code is issued in paper form only.
    iii. A merchant issues a paper certificate or receipt bearing a 
bar code or certificate number that can later be scanned or entered 
into the merchant's system and redeemed by the certificate or 
receipt holder towards the purchase of goods or services. The bar 
code or certificate number is not issued by the merchant in any form 
other than paper. The exclusion in Sec.  1005.20(b)(5) applies 
because the bar code or certificate number is issued in paper form 
only.
    iv. An online merchant electronically provides a bar code, card 
or certificate number, or certificate or coupon to a

[[Page 81056]]

consumer that the consumer may print on a home printer and later 
redeem towards the purchase of goods or services. The exclusion in 
Sec.  1005.20(b)(5) does not apply because the bar code or card or 
certificate number was issued to the consumer in electronic form, 
even though it can be reproduced or otherwise printed on paper by 
the consumer.

Paragraph 20(b)(6)

    1. Exclusion explained. The exclusion for cards, codes, or other 
devices that are redeemable solely for admission to events or venues 
at a particular location or group of affiliated locations generally 
applies to cards, codes, or other devices that are not redeemed for 
a specified monetary value, but rather solely for admission or entry 
to an event or venue. The exclusion also covers a card, code, or 
other device that is usable to purchase goods or services in 
addition to entry into the event or the venue, either at the event 
or venue or at an affiliated location or location in geographic 
proximity to the event or venue.
    2. Examples. The following examples illustrate the application 
of the exclusion in Sec.  1005.20(b)(6):
    i. A consumer purchases a prepaid card that entitles the holder 
to a ticket for entry to an amusement park. The prepaid card may 
only be used for entry to the park. The card qualifies for the 
exclusion in Sec.  1005.20(b)(6) because it is redeemable for 
admission or entry and for goods or services in conjunction with 
that admission. In addition, if the prepaid card does not have a 
monetary value, and therefore is not ``issued in a specified 
amount,'' the card does not meet the definitions of ``gift 
certificate,'' ``store gift card,'' or ``general-use prepaid card'' 
in Sec.  1005.20(a). See comment 20(a)-3.
    ii. Same facts as in i., except that the gift card also entitles 
the holder of the gift card to a dollar amount that can be applied 
towards the purchase of food and beverages or goods or services at 
the park or at nearby affiliated locations. The card qualifies for 
the exclusion in Sec.  1005.20(b)(6) because it is redeemable for 
admission or entry and for goods or services in conjunction with 
that admission.
    iii. A consumer purchases a $25 gift card that the holder of the 
gift card can use to make purchases at a merchant, or, 
alternatively, can apply towards the cost of admission to the 
merchant's affiliated amusement park. The card is not eligible for 
the exclusion in Sec.  1005.20(b)(6) because it is not redeemable 
solely for the admission or ticket itself (or for goods and services 
purchased in conjunction with such admission). The card meets the 
definition of ``store gift card'' and is therefore subject to Sec.  
1005.20, unless a different exclusion applies.

20(c) Form of Disclosures

20(c)(1) Clear and Conspicuous

    1. Clear and conspicuous standard. All disclosures required by 
this section must be clear and conspicuous. Disclosures are clear 
and conspicuous for purposes of this section if they are readily 
understandable and, in the case of written and electronic 
disclosures, the location and type size are readily noticeable to 
consumers. Disclosures need not be located on the front of the 
certificate or card, except where otherwise required, to be 
considered clear and conspicuous. Disclosures are clear and 
conspicuous for the purposes of this section if they are in a print 
that contrasts with and is otherwise not obstructed by the 
background on which they are printed. For example, disclosures on a 
card or computer screen are not likely to be conspicuous if obscured 
by a logo printed in the background. Similarly, disclosures on the 
back of a card that are printed on top of indentations from embossed 
type on the front of the card are not likely to be conspicuous if 
the indentations obstruct the readability of the disclosures. To the 
extent permitted, oral disclosures meet the standard when they are 
given at a volume and speed sufficient for a consumer to hear and 
comprehend them.
    2. Abbreviations and symbols. Disclosures may contain commonly 
accepted or readily understandable abbreviations or symbols, such as 
``mo.'' for month or a ``/'' to indicate ``per.'' Under the clear 
and conspicuous standard, it is sufficient to state, for example, 
that a particular fee is charged ``$2.50/mo. after 12 mos.''

