Federal Register / Vol. 71, No. 168 / Wednesday, August 30, 2006 / Rules and Regulations 51437 

eligible for importation, APHIS will 

issue an import permit indicating the 

applicable conditions for importation. 

An import permit does not guarantee 

that any live fish, fertilized eggs, or 

gametes will be allowed entry into the 

United States; the fish, fertilized eggs, or 

gametes will be allowed to enter the 

United States only if they meet all 

applicable requirements of the permit 

and regulations. 

(Approved by the Office of Management and 

Budget under control number 0579–0301) 

§ 93.904 Health certificate for live fish, 

fertilized eggs, and gametes. 

(a) General. All live fish, fertilized 

eggs, and gametes of SVC-susceptible 

species that are imported from any 

region of the world must be 

accompanied by a health certificate 

issued by a full-time salaried 

veterinarian of the national government 

of the exporting region, or issued by a 

certifying official and endorsed by the 

competent authority of that country. 

The health certificate must be written in 

English or contain an English 

translation. The health certificate will 

be valid for 30 days from the date of 

issuance. The health certificate for the 

live fish, fertilized eggs, or gametes must 

state that: 

(1) The live fish, fertilized eggs, or 

gametes were inspected by the 

veterinarian or certifying official who 

issued the certificate within 72 hours 

prior to shipment, and were found to be 

free of any clinical signs of disease 

consistent with SVC; and 

(2) The live fish, fertilized eggs, or 

gametes covered by the health certificate 

meet the requirements of this section. 

(b) Surveillance. The live fish, 

fertilized eggs, or gametes must meet the 

following conditions to be eligible for 

importation into the United States: 

(1) The live fish, fertilized eggs, or 

gametes must originate in a region or 

establishment which conducts a 

surveillance program for SVC under the 

supervision of the competent authority. 

(2) The region or establishment must 

demonstrate freedom from SVC through 

a minimum of 2-years’ continuous 

health history, supported by laboratory 

testing by a pathogen detection facility 

approved for SVC viral assays by the 

competent authority. 

(3) SVC-susceptible fish populations 

in the region or establishment must be 

tested at least twice annually, with at 

least 3 months between the tests and at 

times or under environmental 

conditions that would facilitate the 

detection of SVCV if it were present. 

Sampling procedures must utilize an 

assumed pathogen prevalence of 2 

percent, with a corresponding 

confidence level of 95 percent. Samples 

must be collected and submitted by a 

certifying official or veterinarian 

recognized by the competent authority. 

The standard screening method for SVC 

must include isolation of SVCV in cell 

culture, using either the epithelioma 

papulosum cyprini (EPC) or fathead 

minnow (FHM) cell lines. However, the 

Administrator may authorize other 

assays for SVCV detection in lieu of 

virus isolation through cell culture, if 

the Administrator determines that such 

assays provide equivalent assurance of 

the SVC status of an exporting region or 

establishment. All viral testing results 

must be negative. 

(c) Shipping containers. All live fish, 

fertilized eggs, and gametes must be 

shipped to the United States in new 

containers or in used containers that 

have been cleaned and disinfected in 

accordance with this section. 

(1) Cleaning and disinfection of 

shipping containers must take place 

under the supervision of the 

veterinarian or certifying official who 

issues the health certificate. 

(2) Cleaning and disinfection must be 

sufficient to neutralize any SVC virus to 

which shipping containers may have 

been exposed. Acceptable disinfection 

procedures include individual or 

combination treatments with: Solutions 

having a pH of 12 or higher or 3 or 

lower with a contact time of at least 10 

minutes; heat at or above 56° C for at 

least 15 minutes; chlorine solutions 

having a concentration of at least 500 

ppm with a contact time of at least 10 

minutes; iodine solutions having a 

concentration of at least 100 ppm with 

a contact time of at least 10 minutes; 

ultraviolet exposure (254 nm; min 

exposure of 10,000 microwatt seconds/ 

cm2); or other disinfectants such as 

Virkon used according to the 

manufacturer’s directions. The 

Administrator may authorize other 

procedures if the Administrator 

determines they are adequate to 

neutralize the SVC virus. 

(3) Cleaning and disinfection 

protocols must be referenced in the 

health certificate or in a separate 

cleaning and disinfection certificate 

accompanying the shipment to the U.S. 

port of entry. 

(Approved by the Office of Management and 

Budget under control number 0579–0301) 

§ 93.905 Declaration and other documents 

for live fish, fertilized eggs, and gametes. 

(a) For all live fish, fertilized eggs, and 

gametes offered for importation under 

this subpart, the importer or his or her 

agent must submit the following 

documents to the collector of customs 

for use by the port veterinarian: 

(1) All permits, certificates, or other 

documentation required by this subpart; 

and 

(2) Two copies of a declaration that 

lists the port of entry, the name and 

address of the importer, the name and 

address of the broker, the origin of the 

live fish, fertilized eggs, or gametes, the 

number, species, and the purpose of the 

importation, the name of the person to 

whom the fish will be delivered, and the 

location of the place to which such 

delivery will be made. 

(b) [Reserved] 

(Approved by the Office of Management and 

Budget under control number 0579–0301) 

§ 93.906 Inspection at the port of entry. 

(a) All live fish, fertilized eggs, and 

gametes of SVC-susceptible species 

imported from any part of the world 

must be presented for inspection at a 

port of entry designated under § 93.902. 

The APHIS port veterinarian must be 

notified at least 72 hours in advance of 

the arrival in the United States of a 

shipment of live fish, fertilized eggs, or 

gametes of SVC-susceptible species. 

Any shipment of live SVC-susceptible 

fish species that the port veterinarian 

determines to exhibit clinical signs 

consistent with SVCV infection or 

disease, or any shipments of live fish, 

fertilized eggs, and gametes of SVCsusceptible species that otherwise do 

not meet the requirements of this 

subpart, shall be refused entry. 

(b) Shipments refused entry, unless 

exported within a time fixed in each 

case by the Administrator, and in 

accordance with other provisions he or 

she may require in each case for their 

handling, shall be disposed of as the 

Administrator may direct. 

(Approved by the Office of Management and 

Budget under control number 0579–0301) 

Done in Washington, DC, this 24th day of 

August 2006. 

Kevin Shea, 

Acting Administrator, Animal and Plant 

Health Inspection Service. 

[FR Doc. E6–14478 Filed 8–29–06; 8:45 am] 

BILLING CODE 3410–34–P 

FEDERAL RESERVE SYSTEM 

12 CFR Part 205 

[Regulation E; Docket No. R–1247] 

Electronic Fund Transfers 

AGENCY: Board of Governors of the 

Federal Reserve System. 

ACTION: Final rule. 

SUMMARY: The Board is amending 

Regulation E, which implements the 


jlentini on PROD1PC65 with RULES
51438 Federal Register / Vol. 71, No. 168 / Wednesday, August 30, 2006 / Rules and Regulations 

Electronic Fund Transfer Act, and the 

official staff commentary to the 

regulation, which interprets the 

requirements of Regulation E. The final 

rule provides that Regulation E covers 

payroll card accounts that are 

established directly or indirectly 

through an employer, and to which 

transfers of the consumer’s salary, 

wages, or other employee compensation 

are made on a recurring basis. The final 

rule also provides financial institutions 

with an alternative to providing 

periodic statements for payroll card 

accounts if they make account 

information available to consumers by 

specified means. 

DATES: This final rule is effective July 1, 

2007. 

FOR FURTHER INFORMATION CONTACT: Ky 

Tran-Trong, Senior Attorney, or David 

A. Stein or John C. Wood, Counsels, 

Division of Consumer and Community 

Affairs, Board of Governors of the 

Federal Reserve System, Washington, 

DC 20551, at (202) 452–2412 or (202) 

452–3667. For users of 

Telecommunications Device for the Deaf 

(TDD) only, contact (202) 263–4869. 

SUPPLEMENTARY INFORMATION: 

I. Statutory Background 

The Electronic Fund Transfer Act (15 

U.S.C. 1693 et seq.) (EFTA or Act), 

enacted in 1978, provides a basic 

framework establishing the rights, 

liabilities, and responsibilities of 

participants in electronic fund transfer 

(EFT) systems. The EFTA is 

implemented by the Board’s Regulation 

E (12 CFR part 205). Examples of types 

of transfers covered by the Act and 

regulation include transfers initiated 

through an automated teller machine 

(ATM), point-of-sale (POS) terminal, 

automated clearinghouse (ACH), 

telephone bill-payment plan, or remote 

banking service. The Act and regulation 

provide for disclosure of terms and 

conditions of an EFT service, 

documentation of EFTs by means of 

terminal receipts and periodic account 

activity statements, limitations on 

consumer liability for unauthorized 

transfers, procedures for error 

resolution, and certain rights related to 

preauthorized EFTs. The Act and 

regulation also restrict the unsolicited 

issuance of ATM cards and other access 

devices. 

The official staff commentary (12 CFR 

part 205 (Supp. I)), which interprets the 

requirements of Regulation E, is 

designed to facilitate compliance and 

provide protection from liability under 

Sections 915 and 916 of the EFTA for 

financial institutions and other persons 

subject to the Act. 15 U.S.C. 

1693m(d)(1). The commentary is 

updated periodically to address 

significant questions that arise. 

II. Background and Overview of 

Comments Received 

Payroll cards have become 

increasingly popular with some 

employers, financial institutions, and 

payroll service providers as a means of 

providing a consumer’s wages or other 

recurring compensation payments—

assets that the consumer is able to 

access and spend through an access 

device that provides functionality 

comparable to a debit card. Typically, 

an employer will arrange with a bank or 

a third-party service provider to make 

available to its employees a magnetic 

stripe-backed card; this card accesses an 

account (or subaccount) assigned to the 

individual employee. Each payday, the 

employer credits this account for the 

amount of the employee’s compensation 

instead of providing the employee with 

a paper check or making a direct deposit 

of salary to the employee’s checking or 

deposit account. The employee then can 

use the payroll card to withdraw the 

funds at an ATM and to make purchases 

at POS (and possibly get cash back). 

Some payroll cards may offer features 

such as convenience checks and 

electronic bill payment. Payroll cards 

are often marketed to employers as a 

cost-effective means of providing wages 

to employees who lack a traditional 

banking relationship. For ‘‘unbanked’’

consumers, payroll card products can 

serve as substitutes for traditional 

transaction accounts at a financial 

institution. 

On September 17, 2004, the Board 

published a notice of proposed 

rulemaking in the Federal Register (69 

FR 55,996) (September 2004 proposal) 

to provide, among other things, that the 

term ‘‘account’’ under Regulation E 

includes payroll card accounts 

established by an employer for the 

purpose of providing an employee’s 

compensation on a recurring basis. 

Under the September 2004 proposal, a 

payroll card account would be subject to 

the regulation whether it is operated or 

managed by the employer, a third-party 

payroll processor, or a depository 

institution. The Board received nearly 

50 comment letters on the proposed 

revisions addressing payroll card 

accounts. 