20(c)(2) Format

    1. Electronic disclosures. Disclosures provided electronically 
pursuant to this section are not subject to compliance with the 
consumer consent and other applicable provisions of the Electronic 
Signatures in Global and National Commerce Act (E-Sign Act) (15 
U.S.C. 7001 et seq.). Electronic disclosures must be in a retainable 
form. For example, a person may satisfy the requirement if it 
provides an online disclosure in a format that is capable of being 
printed. Electronic disclosures may not be provided through a 
hyperlink or in another manner by which the purchaser can bypass the 
disclosure. A person is not required to confirm that the consumer 
has read the electronic disclosures.

20(c)(3) Disclosure Prior to Purchase

    1. Method of purchase. The disclosures required by this 
paragraph must be provided before a certificate or card is purchased 
regardless of whether the certificate or card is purchased in 
person, online, by telephone, or by other means.
    2. Electronic disclosures. Section 1005.20(c)(3) provides that 
the disclosures required by this section must be provided to the 
consumer prior to purchase. For certificates or cards purchased 
electronically, disclosures made to the consumer after a consumer 
has initiated an online purchase of a certificate or card, but prior 
to completing the purchase of the certificate or card, would satisfy 
the prior-to-purchase requirement. However, electronic disclosures 
made available on a person's Web site that may or may not be 
accessed by the consumer are not provided to the consumer and 
therefore would not satisfy the prior-to-purchase requirement.
    3. Non-physical certificates and cards. If no physical 
certificate or card is issued, the disclosures must be provided to 
the consumer before the certificate or card is purchased. For 
example, where a gift certificate or card is a code that is provided 
by telephone, the required disclosures may be provided orally prior 
to purchase. See also Sec.  1005.20(c)(2).

20(c)(4) Disclosures on the Certificate or Card

    1. Non-physical certificates and cards. If no physical 
certificate or card is issued, the disclosures required by this 
paragraph must be disclosed on the code, confirmation, or other 
written or electronic document provided to the consumer. For 
example, where a gift certificate or card is a code or confirmation 
that is provided to a consumer online or sent to a consumer's email 
address, the required disclosures may be provided electronically on 
the same document as the code or confirmation.
    2. No disclosures on a certificate or card. Disclosures required 
by Sec.  1005.20(c)(4) need not be made on a certificate or card if 
it is accompanied by a certificate or card that complies with this 
section. For example, a person may issue or sell a supplemental gift 
card that is smaller than a standard size and that does not bear the 
applicable disclosures if it is accompanied by a fully compliant 
certificate or card. See also comment 20(c)(2)-2.

20(d) Prohibition on Imposition of Fees or Charges

    1. One-year period. Section 1005.20(d) provides that a person 
may impose a dormancy, inactivity, or service fee only if there has 
been no activity with respect to a certificate or card for one year. 
The following examples illustrate this rule:
    i. A certificate or card is purchased on January 15 of year one. 
If there has been no activity on the certificate or card since the 
certificate or card was purchased, a dormancy, inactivity, or 
service fee may be imposed on the certificate or card on January 15 
of year two.
    ii. Same facts as i., and a fee was imposed on January 15 of 
year two. Because no more than one dormancy, inactivity, or service 
fee may be imposed in any given calendar month, the earliest date 
that another dormancy, inactivity, or service fee may be imposed, 
assuming there continues to be no activity on the certificate or 
card, is February 1 of year two. A dormancy, inactivity, or service 
fee is permitted to be imposed on February 1 of year two because 
there has been no activity on the certificate or card for the 
preceding year (February 1 of year one through January 31 of year 
two), and February is a new calendar month. The imposition of a fee 
on January 15 of year two is not activity for purposes of Sec.  
1005.20(d). See comment 20(a)(7)-1.
    iii. Same facts as i., and a fee was imposed on January 15 of 
year two. On January 31 of year two, the consumer uses the card to 
make a purchase. Another dormancy, inactivity, or service fee could 
not be imposed until January 31 of year three, assuming there has 
been no activity on the certificate or card since January 31 of year 
two.
    2. Relationship between Sec. Sec.  1005.20(d)(2) and (c)(3). 
Sections 1005.20(d)(2) and (c)(3) contain similar, but not 
identical, disclosure requirements. Section 1005.20(d)(2) requires 
the disclosure of dormancy, inactivity, and

[[Page 81057]]

service fees on a certificate or card. Section 1005.20(c)(3) 
requires that vendor person that issues or sells such certificate or 
card disclose to a consumer any dormancy, inactivity, and service 
fees associated with the certificate or card before such certificate 
or card may be purchased. Depending on the context, a single 
disclosure that meets the clear and conspicuous requirements of both 
Sec. Sec.  1005.20(d)(2) and (c)(3) may be used to disclose a 
dormancy, inactivity, or service fee. For example, if the 
disclosures on a certificate or card, required by Sec.  
1005.20(d)(2), are visible to the consumer without having to remove 
packaging or other materials sold with the certificate or card, for 
a purchase made in person, the disclosures also meet the 
requirements of Sec.  1005.20(c)(3). Otherwise, a dormancy, 
inactivity, or service fee may need to be disclosed multiple times 
to satisfy the requirements of Sec. Sec.  1005.20(d)(2) and (c)(3). 
For example, if the disclosures on a certificate or card, required 
by Sec.  1005.20(d)(2), are obstructed by packaging sold with the 
certificate or card, for a purchase made in person, they also must 
be disclosed on the packaging sold with the certificate or card to 
meet the requirements of Sec.  1005.20(c)(3).
    3. Relationship between Sec. Sec.  1005.20(d)(2), (e)(3), and 
(f)(2). In addition to any disclosures required under Sec.  
1005.20(d)(2), any applicable disclosures under Sec. Sec.  
1005.20(e)(3) and (f)(2) of this section must also be provided on 
the certificate or card.
    4. One fee per month. Under Sec.  1005.20(d)(3), no more than 
one dormancy, inactivity, or service fee may be imposed in any given 
calendar month. For example, if a dormancy fee is imposed on January 
1, following a year of inactivity, and a consumer makes a balance 
inquiry on January 15, a balance inquiry fee may not be imposed at 
that time because a dormancy fee was already imposed earlier that 
month and a balance inquiry fee is a type of service fee. If, 
however, the dormancy fee could be imposed on January 1, following a 
year of inactivity, and the consumer makes a balance inquiry on the 
same date, the person assessing the fees may choose whether to 
impose the dormancy fee or the balance inquiry fee on January 1. The 
restriction in Sec.  1005.20(d)(3) does not apply to any fee that is 
not a dormancy, inactivity, or service fee. For example, assume a 
service fee is imposed on a general-use prepaid card on January 1, 
following a year of inactivity. If a consumer cashes out the 
remaining funds by check on January 15, a cash-out fee, to the 
extent such cash-out fee is permitted under Sec.  1005.20(e)(4), may 
be imposed at that time because a cash-out fee is not a dormancy, 
inactivity, or service fee.
    5. Accumulation of fees. Section 1005.20(d) prohibits the 
accumulation of dormancy, inactivity, or service fees for previous 
periods into a single fee because such a practice would circumvent 
the limitation in Sec.  1005.20(d)(3) that only one fee may be 
charged per month. For example, if a consumer purchases and 
activates a store gift card on January 1 but never uses the card, a 
monthly maintenance fee of $2.00 a month may not be accumulated such 
that a fee of $24 is imposed on January 1 the following year.