Both industry and consumer group 

commenters generally reacted favorably 

to the September 2004 proposal, 

agreeing that coverage of payroll card 

accounts under Regulation E was 

appropriate. Consumer groups further 

urged the Board to expand the scope of 

the proposal to cover any stored-value 

card product that is marketed or used as 

an account substitute, or that is used to 

receive payments of significant 

household funds, such as workers’

compensation or unemployment 

benefits. 

Most industry commenters urged the 

Board to grant financial institutions 

relief from the requirement to provide 

paper periodic statements. These 

commenters cited various reasons, 

including that other means of accessing 

balance and transaction information, 

such as by telephone or through the 

Internet, provided more useful and 

timely information to consumers at less 

cost to financial institutions. 

On January 10, 2006, the Board 

published an interim final rule in the 

Federal Register (71 FR 1,473) (interim 

rule), that adopted the proposed 

treatment of payroll card accounts as 

‘‘accounts’’ for purposes of coverage 

under Regulation E. In response to 

commenters’ suggestions, the interim 

rule included a new § 205.18 which 

granted financial institutions an 

alternative means to provide account 

transaction information to payroll card 

users instead of providing periodic 

statements. Specifically, a financial 

institution could provide account 

information by: (1) Making balance 

information available to the consumer 

through a readily available telephone 

line; (2) making available to the 

consumer an electronic history of the 

consumer’s account transactions, such 

as through an Internet Web site, 

covering a period of at least 60 days; 

and (3) providing promptly upon the 

consumer’s request, a written history of 

the consumer’s account transactions 

covering a period of at least 60 days 

prior to the request. The interim rule 

included additional revisions regarding 

initial disclosures, error resolution 

rights, and other consumer protections. 

To give interested parties an 

opportunity to comment on these 

modifications, particularly the 

alternative means of providing account 

information, the Board requested 

additional comment on the interim rule. 

The Board received approximately 30 

comment letters on the interim rule. A 

variety of business entities, including 

banks, credit unions, payroll services 

providers, and industry trade 

associations, provided comments. 

Consumer groups and a state attorney 

general also provided comments. This 

section provides a brief overview of the 

comments received. The section-bysection analysis discusses specific 

comments, and sets forth the Board’s 

analysis of those comments, in more 

detail. 


jlentini on PROD1PC65 with RULES
Federal Register / Vol. 71, No. 168 / Wednesday, August 30, 2006 / Rules and Regulations 51439 

Many commenters addressed the 

scope of the interim rule. Industry 

commenters generally continued to 

support the Board’s coverage of payroll 

card accounts under Regulation E. 

Several industry commenters urged the 

Board not to extend the scope of the rule 

to cover additional stored-value, or 

prepaid, products, as this could 

discourage the continued evolution of 

such products. However, other industry 

commenters recommended that the 

interim rule’s definition of ‘‘payroll card 

account’’ be extended to cover other 

card products to which a consumer 

might elect to add his or her salary by 

direct deposit and which are not 

necessarily ‘‘established by an 

employer.’’ A few industry commenters 

also expressed concern about the 

proposal to treat employers who make 

payroll cards available to their 

employees as financial institutions 

subject to the regulation. Consumer 

groups urged the Board to engage 

immediately in a separate rulemaking to 

provide specifically that Regulation E 

covers any card product that is 

marketed or used as an account 

substitute, or to any card product used 

to receive payments of significant 

household funds, such as workers’

compensation or unemployment 

benefits. 

Commenters also addressed the 

appropriateness of the interim rule’s 

alternative to providing paper periodic 

statements. Most industry commenters 

commended the Board’s grant of relief 

from the requirement to provide paper 

periodic statements if account 

information is available through 

alternative means, but many asked for 

clarification or proposed specific 

changes regarding the alternative 

methods of delivery. A few industry 

commenters asked the Board to provide 

similar relief for other types of card 

accounts, such as accounts to which 

government benefits are deposited on a 

recurring basis. In contrast, consumer 

groups asserted that full Regulation E 

protections should apply to payroll card 

accounts, including the requirement to 

provide paper periodic statements. 

These groups stated that paper periodic 

statements would enable consumers to 

track their balances and transactions 

more effectively. 

III. Summary of the Final Rule 

The Board is revising Regulation E 

substantially as published in the 

January 2006 interim rule, with one 

significant revision regarding the scope 

of entities that are subject to the 

regulation with respect to payroll card 

accounts and a few additional clarifying 

modifications. 

Under the final rule, payroll card 

accounts specifically are included in the 

definition of ‘‘account’’ for purposes of 

Regulation E. A ‘‘payroll card account’’

is defined as an account directly or 

indirectly established through an 

employer to which transfers of the 

consumer’s wages or other 

compensation are made on a recurring 

basis. Section 205.18 of the final rule 

grants financial institutions flexibility in 

providing certain account information 

to payroll card users. In particular, a 

financial institution need not provide 

periodic statements under § 205.9 if the 

institution: (1) Makes available balance 

information to the consumer through a 

readily available telephone line; (2) 

makes available to the consumer an 

electronic history, such as through an 

Internet Web site, of the consumer’s 

account transactions covering a period 

of at least 60 days preceding the date the 

consumer electronically accesses the 

account; and (3) upon the consumer’s 

oral or written request, promptly 

provides a written history of the 

consumer’s account transactions 

covering a period of at least 60 days 

prior to the request. The history of 

account transactions provided 

electronically or upon request must set 

forth the same type of information 

required on periodic statements under 

Regulation E, including information 

about any fees for EFTs imposed during 

the 60-day period. 

Unlike the approach set forth in the 

interim final rule, the final rule would 

generally not cover employers and 

third-party service providers as 

‘‘financial institutions’’ under the 

regulation because they typically do not 

hold payroll card accounts, or issue 

payroll cards and agree to provide EFT 

services to payroll card holders. 

However, if an employer or a service 

provider were to undertake either of 

these functions, it would become a 

financial institution subject to the rule. 

In addition, the final rule clarifies 

how financial institutions that do not 

provide periodic statements under 

§ 205.9 can comply with the error 

resolution procedures in § 205.11 of 

Regulation E. As provided in the interim 

rule, a consumer’s 60-day period to 

report errors begins on the earlier of the 

date the consumer electronically 

accesses the account (provided that 

information about the alleged error is 

made available to the consumer) or the 

date the financial institution sends a 

written history including that 

transaction. To assist institutions that 

may not, or are unable to, track when 

consumers electronically access their 

accounts, the final rule also provides 

that institutions can comply with the 

error resolution provisions if they allow 

a consumer to report an error up to 120 

days after the date the transaction 

allegedly in error was credited or 

debited to the consumer’s account. As 

explained in more detail in the sectionby-section analysis, this approach 

allows an institution to comply with the 

regulation without tracking when 

consumers electronically access their 

account information and, at the same 

time, ensures that consumers will have 

at least 60 days from the date of every 

transaction listed in the electronic or 

written statement to report an error. A 

similar clarification is provided with 

respect to the liability provisions in 

§ 205.6. 

The effective date of the final rule 

with respect to the payroll card 

provisions is July 1, 2007. 

IV. Section-by-Section Analysis 

Section 205.2 Definitions 

2(b) Account 

The EFTA and Regulation E apply to 

any EFT that authorizes a financial 

institution to debit or credit a 

consumer’s asset account. Under the 

final rule, the term ‘‘account’’ in 

§ 205.2(b) is revised to include a 

‘‘payroll card account,’’ which is 

defined as an account directly or 

indirectly established through an 

employer to which transfers of the 

consumer’s wages, salary, or other 

employee compensation are made on a 

recurring basis. A payroll card account 

is an account subject to the regulation 

whether the account is operated or 

managed by the employer, a third-party 

payroll processor, or a depository 

institution. 

Many industry commenters agreed 

that the scope of the rule was 

appropriately limited to payroll card 

accounts as defined in the interim rule, 

and stated that a rule with broader 

coverage could stifle the development of 

other stored-value, or prepaid, card 

products. One such commenter urged 

the Board to state expressly in the 

commentary that other card products 

offered by third parties that may be used 

by consumers to access their salary are 

not covered by the regulation. 

Several industry commenters, 

however, asserted that the final rule 

should be revised, or interpreted, to 

cover other card products that may also 

be used primarily to access recurring 

deposits of salary, even if they are 

established by a consumer without the 

involvement of an employer. In this 

regard, a few commenters noted that 

some depository institutions offer 

payroll card products directly to 

consumers who may not want to 


jlentini on PROD1PC65 with RULES
51440 Federal Register / Vol. 71, No. 168 / Wednesday, August 30, 2006 / Rules and Regulations 

1Under Section 904(d) of the EFTA, ‘‘[i]f EFT 

services are made available to consumers by a 

person other than a financial institution holding a 

consumer’s account, the Board shall by regulation 

assure that the disclosures, protections, 

responsibilities, and remedies created by [the 

EFTA] are made applicable to such persons and 

services.’’

manage, or who may not qualify for, a 

traditional deposit account and whose 

employers may not offer a payroll card 

option. These commenters observed 

that, like the payroll card accounts 

covered by the interim rule, these 

products may permit only electronic 

deposits of salary and wages and allow 

access to funds only by means of a card. 

A few industry commenters urged the 

Board to extend the rule to also cover 

general spending cards that permit a 

consumer to add value through a variety 

of means, including through direct 

deposits of salary. Some industry 

commenters asked the Board to clarify 

the status of Regulation E coverage for 

other card products, such as cards used 

to deliver health benefits or to deliver 

government-managed or directed 

consumer payments, such as child 

support, unemployment insurance, and 

workers’ compensation. 

Consumer groups supported coverage 

of payroll card accounts, but stated that 

consumer protection could be 

strengthened by also covering card 

products used to receive one-time 

payments of wages, salary, and other 

compensation, which, in their view, 

should be similarly protected from 

unauthorized use under Regulation E. 

Consumer groups also urged the Board 

to initiate a separate rulemaking to 

cover additional cards used to deliver 

important household funds, such as 

emergency benefit payments, income 

tax refunds, or loan proceeds, as well as 

other cards marketed or used as deposit 

account substitutes. 

By express definition, the coverage of 

EFT services under the EFTA and 

Regulation E depends upon whether a 

transaction involves an EFT to or from 

a consumer’s account. Section 903(2) of 

the EFTA defines an ‘‘account’’ as a 

‘‘demand deposit, savings deposit, or 

other asset account * * * as described 

in regulations of the Board, established 

primarily for personal, family, or 

household purposes.’’ As explained in 

the interim rule, in light of the 

characteristics of payroll cards, the 

Board believes it is appropriate to 

exercise its authority under Sections 

903(2) and 904(d) of the EFTA to 

classify payroll card accounts as 

‘‘accounts’’ for purposes of Regulation 

E.1 Payroll card accounts are assigned to 

an identifiable consumer and represent 

a recurring stream of payments that is 

likely the primary source of the 

consumer’s income. They are 

replenished on a recurring basis and 

designed for ongoing use at multiple 

locations and for multiple purposes. 