20(e) Prohibition on Sale of Gift Certificates or Cards With 
Expiration Dates

    1. Reasonable opportunity. Under Sec.  1005.20(e)(1), no person 
may sell or issue a gift certificate, store gift card, or general-
use prepaid card with an expiration date, unless there are policies 
and procedures in place to provide consumers with a reasonable 
opportunity to purchase a certificate or card with at least five 
years remaining until the certificate or card expiration date. 
Consumers are deemed to have a reasonable opportunity to purchase a 
certificate or card with at least five years remaining until the 
certificate or card expiration date if:
    i. There are policies and procedures established to prevent the 
sale of a certificate or card unless the certificate or card 
expiration date is at least five years after the date the 
certificate or card was sold or initially issued to a consumer; or
    ii. A certificate or card is available to consumers to purchase 
five years and six months before the certificate or card expiration 
date.
    2. Applicability to replacement certificates or cards. Section 
1005.20(e)(1) applies solely to the purchase of a certificate or 
card. Therefore, Sec.  1005.20(e)(1) does not apply to the 
replacement of such certificates or cards. Certificates or cards 
issued as a replacement may bear a certificate or card expiration 
date of less than five years from the date of issuance of the 
replacement certificate or card. If the certificate or card 
expiration date for a replacement certificate or card is later than 
the date set forth in Sec.  1005.20(e)(2)(i), then pursuant to Sec.  
1005.20(e)(2), the expiration date for the underlying funds at the 
time the replacement certificate or card is issued must be no 
earlier than the expiration date for the replacement certificate or 
card. For purposes of Sec.  1005.20(e)(2), funds are not considered 
to be loaded to a store gift card or general-use prepaid card solely 
because a replacement card has been issued or activated for use.
    3. Disclosure of funds expiration--date not required. Section 
1005.20(e)(3)(i) does not require disclosure of the precise date the 
funds will expire. It is sufficient to disclose, for example, 
``Funds expire 5 years from the date funds last loaded to the 
card.''; ``Funds can be used 5 years from the date money was last 
added to the card.''; or ``Funds do not expire.''
    4. Disclosure not required if no expiration date. If the 
certificate or card and underlying funds do not expire, the 
disclosure required by Sec.  1005.20(e)(3)(i) need not be stated on 
the certificate or card. If the certificate or card and underlying 
funds expire at the same time, only one expiration date need be 
disclosed on the certificate or card.
    5. Reference to toll-free telephone number and Web site. If a 
certificate or card does not expire, or if the underlying funds are 
not available after the certificate or card expires, the disclosure 
required by Sec.  1005.20(e)(3)(ii) need not be stated on the 
certificate or card. See, however, Sec.  1005.20(f)(2).
    6. Relationship to Sec.  226.20(f)(2). The same toll-free 
telephone number and Web site may be used to comply with Sec. Sec.  
226.20(e)(3)(ii) and (f)(2). Neither a toll-free number nor a Web 
site must be maintained or disclosed if no fees are imposed in 
connection with a certificate or card, and the certificate or card 
and the underlying funds do not expire.
    7. Distinguishing between certificate or card expiration and 
funds expiration. If applicable, a disclosure must be made on the 
certificate or card that notifies a consumer that the certificate or 
card expires, but the funds either do not expire or expire later 
than the certificate or card, and that the consumer may contact the 
issuer for a replacement card. The disclosure must be made with 
equal prominence and in close proximity to the certificate or card 
expiration date. The close proximity requirement does not apply to 
oral disclosures. In the case of a certificate or card, close 
proximity means that the disclosure must be on the same side as the 
certificate or card expiration date. For example, if the disclosure 
is the same type size and is located immediately next to or directly 
above or below the certificate or card expiration date, without any 
intervening text or graphical displays, the disclosures would be 
deemed to be equally prominent and in close proximity. The 
disclosure need not be embossed on the certificate or card to be 
deemed equally prominent, even if the expiration date is embossed on 
the certificate or card. The disclosure may state on the front of 
the card, for example, ``Funds expire after card. Call for 
replacement card.'' or ``Funds do not expire. Call for new card 
after 09/2016.'' Disclosures made pursuant to Sec.  
1005.20(e)(3)(iii)(A) may also fulfill the requirements of Sec.  
1005.20(e)(3)(i). For example, making a disclosure that ``Funds do 
not expire'' to comply with Sec.  1005.20(e)(3)(iii)(A) also 
fulfills the requirements of Sec.  1005.20(e)(3)(i).
    8. Expiration date safe harbor. A non-reloadable certificate or 
card that bears an expiration date that is at least seven years from 
the date of manufacture need not state the disclosure required by 
Sec.  1005.20(e)(3)(iii). However, Sec.  1005.20(e)(1) still 
prohibits the sale or issuance of such certificate or card unless 
there are policies and procedures in place to provide a consumer 
with a reasonable opportunity to purchase the certificate or card 
with at least five years remaining until the certificate or card 
expiration date. In addition, under Sec.  1005.20(e)(2), the funds 
may not expire before the certificate or card expiration date, even 
if the expiration date of the certificate or card bears an 
expiration date that is more than five years from the date of 
purchase. For purposes of this safe harbor, the date of manufacture 
is the date on which the certificate or card expiration date is 
printed on the certificate or card.
    9. Relationship between Sec. Sec.  1005.20(d)(2), (e)(3), and 
(f)(2). In addition to any disclosures required to be made under 
Sec.  1005.20(e)(3), any applicable disclosures under Sec. Sec.  
1005.20(d)(2) and (f)(2) must also be provided on the certificate or 
card.
    10. Replacement or remaining balance of an expired certificate 
or card. When a certificate or card expires, but the underlying 
funds have not expired, an issuer, at its option in accordance with 
applicable state

[[Page 81058]]

law, may provide either a replacement certificate or card or 
otherwise provide the certificate or card holder, for example, by 
check, with the remaining balance on the certificate or card. In 
either case, the issuer may not charge a fee for the service.
    11. Replacement of a lost or stolen certificate or card not 
required. Section 1005.20(e)(4) does not require the replacement of 
a certificate or card that has been lost or stolen.
    12. Date of issuance or loading. For purposes of Sec.  
1005.20(e)(2)(i), a certificate or card is not issued or loaded with 
funds until the certificate or card is activated for use.
    13. Application of expiration date provisions after redemption 
of certificate or card. The requirement that funds underlying a 
certificate or card must not expire for at least five years from the 
date of issuance or date of last load ceases to apply once the 
certificate or card has been fully redeemed, even if the underlying 
funds are not used to contemporaneously purchase a specific good or 
service. For example, some certificates or cards can be used to 
purchase music, media, or virtual goods. Once redeemed by a 
consumer, the entire balance on the certificate or card is debited 
from the certificate or card and credited or transferred to another 
``account'' established by the merchant of such goods or services. 
The consumer can then make purchases of songs, media, or virtual 
goods from the merchant using that ``account'' either at the time 
the value is transferred from the certificate or card or at a later 
time. Under these circumstances, once the card has been fully 
redeemed and the ``account'' credited with the amount of the 
underlying funds, the five-year minimum expiration term no longer 
applies to the underlying funds. However, if the consumer only 
partially redeems the value of the certificate or card, the five-
year minimum expiration term requirement continues to apply to the 
funds remaining on the certificate or card.

20(f) Additional Disclosure Requirements for Gift Certificates or 
Cards

    1. Reference to toll-free telephone number and Web site. If a 
certificate or card does not have any fees, the disclosure under 
Sec.  1005.20(f)(2) is not required on the certificate or card. See, 
however, Sec.  1005.20(e)(3)(ii).
    2. Relationship to Sec.  226.20(e)(3)(ii). The same toll-free 
telephone number and Web site may be used to comply with Sec. Sec.  
226.20(e)(3)(ii) and (f)(2). Neither a toll-free number nor a Web 
site must be maintained or disclosed if no fees are imposed in 
connection with a certificate or card, and both the certificate or 
card and underlying funds do not expire.
    3. Relationship between Sec. Sec.  1005.20(d)(2), (e)(3), and 
(f)(2). In addition to any disclosures required pursuant to Sec.  
1005.20(f)(2), any applicable disclosures under Sec. Sec.  
1005.20(d)(2) and (e)(3) must also be provided on the certificate or 
card.

20(g) Compliance Dates

    1. Period of eligibility for loyalty, award, or promotional 
programs. For purposes of Sec.  1005.20(g)(2), the period of 
eligibility is the time period during which a consumer must engage 
in a certain action or actions to meet the terms of eligibility for 
a loyalty, award, or promotional program and obtain the card, code, 
or other device. Under Sec.  1005.20(g)(2), a gift card issued 
pursuant to a loyalty, award, or promotional program that began 
prior to August 22, 2010 need not state the disclosures in Sec.  
1005.20(a)(4)(iii) regardless of whether the consumer became 
eligible to receive the gift card prior to August 22, 2010, or after 
that date. For example, a product manufacturer may provide a $20 
rebate card to a consumer if the consumer purchases a particular 
product and submits a fully completed entry between January 1, 2010 
and December 31, 2010. Similarly, a merchant may provide a $20 gift 
card to a consumer if the consumer makes $200 worth of qualifying 
purchases between June 1, 2010 and October 30, 2010. Under both 
examples, gift cards provided pursuant to these loyalty, award, or 
promotional programs need not state the disclosures in Sec.  
1005.20(a)(4)(iii) to qualify for the exclusion in Sec.  
1005.20(b)(3) for loyalty, award, or promotional gift cards because 
the period of eligibility for each program began prior to August 22, 
2010.