Payroll card accounts utilize the same 

kinds of access devices, electronic 

terminals, and networks as do other EFT 

services historically covered by the 

EFTA. 

Section 205.2(b)(2) is generally 

adopted as set forth in the interim rule 

and provides that the term ‘‘account’’

includes a ‘‘payroll card account,’’

which is an account that is directly or 

indirectly established through an 

employer, and to which EFTs of the 

consumer’s wages, salary, or other 

employee compensation are made on a 

recurring basis. (Former § 205.2(b)(2) 

was previously redesignated under the 

interim final rule as § 205.2(b)(3).) The 

definition generally includes a payroll 

card account that represents the means 

by which an employer regularly pays 

the employee’s wages, salary, or other 

form of employee compensation and 

would include, for example, card 

accounts for seasonal workers or 

employees that are paid on a 

commission basis. Coverage under 

Regulation E applies whether the 

account is operated or managed by an 

employer, a third-party payroll 

processor, or a depository institution. 

However, as further discussed below 

under § 205.18(a), the fact an employee 

is paid by payroll card account through 

the employment relationship would not 

make the employer a financial 

institution subject to the regulation 

unless the employer holds payroll card 

funds, or issues the payroll card and 

agrees with the employee to provide 

EFT services. The definition has been 

revised to refer to accounts established 

‘‘through’’ an employer, rather than 

‘‘by’’ an employer as in the interim rule 

to clarify what a payroll card account is, 

regardless of which entities are covered 

as financial institutions with respect to 

the account. In addition, the reference 

in the definition to a payroll card 

account that is established ‘‘on behalf of 

a consumer’’ has been deleted as 

unnecessary. 

A few industry commenters observed 

that an employer may elect to provide 

bonuses or other incentive-based 

payments on a non-recurring basis more 

than once during a year on a card used 

only for that purpose. Thus, these 

commenters urged that the Board clarify 

that the term ‘‘payroll card account’’

does not include cards used to disburse 

such ‘‘isolated or limited’’ payments. 

The Board agrees with commenters’

suggestions and has revised comment 

2(b)–2 to clarify that the term ‘‘payroll 

card account’’ generally does not 

include a card used solely to disburse 

bonuses or other incentive-based 

payments because such payments are 

unlikely to be the consumer’s primary 

source of salary or compensation. In 

contrast, the term would include card 

accounts that receive deposits of 

commission-based payments paid to an 

employee, even if not made on regular 

intervals (for example, if based on 

sales), because such payments are 

typically the primary means by which 

that employee receives his salary or 

other compensation. See also 

§ 205.2(b)(2). Comment 2(b)–2 further 

clarifies that cards exclusively used to 

disburse payments other than 

compensation, such as petty cash or 

travel expenses, are not ‘‘payroll card 

accounts.’’ Nevertheless, to the extent 

bonuses or other incentive-based 

payments, payments to reimburse travel 

expenses, or any other deposits of funds 

(for example, if a consumer is permitted 

to add his or her funds) are transferred 

to an account that otherwise meets the 

definition of a payroll card account, 

such transfers are EFTs covered by the 

regulation. 

The fact that an employee only 

remains in the employer’s hire for a 

short time, for example, a few pay 

cycles, does not negate coverage, so long 

as the employer intended to make 

recurring payments to the payroll card 

account. However, if the employer only 

transmits funds to an account accessible 

by a card in isolated instances—for 

example, in final-payment situations, or 

in emergency situations when other 

payment methods are unavailable, such 

a card ‘‘account’’ would not fall within 

the definition of a payroll card account. 

See also comment 2(b)–2. In these cases, 

the Board believes that the costs of 

applying Regulation E’s protections and 

providing disclosures for a card serving 

a one-time or limited use would 

outweigh any incremental benefit to 

consumers. 

As noted in the supplemental 

information to the interim rule, a 

payroll card account is covered under 

the final rule whether the underlying 

funds are held in individual employee 

accounts or in a pooled account with 

some form of ‘‘subaccounting’’

maintained by a depository institution 

(or by a third party) to enable a 

determination of the amounts of money 

owed or attributed to particular 

employees. See 71 FR at 1,475. This 

approach assures uniform application 

and minimizes potential circumvention 

of the rule. 

The Board’s final rule limits the scope 

of the payroll card account definition to 

payroll card accounts established 


jlentini on PROD1PC65 with RULES
Federal Register / Vol. 71, No. 168 / Wednesday, August 30, 2006 / Rules and Regulations 51441 

directly or indirectly through an 

employer. Thus, the term ‘‘payroll card 

account’’ does not include accounts 

directly established by a consumer at a 

depository institution without the 

involvement of an employer, even if the 

depository institution limits the account 

to receiving direct deposits of recurring 

payments of salary or other 

compensation. The requirement that a 

payroll card account be established 

through a consumer’s employer creates 

a bright-line test for determining which 

accounts are subject to special rules 

regarding payroll card accounts. 

Moreover, it would be difficult for 

financial institutions and others to 

distinguish an account directly 

established by a consumer to receive 

deposits of salary (without the 

involvement of an employer) from a 

‘‘traditional’’ deposit account opened by 

a consumer. As a result, the definition 

of a payroll card account is limited as 

explained above. Accounts established 

directly by a consumer at a depository 

institution are fully covered by 

Regulation E because they fall within 

the existing definition of ‘‘account’’ in 

§ 205.2(b)(1). 

Gift cards issued by merchants that 

can be used to purchase items in the 

merchant’s store are not covered by 

Regulation E. The regulation also does 

not cover general spending cards to 

which a consumer might transfer by 

direct deposit some portion of the 

consumer’s wages. Although consumers 

might choose to send some or all of their 

salary or other compensation by direct 

deposit into a general spending card 

account, the consumer also may use 

these products for other purposes or for 

limited periods of time, like gift cards or 

other stored-value, or prepaid, cards. 

Consumers would derive little benefit 

from receiving full Regulation E 

protections for cards that may only be 

used for limited purposes or on a shortterm basis, and which may hold 

minimal funds, while the issuer’s costs 

of compliance with Regulation E might 

be significant. In contrast, for payroll 

card accounts that are established 

through an employer, there is a greater 

likelihood that the account will serve as 

a consumer’s principal transaction 

account and hold significant funds for 

an extended period of time. 

In addition, cards used solely for 

health-related expenses—such as cards 

linked to flexible spending accounts, 

health savings accounts or health 

reimbursement arrangements—are not 

covered by the regulation, whether 

funded by the employer or the 

employee. The Board will continue to 

monitor the development of the prepaid 

card market and could reconsider 

whether the current treatment of these 

products under Regulation E remains 

appropriate over time. But see 62 FR 

43,467, 43,468 (August 14, 1997) 

(stating that accounts established by a 

government agency for distributing state 

or local employment-related benefits, 

such as unemployment benefits, are 

electronic benefit transfer (EBT) 

accounts covered by § 205.15). 

Former comment 2(b)–2, which 

addresses examples of accounts not 

covered by Regulation E, was previously 

redesignated under the interim rule as 

comment 2(b)–3. 

Section 205.18 Requirements for 

Financial Institutions Offering Payroll 

Card Accounts 

In the interim rule, the Board 

proposed to grant financial institutions 

relief from the requirement to provide 

periodic statements for payroll card 

accounts, provided that the financial 

institution makes account information 

available to the consumer through 

certain alternative means. The final rule 

adopts the approach set forth in the 

interim rule substantially as proposed, 

with a few clarifying changes to address 

commenters’ concerns. In addition, the 

final rule applies the general definition 

of ‘‘financial institution’’ to describe the 

entities subject to the payroll card 

requirements. Thus, unlike the 

approach in the interim rule, employers 

and third-party service providers will 

generally not be covered as financial 

institutions under the regulation 

because they typically do not hold 

payroll card accounts, or issue payroll 

cards and agree with a consumer to 

provide EFT services. 

Financial institutions covered under 

the rule are not required to provide 

periodic statements for payroll card 

accounts if they provide specified 

account information by telephone, 

electronically, and, upon the 

consumer’s request, in writing. Section 

205.18 of the final rule further addresses 

the requirements governing initial 

disclosures, the issuance of access 

devices, error resolution, and 

limitations on liability under the 

modified approach. 

18(a) Coverage 

The final rule adopts the existing 

definition of ‘‘financial institution’’ in 

§ 205.2(i) to identify the entities that are 

subject to the regulation with respect to 

a payroll card account. See § 205.2(i). 

Thus, unlike the interim rule, employers 

and service providers typically would 

be excluded from the scope of the 

regulation because they are unlikely to 

either hold payroll card accounts or 

issue payroll cards and agree to provide 

EFT services to payroll card account 

holders. Except as modified by § 205.18, 

all provisions of Regulation E apply to 

financial institutions with respect to 

payroll card accounts in the same 

manner and to the same extent that they 

apply with respect to other accounts 

subject to the regulation. 

Under one typical payroll card model, 

an employer contracts with a depository 

institution to provide payroll cards to its 

employees. In many cases, the 

depository institution may use a thirdparty service provider to perform some 

or a substantial proportion of the 

compliance duties (e.g., in a turnkey 

arrangement), including mailing 

account terms and conditions and 

providing error resolution services. Or, 

the depository institution may elect to 

perform all of the compliance duties inhouse. Under another payroll card 

model, the employer may contract 

directly with the third-party service 

provider for the payroll card program. 

Under both arrangements, a depository 

institution’s participation in the payroll 

card program will be necessary both to 

hold the underlying funds as well as to 

issue the payroll card itself. In addition, 

the account relationship will generally 

be between the issuing bank and the 

employee, regardless of whether it is the 

bank or a service provider that is 

ultimately responsible for performing a 

particular compliance obligation. An 

employer’s involvement in a particular 

payroll card program is likely to be 

limited to providing initial payroll card 

account disclosures on behalf of the 

depository institution or service 

provider. 

Under the interim rule, an entity 

would have been treated as a financial 

institution if it directly or indirectly 

held a payroll card account or directly 

or indirectly issued a payroll card. 

Thus, employers that provided payroll 

cards to their employees would have 

been subject to the regulation because 

the scope of coverage did not require a 

person issuing an access device for a 

payroll card account to also agree with 

a consumer to provide EFT services. 

Similarly, a service provider would 

have been treated as a financial 

institution if it indirectly issued payroll 

cards through a bank. See 71 FR at 

1,477. 

Two commenters, one representing 

card issuers and a second representing 

specialists in corporate treasury 

functions, observed that most employers 

will not have expertise in complying 

with the regulation, and thus requested 

that the Board exclude employers from 

coverage under § 205.18(a) entirely. In 

particular, these commenters asserted 

that the compliance burden could be a 


jlentini on PROD1PC65 with RULES
51442 Federal Register / Vol. 71, No. 168 / Wednesday, August 30, 2006 / Rules and Regulations 

disincentive for some employers to offer 

payroll cards as a payment option for 

their employees. In this regard, a few 

commenters asserted that even if 

employers shift compliance duties to a 

third-party service provider by contract, 

the employer might still be liable for 

that party’s failure to comply. In 

contrast, consumer groups agreed with 

the interim rule’s treatment of all 

entities participating in card 

distribution, card processing, or transfer 

of payroll card funds as financial 

institutions. 

Upon further consideration and 

analysis of the issue, the Board is 

revising § 205.18(a) to use the same 

definition of ‘‘financial institution’’ with 

respect to payroll card accounts that 

applies to other types of accounts to 

determine which entities providing 

payroll card services are covered under 

the rule. See § 205.2(i). Thus, an entity 

would be deemed a ‘‘financial 

institution’’ with respect to a payroll 

card account if it holds the payroll card 

account or if it issues a payroll card and 

agrees with the consumer to provide 

EFT services. Accordingly, the 

depository institution holding the funds 

will always be treated as a financial 

institution under the rule, but 

employers and service providers 

typically will not be covered because 

they generally do not hold payroll card 

accounts or issue payroll cards and 

agree with a consumer to provide EFT 

services. 

Because payroll card account holders 

will, at a minimum, be able to assert 

their Regulation E rights against the 

depository institution holding their 

account in all cases, the Board believes 

that there would be little, if any, benefit 

of also covering employers under 

Regulation E. Under the interim rule’s 

approach, employer coverage might lead 

employers who are generally unfamiliar 

with Regulation E’s requirements to 

incur additional compliance costs and 

risk. The Board believes the imposition 

of such costs and risks on employers 

who neither hold payroll card accounts 

nor issue payroll cards could deter some 

employers from adopting payroll cards. 

Accordingly, under the final rule, if an 

employer arranges or contracts with a 

depository institution or third-party 

payroll services provider to pay its 

employees by payroll card account, the 

employer would not be a ‘‘financial 

institution’’ subject to the regulation. 

Similarly, based upon the Board’s 

understanding of how payroll card 

programs are structured, while a thirdparty service provider may perform 

some, most, or even all of the 

compliance duties for a particular 

payroll card program, it will neither 

hold payroll card accounts nor issue the 

payroll card itself. Thus, a third-party 

service provider typically would not be 

deemed a financial institution subject to 

the regulation. New comment 18(a)–2 

sets forth the preceding discussion of 

how the final rule applies to employers 

and service providers. The comment 

also states that to the extent that an 

employer or a service provider 

undertakes to hold payroll card 

accounts or issue payroll cards and 

agree with a consumer to provide EFT 

services, it would become a financial 

institution subject to the regulation. 

To the extent that more than one party 

(e.g., a depository institution and a 

third-party service provider) each 

qualify as a financial institution with 

respect to the same payroll card 

account, those parties may contract 

among themselves to ensure compliance 

with the final rule. See also § 205.4(e) 

(stating that institutions providing EFT 

services jointly may contract among 

themselves to allocate requirements 

under the regulation). Thus, for 

example, disclosure obligations satisfied 

by one party, such as a service provider, 

would satisfy the disclosure obligations 

for any other financial institution with 

respect to that payroll card account. 

However, if the party that has 

contractually agreed to satisfy a 

compliance obligation fails to do so, 

each of the parties would be 

accountable under the EFTA and the 

final rule. These parties could also 

allocate among themselves the financial 

obligation for any liability resulting 

from the failure. 

The final rule includes comment 

18(a)–1 as proposed to clarify that a 

financial institution may issue an access 

device for a payroll card account only 

in response to an oral or written request 

for the device, or as a renewal or 

substitute of an accepted access device. 

See § 205.5(a). The comment further 

clarifies that a consumer is deemed to 

request an access device when the 

consumer chooses to receive his or her 

compensation through a payroll card 

account. The compulsory use 

prohibition in § 205.10(e) would not be 

violated as long as a job applicant is not 

required to establish a payroll card 

account as a condition of employment. 

One commenter asked the Board to 

clarify whether an employer may 

include an unactivated payroll card 

with materials provided to employees 

about the terms and conditions of the 

payroll card account. Such a procedure 

would not violate Regulation E, 

provided that the terms and conditions 

for issuing an unsolicited access device 

as provided under § 205.5(b) are 

satisfied and the consumer retained the 

option to receive compensation by 

means other than the payroll card 

account. 

18(b) Alternative to Periodic Statement 

General Provisions 

In the September 2004 proposal, the 

Board proposed that all provisions of 

Regulation E should apply to payroll 

card accounts in the same manner that 

they apply to other accounts, including 

the requirement to provide periodic 

statements. Most industry commenters 

urged the Board to permit entities 

offering payroll cards an alternative 

means of providing account information 

similar to the rules in § 205.15 of 

Regulation E for accounts established 

for the electronic transfer of government 

benefits (EBT accounts). The January 

2006 interim rule granted relief from the 

requirement to provide periodic 

statements under § 205.9(b), provided 

that financial institutions make account 

information available by telephone, 

electronically, and, upon the 

consumer’s request, in writing. The final 

rule adopts this approach. Some 

modifications have been made to clarify 

certain issues raised by commenters. 

Industry commenters strongly 

supported the Board’s decision to 

provide relief from the periodic 

statement requirement for payroll card 

accounts. Many stated that the 

alternative set forth in the interim rule 

strikes an appropriate balance between 

the needs of consumers and the costs to 

employers and institutions. A few 

industry commenters urged the Board to 

provide similar relief for other types of 

accounts that receive recurring 

payments, including accounts 

established by consumers at depository 

institutions without the involvement of 

an employer that only receive deposits 

of employee compensation and accounts 

funded solely by government benefit 

payments. One commenter 

recommended that the Board grant relief 

from the periodic statement 

requirements for all retail payment 

cards, including general spending cards, 

to the extent such cards may be covered 

under Regulation E. Another commenter 

suggested that the Board consider the 

adoption of a similar approach for the 

delivery of information for accounts 

generally under Regulation E, as well as 

for accounts and other banking products 

under other consumer financial services 

regulations (e.g., Regulations Z and DD). 

In contrast, consumer group 

commenters asserted that payroll card 

accounts should be given the same 

protections as are provided for other 

consumer accounts under the EFTA, 

including the right to paper periodic 


jlentini on PROD1PC65 with RULES
Federal Register / Vol. 71, No. 168 / Wednesday, August 30, 2006 / Rules and Regulations 51443 

statements. Consumer group 

commenters noted that periodic 

statements assist consumers in tracking 

their account balances and transactions 

and discovering unauthorized transfers 

or other errors involving their accounts. 

One state attorney general recognized 

that some employees are transient but 

recommended that the Board require 

periodic statements for any consumer 

that can provide a mailing address to 

the employer. 

When the Board addressed EBT 

programs in 1994, it recognized that 

periodic statements are a central 

component of Regulation E’s disclosure 

scheme. However, the Board granted 

EBT providers relief from the periodic 

statement requirement in light of the 

limited types of transactions involved, 

the availability of other means to obtain 

account information for benefit 

recipients, and the expense of routinely 

mailing monthly statements to all 

recipients. See 59 FR 10,678, 10,681 

(March 7, 1994). Similarly, the Board is 

exercising its authority under Section 

904(c) of the EFTA to grant financial 

institutions flexibility in connection 

with the periodic statement requirement 

for payroll card accounts. 

In addition to the comments received 

on the September 2004 proposal and the 

January 2006 interim rule, the Board 

considered data it collected during 

focus group testing of payroll card 

holders during the fall of 2005. As 

described in more detail in the 

supplemental information for the 

interim rule, the majority of focus group 

participants regularly checked their 

balances over the telephone or checked 

balance and transaction information online; some checked their accounts 

through these methods multiple times 

per week. Most focus group participants 

who received paper periodic statements 

stated that they generally kept their 

statements as a record of account 

activity but otherwise rarely used them 

to track transactions or look for errors. 

Participants generally attributed their 

lack of statement use to the fact that 

they monitored their account 

information frequently during the 

month by the telephone or on-line. 

While a few participants wanted to 

receive paper statements, most 

indicated a clear preference for using 

alternative means of monitoring account 

activity, in particular by phone and online. See 71 FR at 1,476. 

As with EBT products, the Board is 

persuaded that the alternative methods 

of providing account transaction 

information currently used by many 

payroll card providers are comparable 

to, and in some respects, better than, 

paper periodic statements. Information 

available by telephone or on-line is 

updated routinely, in contrast to 

periodic statements which only provide 

information as of the end of each 

statement cycle. Thus, consumers using 

telephone and on-line methods often 

have access to more timely information, 

which may assist consumers in more 

effectively tracking transactions to avoid 

overdrawing their accounts. 

The Board also has weighed the 

potential burden and benefits of 

requiring financial institutions to 

provide periodic statements. Such a 

requirement could impose considerable 

one-time implementation costs, as well 

as ongoing costs for mailing such 

statements, on financial institutions 

currently offering such accounts and 

could discourage other financial 

institutions from offering them in the 

future. Weighing these considerations 

along with the alternative methods 

available to consumers for obtaining 

account information and consumers’

actual account-monitoring practices, the 

Board concludes that granting relief 

from the periodic statement requirement 

for payroll card accounts is appropriate. 

Section 205.18(b) of the final rule 

provides financial institutions flexibility 

either to provide periodic statements 

under § 205.9 as they would for other 

accounts or, as an alternative, to: (1) 

Make balance information available 

through a readily available telephone 

line; (2) make available an electronic 

history of the consumer’s account 

transactions, such as through an Internet 

web site, that covers at least 60 days 

preceding the date the consumer 

electronically accesses the account; and 

(3) provide promptly upon request a 

written history of the consumer’s 

account transactions, covering at least 

60 days preceding the date the 

institution receives the consumer’s 

request. As further explained below in 

the discussion about the error resolution 

and liability limit time frames, a 

consumer ‘‘electronically accesses’’ an 

account once the consumer enters a user 

identification code or a password or 

otherwise complies with a security 

procedure used by an institution to 

verify the consumer’s identity. 

The final rule does not provide relief 

from the requirement to provide paper 

periodic statements for other types of 

accounts. However, the Board will 

continue to monitor this issue and may 

reassess whether it would be 

appropriate to propose such relief in the 

future. 

Readily Available Telephone Line 

The Board stated in the 

supplementary information for the 

interim rule that a readily available 

telephone line for providing balance 

information must be a local or toll-free 

line that, at a minimum, is available 

during standard business hours. 

Consumer groups and the state attorney 

general that commented suggested that 

the telephone line should be operable 

beyond standard business hours in each 

time zone so that employees have 

sufficient time to access their account 

information when they are not at work. 