20(h) Temporary Exemption

20(h)(1) Delayed Effective Date

    1. Application to certificates or cards produced prior to April 
1, 2010. Certificates or cards produced prior to April 1, 2010 may 
be sold to a consumer on or after August 22, 2010 without satisfying 
the requirements of Sec. Sec.  1005.20(c)(3), (d)(2), (e)(1), 
(e)(3), and (f) through January 30, 2011, provided that issuers of 
such certificates or cards comply with the additional substantive 
and disclosure requirements of Sec. Sec.  1005.20(h)(1)(i) through 
(iv). Issuers of certificates or cards produced prior to April 1, 
2010 need not satisfy these additional requirements if the 
certificates or cards fully comply with the rule (Sec. Sec.  
1005.20(a) through (f)). For example, the in-store signage and other 
disclosures required by Sec.  1005.20(h)(2) do not apply to gift 
cards produced prior to April 1, 2010 that do not have fees and do 
not expire, and which otherwise comply with the rule.
    2. Expiration of temporary exemption. Certificates or cards 
produced prior to April 1, 2010 that do not fully comply with 
Sec. Sec.  1005.20(a) through (f) may not be issued or sold to 
consumers on or after January 31, 2011.

20(h)(2) Additional Disclosures

    1. Disclosures through third parties. Issuers may make the 
disclosures required by Sec.  1005.20(h)(2) through a third party, 
such as a retailer or merchant. For example, an issuer may have a 
merchant install in-store signage with the disclosures required by 
Sec.  1005.20(h)(2) on the issuer's behalf.
    2. General advertising disclosures. Section 1005.20(h)(2) does 
not impose an obligation on the issuer to advertise gift 
certificates, store gift cards, or general-use prepaid cards.

Appendix A--Model Disclosure Clauses and Forms

    1. Review of forms. The Bureau will not review or approve 
disclosure forms or statements for financial institutions. However, 
the Bureau has issued model clauses for institutions to use in 
designing their disclosures. If an institution uses these clauses 
accurately to reflect its service, the institution is protected from 
liability for failure to make disclosures in proper form.
    2. Use of forms. The appendix contains model disclosure clauses 
for optional use by financial institutions to facilitate compliance 
with the disclosure requirements of sections 1005.5(b)(2) and 
(b)(3), 1005.6(a), 1005.7, 1005.8(b), 1005.14(b)(1)(ii), 
1005.15(d)(1) and (d)(2), and 1005.18(c)(1) and (c)(2). The use of 
appropriate clauses in making disclosures will protect a financial 
institution from liability under sections 916 and 917 of the Act 
provided the clauses accurately reflect the institution's EFT 
services.
    3. Altering the clauses. Financial institutions may use clauses 
of their own design in conjunction with the Bureau's model clauses. 
The inapplicable words or portions of phrases in parentheses should 
be deleted. The catchlines are not part of the clauses and need not 
be used. Financial institutions may make alterations, substitutions, 
or additions in the clauses to reflect the services offered, such as 
technical changes (including the substitution of a trade name for 
the word ``card,'' deletion of inapplicable services, or 
substitution of lesser liability limits). Several of the model 
clauses include references to a telephone number and address. Where 
two or more of these clauses are used in a disclosure, the telephone 
number and address may be referenced and need not be repeated.

    Dated: October 24, 2011.
Alastair M. Fitzpayne,
Deputy Chief of Staff and Executive Secretary, Department of the 
Treasury.
[FR Doc. 2011-31725 Filed 12-23-11; 8:45 am]
BILLING CODE 4810-AM-P
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