Consumer groups also urged the Board 

to require institutions to provide 

transaction information by telephone. 

As in the interim rule, the final rule 

requires that institutions, at a minimum, 

make available a local or toll-free line 

for consumers to obtain their available 

balance during standard business hours. 

The Board expects that, in most cases, 

institutions will provide 24-hour access 

to balance information through an 

automated line, which would ensure 

that employees can access balance 

information at their convenience. 

Because the Board believes it may be 

operationally difficult for some 

institutions to include 60 days’ worth of 

transactions through a telephone 

system, the final rule does not require 

institutions to provide information 

about specific transactions by 

telephone. In addition, the Board’s focus 

group testing indicated that while 

limited transaction information was 

available through the telephone, most 

consumers chose not to access 

transaction information in that manner. 

See 71 FR at 1,476. 

Model Form A–7(a), discussed below, 

contains a model clause that institutions 

may use to inform consumers at 

account-opening about how to access 

their account information, including a 

reference to the telephone number that 

consumers may call to obtain this 

information. Consumer groups urged the 

Board to also require that institutions 

print the telephone number on each 

payroll card as a reminder for 

consumers. The Board is aware that 

many payroll cards already display the 

telephone number for obtaining account 

information on the back of the card and, 

therefore, the Board has chosen not to 

impose such a requirement in the final 

rule. If the Board learns in the future, 

however, that consumers are unaware of 

the ability to obtain account information 

by telephone, the Board will consider 

whether additional protections are 

needed. 

Electronic History 

For transaction histories provided 

electronically, institutions are not 

limited to using an Internet Web site to 

comply with the rule. However, because 

electronic histories are disclosures 


jlentini on PROD1PC65 with RULES
51444 Federal Register / Vol. 71, No. 168 / Wednesday, August 30, 2006 / Rules and Regulations 

under Regulation E, they must be 

provided in a form that the consumer 

may keep, as is required for disclosures 

generally under § 205.4(a)(1). A new 

comment 18(b)–2 explains that financial 

institutions satisfy this requirement if 

the electronic history is available in a 

format that is capable of being retained 

by the consumer. For example, an 

institution would satisfy the 

requirement if it provides a history at an 

Internet Web site in a format that is 

capable of being printed or downloaded 

using an Internet web browser. 

A few industry commenters asked the 

Board to clarify that ATM access to a 

transaction history constitutes an 

acceptable means of providing an 

electronic history of transactions. 

Although the Board is unaware of any 

ATMs that currently offer the option of 

printing transaction histories of at least 

60 days, institutions would be able to 

provide an electronic history at an ATM 

if consumers were able to print a copy 

of all the required information at the 

ATM. 

Written History Upon Consumer’s 

Request 

The Board solicited comment on 

whether the requirement to provide a 

written history of transactions upon the 

consumer’s oral or written request was 

a necessary or appropriate protection. 

Consumer groups and most industry 

commenters stated that the option to 

obtain a written history of transactions 

was both necessary and appropriate 

because some consumers may not be 

able to access the information 

electronically. However, a few industry 

commenters believed that institutions 

should be given flexibility in the 

manner in which they provide 

transaction information and that, 

accordingly, the rule should not require 

institutions to provide both an 

electronic and a written history. 

The final rule retains the requirement 

that a financial institution mails or 

delivers a written history of account 

transactions promptly upon the 

consumer’s oral or written request to 

address the possibility that some 

consumers may have limited on-line 

access. An institution would not satisfy 

the requirement to provide a written 

history by making a printed history 

available at an ATM because it does not 

ensure that a consumer is able to obtain 

a written history in all cases (for 

example, if the ATM is located in an 

inconvenient location). 

The Board anticipates that, in general, 

written histories will be sent the next 

business day or soon after the 

institution receives the consumer’s oral 

or written request. Institutions also may 

designate a specific telephone number 

for consumers to call and a specific 

address for consumers to write to 

request a written copy of account 

transactions. A few industry 

commenters asked whether a financial 

institution could charge a fee if a 

consumer makes frequent or multiple 

requests for copies of account 

statements within a short time frame. 

Although the final rule does not address 

the issue, the Board believes that 

charging fees to consumers who make 

occasional requests for written histories 

could have a chilling effect on 

consumers’ ability to obtain information 

about transactions and thus, to exercise 

their error resolution rights. 

Sixty-Day Transaction History 

Most industry commenters stated that 

the requirement to provide 60 days of 

transactions was appropriate regardless 

of the means by which the account 

history is provided. Some industry 

commenters observed that many 

institutions provide up to 12 months of 

transactions on their Internet Web sites. 

However, a trade association 

representing community banks noted 

that some of its members currently can 

only provide a 30-day or a 45-day 

account history and expressed concern 

that these members would not be able 

to take advantage of the alternative to 

providing periodic account statements. 

A few industry commenters stated that 

providing a rolling 60-day transaction 

history might pose operational 

difficulties for those institutions that 

have developed systems that provide 

transaction histories only for specific 

statement cycles. One commenter asked 

the Board to clarify whether account 

histories must include transactions that 

have not yet posted to the account. 

The final rule requires institutions to 

provide 60 days of transaction 

information, as proposed. Thus, if the 

consumer electronically accesses his or 

her account, the history must cover at 

least the preceding 60 days. Similarly, if 

the consumer requests a written history 

of transactions, the written history must 

cover at least 60 days preceding the date 

of the institution’s receipt of that 

request. 

The Board believes the 60-day 

requirement is appropriate for payroll 

card account holders because these 

consumers will not automatically be 

sent a statement that sets forth 

transaction information for each transfer 

occurring during a monthly cycle as 

they would for most other accounts 

covered by Regulation E. For those 

payroll card holders who do not access 

or request a copy of their transaction 

history at least on a monthly basis, the 

60-day requirement is intended to help 

them avoid inadvertently losing their 

right to assert an error under § 205.11. 

New comment 18(b)–1 clarifies that a 

financial institution must include a 

transaction in the account history only 

if the transaction has posted to the 

payroll card account. 

Section 205.18(b)(2) of the final rule 

requires that the account history 

provided under this section, whether 

provided electronically or in writing, 

contain the same type of account 

information that would be provided in 

a periodic statement under 

§ 205.9(b)(1)–(6), including information 

about fees, account balances, and an 

address and telephone number for 

inquiries. Although a few commenters 

expressed concern that requiring all the 

information typically included on 

periodic statements could impose 

significant and costly systems changes, 

the Board believes such a requirement is 

necessary to ensure that consumers 

receive comparable account information 

regardless of whether they receive 

periodic statements or transaction 

histories under the alternative 

procedures in this final rule. The Board 

also believes that requiring that the 

same information be provided for 

payroll card accounts as for other 

accounts should facilitate institutions’

ability to use the same systems for 

delivering account information and 

minimize the need to construct new 

systems. 

18(c) Modified Requirements 

Initial Disclosures and Annual ErrorResolution Notice 

For financial institutions that do not 

furnish periodic statements, § 205.18(c) 

sets forth provisions clarifying the 

requirements relating to disclosures, 

liability limits, and error resolution 

procedures under Regulation E. Section 

205.18(c)(1) generally sets forth 

modified disclosures that a financial 

institution must provide in addition to 

or in lieu of required initial disclosures 

under § 205.7(b). Commenters did not 

address this provision, and the Board 

has adopted § 205.18(c)(1) of the interim 

rule with minor revisions for clarity. 

Section 205.18(c)(1)(i) requires the 

initial disclosures for payroll card 

accounts to disclose the means by 

which consumers can access 

information about their account, 

including the telephone number that 

may be used to obtain the account 

balance, and information about how an 

electronic history of account 

transactions can be obtained, such as 

the address of an Internet Web site. The 

initial disclosures also must include a 


jlentini on PROD1PC65 with RULES
Federal Register / Vol. 71, No. 168 / Wednesday, August 30, 2006 / Rules and Regulations 51445 

summary of the consumer’s right to 

obtain a written history of account 

transactions upon request, including a 

telephone number to call to request a 

written history, in place of the summary 

of the consumer’s right to receive 

periodic statements pursuant to 

§ 205.7(b)(6). Under § 205.18(c)(1)(ii), 

the initial disclosures must contain a 

notice explaining the error resolution 

rights associated with payroll card 

accounts in place of the error resolution 

notice required by § 205.7(b)(10). In 

addition to these disclosures, 

institutions must also provide the other 

required disclosures set forth in § 205.7, 

including the disclosures explaining the 

consumer’s liability for unauthorized 

EFTs and the fees imposed for EFTs or 

for the right to make transfers. 

The final rule provides Model Clauses 

that financial institutions may use to 

facilitate compliance with the initial 

disclosure requirements, located in 

section A–7 of Appendix A to Part 205. 

Institutions choosing to utilize model 

clauses for initial disclosures will also 

have to modify paragraph (a) in section 

A–2 of Appendix A to Part 205 as 

appropriate to explain the consumer 

liability provisions if they opt not to 

provide periodic statements under this 

rule. 

Section 205.18(c)(2) of the interim 

rule required financial institutions to 

provide an annual notice describing 

error-resolution rights substantially 

similar to the notice contained in 

section A–7(b) in Appendix A in place 

of the notice required by § 205.8(b). 

Several industry commenters urged the 

Board to give financial institutions the 

option to provide an abbreviated notice 

on a regular basis, as is currently 

permitted on periodic statements under 

§ 205.8(b). These commenters believed 

an abbreviated notice could be provided 

when providing balance information by 

telephone, or when providing an 

account history electronically or in 

writing. In particular, some industry 

commenters noted that it was difficult 

to provide error resolution notices by 

mail to transient employees. The Board 

agrees that the approach suggested by 

these commenters is likely to provide 

payroll card users with information 

about their error resolution rights on a 

more timely basis, that is, when 

consumers are reviewing their history of 

account transactions. Accordingly, the 

final rule is revised to permit 

institutions to provide a notice similar 

to the abbreviated notice provided in 

Appendix A–3(b). Institutions must 

modify this notice to reflect the error 

resolution time frames and procedures 

set forth in this final rule. The 

abbreviated notice would have to be 

provided on each history of 

transactions, whether provided 

electronically or in writing upon the 

consumer’s request, in lieu of the 

annual error resolution notice. The 

Board does not believe that it would be 

appropriate to permit the abbreviated 

notice to be provided exclusively 

through a telephone line because 

consumers would not be able to retain 

a copy of the notice. 

Limitations on Liability and Error 

Resolution 

Sections 205.18(c)(3) and (4) of the 

final rule are substantively similar to the 

interim rule and explain the limitations 

on liability and error resolution 

procedures for payroll card accounts 

when a financial institution does not 

provide periodic statements but instead 

follows the modified requirements. To 

address the concerns of some 

commenters about potential operational 

difficulties in determining when the 

liability limit and error resolution time 

frames begin to run, the final rule has 

been revised to provide a safe harbor 

that will satisfy the timing requirements 

in all instances. 

As proposed in the interim rule, the 

final rule contains two different triggers 

for beginning the 60-day period for 

limiting liability for unauthorized EFTs 

in § 205.18(c)(3), depending on when 

and how the consumer has obtained a 

history of his or her account 

transactions. If the consumer obtains 

transaction information electronically 

under § 205.18(b)(1)(ii), the 60-day 

period begins on the date the account is 

electronically accessed by the 

consumer. If the consumer has 

requested a written history of his or her 

account transactions under 

§ 205.18(b)(1)(iii), the 60-day period 

begins on the date the institution sends 

the written history. In either case, in 

order for the 60-day period to begin 

running, the alleged unauthorized 

transaction must be reflected in the 

electronic history or on the written 

history provided to the consumer. If a 

consumer accesses an electronic history 

and also requests a written history, both 

of which reflect information about the 

disputed transaction, the applicable 60- 

day period for reporting an 

unauthorized EFT begins on the earlier 

of these two events. 

A similar rule is established in 

§ 205.18(c)(4) for determining when the 

60-day period begins for reporting an 

error under the procedures set forth in 

§ 205.11. Thus, if a consumer obtains 

transaction information electronically 

under § 205.18(b)(1)(ii), the 60-day 

period for reporting an error begins on 

the date the account is electronically 

accessed by the consumer. If the 

consumer requests a written history of 

transactions under § 205.18(b)(1)(iii), 

the 60-day period begins on the date the 

institution sends the written history. 

Again, in either case, in order for the 60- 

day period to begin running, the alleged 

error must be reflected on the electronic 

history or on the written history 

provided to the consumer. Also, if the 

consumer both accesses an account 

electronically and requests a written 

history, the applicable 60-day period for 

reporting an alleged error begins on the 

earlier of these two events. Transactions 

that have not yet posted to the account 

do not trigger either the liability limit or 

the error resolution time frames. 

Several industry commenters 

suggested alternate triggers for 

determining when the liability limit and 

error resolution time frames begin to 

run. For example, some industry 

commenters asserted that the 60-day 

period should begin running at the time 

information about a specific transfer is 

posted and becomes available to the 

consumer, regardless of when the 

consumer actually obtains the 

information. A few industry 

commenters suggested that the 60-day 

period should begin on the date of the 

transaction. Others stated that the 60- 

day period should begin when the 

consumer accesses an account balance 

by telephone. One industry commenter 

noted that the rule should provide 

certainty to financial institutions and 

merchants so that their systems need 

only retain information for a set period 

of time. In this regard, some industry 

commenters suggested that the Board 

clarify that a consumer’s error 

resolution rights do not apply to a 

transaction more than 120 days old. 

Safe Harbor 

As proposed, the final rule provides 

that consumers’ 60-day period to report 

an error with respect to a particular 

transaction begins on the date the 

consumer accesses the electronic history 

reflecting the alleged error or the date 

the institution sends a written history 

that includes that error, whichever is 

earlier. In response to comments 

received, the Board has revised the final 

rule to clarify institutions’ options for 

compliance. A few industry commenters 

noted that some institutions may prefer 

to develop compliance systems that do 

not track consumers’ access to their 

electronic history or when a written 

history is sent. The final rule provides 

a safe harbor to clarify that these 

institutions would comply with the 

error resolution provisions as long as 

they treat a notice of error as timely 

when it is received from the consumer 


jlentini on PROD1PC65 with RULES
51446 Federal Register / Vol. 71, No. 168 / Wednesday, August 30, 2006 / Rules and Regulations 

within 120 days after the transaction 

allegedly in error was credited or 

debited to the consumer’s account. See 

§ 205.18(c)(4)(ii). Providing consumers 

120 days after the date a transaction has 

posted to a consumer’s account to report 

an error ensures that the consumer will 

have at least 60 days to report an error 

even if the consumer first accesses the 

information on the last day that the 

transaction is required to be included in 

the account history. Institutions 

choosing to follow this practice would 

in most cases be affording consumers 

more than the minimum time period 

required by the regulation. A similar 

safe harbor is provided for reporting 

unauthorized transactions under 

§ 205.18(c)(3)(ii). 

New comment 18(c)–1 provides that 

institutions that choose to determine the 

consumers’ reporting period in this way 

may still disclose the time period 

required by the regulation (as set forth 

in the Model Form in Appendix A–7). 

For example, an institution may 

disclose to payroll card account holders 

that the institution will investigate a 

notice of error provided within 60 days 

after the date the consumer 

electronically accesses an account or the 

date the institution sends a written 

history of transactions even if the 

institution actually provides a longer 

period of time for the consumer to 

report an error (i.e., up to 120 days 

following the date a transaction has 

posted). Comment 18(c)–1 further states 

that an institution’s summary of the 

consumer’s liability (as required under 

§ 205.7(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 the 

institution may allow a consumer to 

assert a notice of error up to 120 days 

from the date of the posting of the 

alleged error. 

Example 

As discussed above, the history of 

account transactions provided under 

§ 205.18(b)(1), whether provided 

electronically or in writing, must cover 

at least 60 days preceding the date that 

the information is made available or 

provided to the consumer. Thus, if a 

consumer accesses a payroll card 

account electronically, or is sent a 

written history, on June 1, then the 

history of transactions must cover a 

period of at least 60 days prior to June 

1 and include any EFTs posted from 

April 2 through May 31. Assuming that 

the consumer did not previously access 

or receive account information 

reflecting transactions during April or 

May, the consumer must have at least 60 

days, or until July 31, to assert any 

unauthorized EFTs or other errors 

occurring between April 2 and May 31 

to preserve his or her rights under 

§§ 205.6 and 205.11 with respect to 

those transfers. 

In the example, suppose the consumer 

electronically accesses his or her 

account on June 1 and discovers an 

error resulting from a transaction that 

posted on May 10. In this case, under 

§ 205.18(c)(4)(i), the consumer must 

provide notice of that error to the 

institution no later than July 31 to 

trigger the institution’s obligation to 

investigate the error. If the consumer 

provides a notice of the May 10 error 

after July 31, the institution would not 

be required to comply with the 

procedures and time limits in § 205.11 

for investigating the error. Nevertheless, 

if the error involves an unauthorized 

EFT, liability for the unauthorized 

transfer may not be imposed on the 

consumer unless the institution satisfies 

the requirements of § 205.6. See 

comment 18(c)–3, discussed below. 

For an institution electing to apply 

the error resolution time frame set forth 

in § 205.18(c)(4)(ii), the institution 

would comply with the regulation if it 

treats a notice of error as timely if 

received within 120 days after the date 

of the May 10 transfer to report the 

alleged error, or by September 7. 

Electronic Access 

With respect to electronic access, the 

Board stated in the supplementary 

information to the interim rule that the 

60-day periods for liability limits and 

error resolution would not begin 

running if the consumer merely visited 

an Internet Web site where account 

information and other information 

could be retrieved. Rather, the 60-day 

period would begin once the consumer 

entered a user identification code or a 

password or otherwise complied with a 

security procedure used by an 

institution to verify the consumer’s 

identity before granting access to 

account information. The interim rule 

did not require institutions to determine 

whether the consumer has in fact 

accessed information about specific 

transactions before triggering the 60-day 

period for liability limits and error 

resolution rights. 

Consumer groups and the state 

attorney general that commented urged 

the Board to revise the rule so that the 

liability limit and error resolution 

provisions are not triggered with respect 

to a transaction unless a consumer 

actually accesses information about that 

specific transaction. In contrast, the vast 

majority of industry commenters stated 

that such a requirement was 

impractical, and would require 

significant expense to implement the 

necessary system changes. Accordingly, 

many industry commenters urged the 

Board to retain the proposed 

interpretation clarifying that ‘‘electronic 

access’’ to an account means that the 

consumer has logged onto a secure 

portion of an institution’s Web site. 

The final rule follows the interim rule 

for purposes of determining when a 

consumer has electronically accessed an 

account. A rule requiring an institution 

to determine if a consumer has reviewed 

specific transactions would be 

operationally burdensome and costly to 

implement. In addition, such an 

approach could require institutions to 

establish more complicated and 

cumbersome procedures for consumers 

to use to access account information. 

Thus, as in the interim rule, a consumer 

is deemed to have accessed his or her 

account electronically once the 

consumer enters a user identification 

code or a password or otherwise 

complies with a security procedure used 

by an institution to verify the 

consumer’s identity. Comment 18(c)–2 

has been added to provide this 

interpretation. Under the final rule, the 

liability and error resolution provisions 

are not triggered when consumers 

obtain balance information by the 

telephone because many institutions 

may not make available specific 

transaction information available by 

telephone, and because, unlike written 

or electronic histories, a consumer will 

not be able to retain a copy of 

transactions to review. In addition, the 

final rule would not require institutions 

to track whether a consumer accessed 

an account electronically if they provide 

consumers at least 120 days after a 

transfer is credited or debited to the 

consumer’s account to report an error. 

Untimely Notice of Error 

Industry commenters also requested 

clarification on the effect of providing 

account histories that include more than 

60 days of transaction information. 

These commenters noted that many 

institutions commonly provide up to 12 

months of transaction information on 

their Internet Web sites. Several 

industry commenters further urged the 

Board to clarify that the limits on 

consumers’ liability for unauthorized 

transactions applies only to transfers 

occurring in the 60-day period before 

the consumer electronically accesses an 

account. Some of these commenters 

noted that researching unauthorized 

EFTs becomes more complicated and 

time-consuming for transactions older 

than 60 days, because documents such 


jlentini on PROD1PC65 with RULES
Federal Register / Vol. 71, No. 168 / Wednesday, August 30, 2006 / Rules and Regulations 51447 

as receipts and ATM security tapes or 

videos are often archived or destroyed 

after 60 days. 

The Board has added new comment 

18(c)–3 to address the circumstance in 

which a financial institution makes 

available more than 60 days of 

transaction information either 

electronically or in writing. The new 

comment provides that institutions 

generally will not be required to comply 

with the error resolution provisions set 

forth in § 205.11 with respect to a 

transaction that occurred more than 60 

days prior to the date the consumer 

electronically accesses the payroll card 

account or the date a written history 

was sent, whichever is earlier (assuming 

information about the alleged error is 

available to the consumer). An 

institution that does not track when a 

consumer accesses an account or is sent 

a written history also may choose not to 

follow the procedures in § 205.11 for 

any notice of error received more than 

120 days after the transfer allegedly in 

error is credited or debited to the 

consumer’s account. In either case, 

however, if the consumer’s assertion of 

error involves an unauthorized transfer, 

the institution is required to comply 

with § 205.6, which specifically 

addresses consumer liability for 

unauthorized transfers, before it may 

impose any liability on the consumer for 

the transfer. See also comment 11(b)(1)–

7; EFTA § 909; 15 U.S.C. 1693g. Some 

institutions asked the Board to clarify 

that the limits on consumers’ liability 

for unauthorized transfers only apply to 

transactions occurring during the 60 

days preceding the date the consumer 

electronically accesses his or her 

account. However, such a rule would 

not be consistent with the EFTA, which 

does not contain a time limitation for 

asserting an unauthorized EFT claim. 

See EFTA § 909; 15 U.S.C. 1693g. 

Additional Issues 

Several commenters were concerned 

that explicitly stating that payroll card 

accounts were covered under Regulation 

E might affect whether they are also 

‘‘accounts’’ for purposes of coverage 

under other laws, such as for customer 

identification procedures under the 

Bank Secrecy Act, for reserve 

requirements under the Board’s 

Regulation D, for Truth in Savings Act 

purposes, and possibly for other 

purposes under state laws. As stated in 

the supplementary information for the 

interim rule, the definition of ‘‘account’’

as amended by the final rule does not 

affect the treatment of payroll card 

accounts under other laws. This final 

rule is intended only to address 

coverage issues under Regulation E. 

Compliance Date 

The interim rule established an 

effective date of July 1, 2007. Consumer 

groups commented that the effective 

date should be earlier in light of the 

projected growth of payroll card 

accounts. Industry commenters, 

however, asserted that financial 

institutions and employers will need at 

least 12 months following the adoption 

of a final rule to implement necessary 

changes, and one industry commenter 

suggested that mandatory compliance be 

delayed until 2008. The final rule 

retains a mandatory compliance date of 

July 1, 2007, for the revisions addressing 

payroll card accounts, to provide 

institutions sufficient time to implement 

necessary changes, but institutions may 

begin complying with the final rule 

beginning 30 days after the date of 

publication in the Federal Register. 

A–7—Model Clauses for Financial 

Institutions Offering Payroll Card 

Accounts 

Model Form A–7 provides model 

clauses consistent with the provisions 

in § 205.18 that apply to financial 

institutions that offer payroll card 

accounts but do not provide periodic 

statements under § 205.9(b). These 

clauses, which are modeled after similar 

clauses provided under Appendix A–5 

for EBT accounts, are intended to assist 

financial institutions in disclosing to 

payroll card holders how to obtain 

account balances and account histories, 

as well as error resolution procedures. 

(The model clauses do not include 

language about the 120-day safe harbor 

under the liability limit and error 

resolution provisions because the safe 

harbor goes beyond the literal 

requirements of the final rule. See 

comment 18(c)–1.) Comment 2 for 

Appendix A is revised to clarify that the 

use of such clauses in making these 

disclosures in connection with payroll 

card accounts will protect a financial 

institution from liability under Sections 

915 and 916 of the EFTA if the clauses 

accurately reflect the institution’s EFT 

services. The final rule also includes 

nonsubstantive changes to the model 

clauses to correct a cross reference to 

§ 205.15 of the regulation. 

V. Final Regulatory Flexibility Analysis 

The Board prepared a regulatory 

flexibility analysis as required by the 

Regulatory Flexibility Act (5 U.S.C. 601 

et seq.) (RFA) in connection with the 

January 2006 interim rule. The Board 

received no comments on its regulatory 

flexibility analysis. 

Under Section 605(b) of the RFA, 5 

U.S.C. 605(b), the regulatory flexibility 

analysis otherwise required under 

Section 604 of the RFA is not required 

if an agency certifies, along with a 

statement providing the factual basis for 

such certification, that the rule will not 

have a significant economic impact on 

a substantial number of small entities. 

Based on its analysis and for the reasons 

stated below, the Board certifies that the 

rule will not have a significant 

economic impact on a substantial 

number of small entities. 

1. Statement of the need for, and 

objectives of, the final rule. The EFTA 

was enacted to provide a basic 

framework establishing the rights, 

liabilities, and responsibilities of 

participants in electronic fund transfer 

systems. The primary objective of the 

EFTA is the provision of individual 

consumer rights with regard to 

electronic fund transfers. 15 U.S.C. 

1693(b). The EFTA authorizes the Board 

to prescribe regulations to carry out the 

purpose and provisions of the statute. 

15 U.S.C. 1693b(a). The EFTA expressly 

states that the Board’s regulations may 

contain ‘‘such classifications, 

differentiations, or other provisions, 

* * * as, in the judgment of the Board, 

are necessary or proper to effectuate the 

purposes of [the EFTA], to prevent 

circumvention or evasion [of the EFTA], 

or to facilitate compliance [with the 

EFTA].’’ 15 U.S.C. 1693b(c). The EFTA 

also states that ‘‘[i]f electronic fund 

transfer services are made available to 

consumers by a person other than a 

financial institution holding a 

consumer’s account, the Board shall by 

regulation assure that the disclosures, 

protections, responsibilities, and 

remedies created by [the EFTA] are 

made applicable to such persons and 

services.’’ 15 U.S.C. 1693b(d). 

The Board is revising Regulation E to 

provide that payroll card accounts 

directly or indirectly established 

through an employer, and to which 

EFTs of the consumer’s wages, salary, or 

other employee compensation are made 

on a recurring basis are ‘‘accounts’’

subject to Regulation E. The Board 

believes that the revisions to Regulation 

E as discussed in the Supplementary 

Information are within Congress’ broad 

grant of authority to the Board to adopt 

provisions that carry out the purposes of 

the statute. 

2. Issues raised by comments in 

response to the initial regulatory 

flexibility analysis. In accordance with 

Section 3(a) of the RFA, the Board 

conducted an initial regulatory 

flexibility analysis in connection with 

the proposed rule. The Board did not 

receive any comments on its initial 

regulatory flexibility analysis with 

respect to the portions relating to 


jlentini on PROD1PC65 with RULES
51448 Federal Register / Vol. 71, No. 168 / Wednesday, August 30, 2006 / Rules and Regulations 

payroll card accounts. The Board also 

did not receive any comments on its 

regulatory flexibility analysis in the 

interim rule. 

3. Small entities affected by the final 

rule. Entities are required to comply 

with the final rule to the extent that they 

qualify as financial institutions with 

respect to a payroll card account. 

Specifically, an entity must either 

directly or indirectly hold a payroll card 

account or issue an access device (i.e., 

the payroll card) and agree with the 

consumer to provide EFT services. The 

Board does not currently believe that 

there are any employers or service 

providers that would qualify as 

financial institutions with respect to 

their payroll card programs. Based on 

available information, the final rule 

will, at the time of its adoption, apply 

to approximately 60 depository 

institutions that are offering payroll card 

programs. The Board is unaware of any 

such institutions which could be 

considered a small institution with 

assets less than $150 million. 

All small entities that are engaged in 

providing payroll card accounts are 

affected by the requirements established 

by this final rule, including initial 

disclosures, error resolution procedures, 

and the provision of account 

information. 

4. Recordkeeping, reporting, and 

compliance requirements. Institutions 

must provide an initial disclosure to 

payroll card account holders regarding 

the means by which the holder may 

obtain account information and the 

means by which the holder may resolve 

errors. In order to comply with the 

amendments to Regulation E, 

institutions must review their accountopening disclosures to ensure 

compliance with the regulation; and 

some institutions may be required to 

revise their disclosures. The rule 

provides model disclosures to facilitate 

the revision of the disclosures and to 

ensure compliance. In addition, if the 

institution elects not to provide periodic 

statements, the institution must 

establish systems for delivering account 

information electronically, upon the 

consumer’s request, and by telephone. 

Institutions also will be required to 

implement error resolution provisions 

under the final rule to the extent that 

they do not currently have such 

procedures. 

The Board understands that many 

depository institutions and payroll card 

services providers that provide such 

products are currently providing 

account-opening disclosures for payroll 

card accounts, and generally have in 

place error resolution procedures. In 

addition, the Board understands that 

many, if not all, institutions providing 

payroll cards make information 

regarding those payroll card accounts 

available to the holders through 

telephone and electronic access. 

Because the final rule codifies the 

current practices and procedures of 

many payroll card providers and 

provides an alternative to periodic 

statements, the Board concludes that the 

final rule will not have a significant 

economic impact on a substantial 

number of small entities. 

5. Other Federal rules. To the Board’s 

knowledge, no Federal rules duplicate, 

overlap, or conflict with the final 

revisions to Regulation E. 

6. Steps taken to minimize the 

economic impact on small entities. The 

Board solicited comment about 

potential ways to reduce regulatory 

burden. Commenters urged the Board to 

provide relief from the periodic 

statement requirement, asserting that 

other more cost-effective methods of 

providing transaction information could 

provide consumers with the information 

necessary to enable consumers to 

manage their payroll card accounts. In 

the final rule, financial institutions 

engaged in providing payroll card 

accounts may elect not to provide 

periodic statements if they make 

available balance information to 

consumers through a readily-available 

telephone line and make available 

account transaction information 

electronically, such as through an 

Internet web site. These financial 

institutions will also be required to 

provide a written history of account 

transactions upon the consumer’s 

request. 

The final rule would also in most 

cases exclude employers from the scope 

of entities subject to the regulation to 

the extent that such employers arrange 

or contract with a bank or third-party 

service provider to provide payroll 

cards. Commenters on the interim rule 

had urged the Board to exclude 

employers from the scope of the rule 

entirely, stating that the additional 

compliance burden may make some 

employers unwilling to establish payroll 

card programs. 

Generally, under the final rule, 

consumers’ 60-day period to report an 

error with respect to a transaction 

begins on the date the consumer 

electronically accesses an account for 

which information about the transaction 

is made available or the date the 

institution sends a written history 

reflecting the transaction, whichever is 

earlier. The final rule provides a safe 

harbor for financial institutions that 

may have operational difficulties in 

tracking when consumers electronically 

access their accounts or are sent a 

written history of transactions. To ease 

compliance, under the final rule, 

institutions can comply with the 

regulation if they allow a consumer up 

to 120 days after a transaction has 

posted to report any errors involving the 

transaction. A similar rule applies with 

respect to the provisions affecting 

consumer liability for unauthorized 

transactions. 

VI. Paperwork Reduction Act 

In accordance with the Paperwork 

Reduction Act of 1995 (44 U.S.C. 3506; 

5 CFR 1320 Appendix A.1) (PRA), the 

Board reviewed the rule under the 

authority delegated to the Board by the 

Office of Management and Budget 

(OMB). The final rule contains 

requirements subject to the PRA. The 

collection of information that is 

required by this rule is found in 12 CFR 

205.2(b)(2) and 205.18. The Federal 

Reserve may not conduct or sponsor, 

and an organization is not required to 

respond to, this information collection 

unless the information collection 

displays a currently valid OMB control 

number. The OMB control number is 

7100–0200. This information is required 

to provide benefits to consumers and is 

mandatory (15 U.S.C. 1693 et seq.). The 

respondents/recordkeepers are for-profit 

financial institutions, including small 

businesses. Institutions are required to 

retain records for 24 months. 

All entities involved in providing 

payroll card accounts that qualify as 

financial institutions under the 

regulation, of which there presently are 

approximately 60, potentially are 

affected by this collection of 

information because these institutions 

will be required to provide initial 

disclosures, account transaction 

histories, error resolution procedures, 

and other consumer protections, to 

consumers who receive their salaries 

through payroll card accounts as 

defined in § 205.2(b)(2). 

The following estimates represent an 

average across all respondents and 

reflect variations among institutions 

based on their size, complexity, and 

practices. The other Federal agencies are 

responsible for estimating and reporting 

to OMB the total paperwork burden for 

the institutions for which they have 

administrative enforcement authority. 

They may, but are not required to, use 

the Federal Reserve’s burden estimate 

methodology. 

The final rule provides disclosure 

obligations with respect to payroll card 

accounts. Financial institutions are 

required to fully comply with 

Regulation E, as amended by this final 

rule, and provide disclosure of basic 


jlentini on PROD1PC65 with RULES
Federal Register / Vol. 71, No. 168 / Wednesday, August 30, 2006 / Rules and Regulations 51449 

terms, costs, and rights relating to 

electronic fund transfer services in 

connection with the payroll card 

account. Certain information must be 

disclosed to consumers, including: 

Initial and updated EFT terms; 

transaction information; the consumer’s 

potential liability for unauthorized 

transfers; and error resolution rights and 

procedures. 

The Federal Reserve estimates that of 

the 1,289 respondents regulated by the 

Federal Reserve that are required to 

comply with Regulation E, 

approximately 5 participate in payroll 

card programs. These institutions 

should already have systems in place to 

comply with the Regulation E 

requirements for accounts generally. 

The Federal Reserve estimates that each 

respondent will take, on average, 8 

hours (one business day) to reprogram 

and update their systems to provide 

initial disclosures to payroll card 

account holders. The Federal Reserve 

also estimates that each respondent will 

take, on average, 7 hours to reprogram 

and update systems to provide periodic 

statements, or to provide account 

information by other means. Finally, the 

Federal Reserve estimates that each 

respondent will take, on average, 8 

hours (one business day) to develop 

error resolution procedures. The total 

annual burden for respondents 

regulated by the Federal Reserve for all 

of these disclosures is estimated to be 

115 hours. Using the Federal Reserve’s 

methodology, the total annual burden 

for all other institutions offering payroll 

cards, including respondents not 

regulated by the Federal Reserve, is 

approximately 1,265 hours. The 

disclosures are standardized and 

machine-generated and do not 

substantively change from one 

individual account to another; thus, the 

average time for providing the 

disclosure to all consumers should be 

small. 

The Federal Reserve’s current annual 

burden for Regulation E disclosures is 

estimated to be 83,751 hours for 

respondents regulated by the Federal 

Reserve. The final rule would increase 

the total burden under Regulation E for 

all respondents regulated by the Federal 

Reserve by 115 hours, from 83,751 to 

83,866 hours. The Board did not receive 

any comments on the burden estimates 

provided in the interim final rule. 

Because the records would be 

maintained by the institution and the 

notices are not provided to the Federal 

Reserve, no issue of confidentiality 

arises under the Freedom of Information 

Act. 

Text of Final Revisions 

Comments are numbered to comply 

with Federal Register publication rules. 

List of Subjects in 12 CFR Part 205 

Consumer protection, Electronic fund 

transfers, Federal Reserve System, 

Reporting and recordkeeping 

requirements. 

■ For the reasons set forth in the 

preamble, the interim rule amending 12 

CFR part 205 and the Official Staff 

Commentary which was published at 71 

FR 1473 on January 10, 2006, is adopted 

as a final rule with the following 

changes: 

PART 205—ELECTRONIC FUND 

TRANSFERS (REGULATION E) 

■ 1. The authority citation for part 205 

continues to read as follows: 

Authority: 15 U.S.C. 1693b. 

■ 2. Section 205.2 is amended by 

revising paragraph (b)(2) as follows: 

§ 205.2 Definitions. 

* * * * * 

(b) * * * 

(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 thirdparty payroll processor, a depository 

institution or any other person. For 

rules governing payroll card accounts, 

see § 205.18. 

* * * * * 

■ 3. Section 205.18 is revised to read as 

follows: 

§ 205.18 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 

§ 205.9(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 an Internet 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 § 205.9(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 § 205.7(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 an Internet 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 § 205.7(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 § 205.7(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 § 205.8(b). 

Alternatively, a financial institution 

may include on or with each electronic 

and written history provided in 

accordance with § 205.18(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 § 205.6(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 


jlentini on PROD1PC65 with RULES
51450 Federal Register / Vol. 71, No. 168 / Wednesday, August 30, 2006 / Rules and Regulations 

(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 § 205.6(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 § 205.11 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 

§ 205.11 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. 

■ 4. In Appendix A to Part 205, 

Appendix A–7—Model Clauses for 

Financial Institutions Offering Payroll 

Card Accounts (§ 205.18(c)) is revised to 

read as follows: 

Appendix A to Part 205—Model 

Disclosure Clauses and Forms 

* * * * * 

A–7—Model Clauses for Financial 

Institutions Offering Payroll Card 

Accounts (§ 205.18(c)) 

(a) Disclosure by financial institutions of 

information about obtaining account 

information for payroll card accounts. 

§ 205.18(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 on-line 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 

(§ 205.18(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 E-mail us at [electronic mail 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, pointof-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]]. 

■ 5. In Supplement I to part 205, the 

following amendments are made: 

■ a. Under § 205.2—Definitions, under 

2(b) Account, paragraph 2. is revised; 

■ b. Under § 205.18—Requirements for 

Financial Institutions Offering Payroll 

Card Accounts, under 18(a) Coverage, 

paragraph 1. is republished, and 

paragraph 2. is added; 

■ c. Under § 205.18—Requirements for 

Financial Institutions Offering Payroll 

Card Accounts, a new heading ‘‘18(b) 

Alternative to Periodic Statements’’ is 

added, and paragraphs 1. and 2. are 

added; 

■ d. Under § 205.18—Requirements for 

Financial Institutions Offering Payroll 

Card Accounts, a new heading ‘‘18(c) 

Modified Requirements’’ is added, and 

paragraphs 1., 2., and 3. are added; 

■ e. Under Appendix A—Model 

Disclosure Clauses and Forms, 

paragraph 2. is republished. 

Supplement I to Part 205—Official Staff 

Interpretations 

§ 205.2 Definitions. 

2(a) * * * 

2(b) Account 

1. * * * 

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 incentivebased payment, or reimbursement, or the 

transaction does not represent a transfer of 

wages, salary, or other employee 

compensation. 

* * * * * 

§ 205.18 Requirements for Financial 

Institutions Offering Payroll Card Accounts. 

18(a) Coverage 

1. Issuance of access device. 

Consistent with § 205.5(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 


jlentini on PROD1PC65 with RULES
Federal Register / Vol. 71, No. 168 / Wednesday, August 30, 2006 / Rules and Regulations 51451 

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 

§§ 205.18(b)(1)(ii) and (iii) shall reflect 

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 § 205.18(b)(1)(ii) 

must be provided in a form that the 

consumer may keep, as required under 

§ 205.4(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 an 

Internet Web site in a format that is 

capable of being printed or stored 

electronically using an Internet 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 § 205.7(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 §§ 205.6 and 

205.11. 

3. Untimely notice of error. An 

institution that provides a transaction 

history under § 205.18(b)(1) is not 

required to comply with the 

requirements of § 205.11 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 § 205.18(c)(4)(ii), an 

institution need not comply with the 

requirements of § 205.11 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 § 205.6 

before it may impose any liability on the 

consumer. 

Appendix A—Model Disclosure Clauses 

and Forms 

1. * * * 

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 

205.5(b)(2) and (b)(3), 205.6(a), 205.7, 

205.8(b), 205.14(b)(1)(ii), 205.15(d)(1) and 

(d)(2), and 205.18(c)(1) and (c)(2). The use of 

appropriate clauses in making disclosures 

will protect a financial institution from 

liability under sections 915 and 916 of the act 

provided the clauses accurately reflect the 

institution’s EFT services. 

* * * * * 

By order of the Board of Governors of the 

Federal Reserve System, August 24, 2006. 

Jennifer J. Johnson, 

Secretary of the Board. 

[FR Doc. 06–7223 Filed 8–29–06; 8:45 am] 

BILLING CODE 6210–01–P 

FEDERAL RESERVE SYSTEM 

12 CFR Part 205 

[Regulation E; Docket No. R–1265] 

Electronic Fund Transfers 

AGENCY: Board of Governors of the 

Federal Reserve System. 

ACTION: Interim final rule; request for 

public comment. 

SUMMARY: The Board is amending 

Regulation E, which implements the 

Electronic Fund Transfer Act, and the 

official staff commentary to the 

regulation, which interprets the 

requirements of Regulation E. The 

amendments clarify that the 

requirement to obtain a consumer’s 

authorization to collect a service fee for 

insufficient or uncollected funds 

through an electronic debit to the 

consumer’s account applies to any 

person that intends to collect the fee in 

that manner. The amendments also 

clarify notice requirements for 

electronic check conversion transactions 

and for collecting insufficient funds fees 

electronically. This interim final rule, 

for which the Board is seeking 

comment, will supersede the 

corresponding provisions of the January 

2006 final rule that addressed these 

topics. 

DATES: This interim final rule is 

effective January 1, 2007. Comments 

must be received on or before 

September 29, 2006. 

ADDRESSES: You may submit comments, 

identified by Docket No. R–1265, by any 

of the following methods: 

• Agency Web site: http:// 

www.federalreserve.gov. Follow the 

instructions for submitting comments at 

http://www.federalreserve.gov/ 

generalinfo/foia/ProposedRegs.cfm. 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• E-mail: 

regs.comments@federalreserve.gov. 

Include the docket number in the 

subject line of the message. 

• Fax: (202) 452–3819 or (202) 452–

3102. 

• Mail: Jennifer J. Johnson, Secretary, 

Board of Governors of the Federal 

Reserve System, 20th Street and 

Constitution Avenue, NW., Washington, 

DC 20551. 

All public comments are available 

from the Board’s Web site at http:// 

www.federalreserve.gov/generalinfo/ 

foia/ProposedRegs.cfm as submitted, 

unless modified for technical reasons. 

Accordingly, your comments will not be 

edited to remove any identifying or 

contact information. Public comments 

may also be viewed electronically or in 

paper in Room MP–500 of the Board’s 

Martin Building (20th and C Streets, 

NW.) between 9 a.m. and 5 p.m. on 

weekdays. 

FOR FURTHER INFORMATION CONTACT: Ky 

Tran-Trong, Senior Attorney, Vivian W. 

Wong, Attorney, or David A. Stein, 


jlentini on PROD1PC65 with RULES