```

[Federal Register Volume 90, Number 9 (Wednesday, January 15, 2025)]
[Proposed Rules]
[Pages 3723-3727]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-00565]

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CONSUMER FINANCIAL PROTECTION BUREAU

12 CFR Part 1005

[CFPB-2025-0003]

Electronic Fund Transfers Through Accounts Established Primarily 
for Personal, Family, or Household Purposes Using Emerging Payment 
Mechanisms

AGENCY: Consumer Financial Protection Bureau.

ACTION: Notice of proposed interpretive rule; request for comment.

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SUMMARY: In light of interest by electronic fund transfer system market 
participants to offer new types of products to transfer funds and make 
purchases through accounts established primarily for personal, family, 
or household purposes, the Consumer Financial Protection Bureau (CFPB) 
is proposing this interpretive rule to assist companies, investors, and 
other market participants evaluating existing statutory and regulatory 
requirements governing electronic fund transfers (EFTs).

DATES: Comments must be received by March 31, 2025.

ADDRESSES: You may submit comments, identified by Docket No. CFPB-2025-
0003, by any of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments. A brief summary of 
this document will be available at https://www.regulations.gov/docket/CFPB-2025-0003.
     Email: [email protected]. 
Include Docket No. CFPB-2025-0003 in the subject line of the message.
     Mail/Hand Delivery/Courier: Comment Intake--2025 Emerging 
Payments Interpretive Rule, c/o Legal Division Docket Manager, Consumer 
Financial Protection Bureau, 1700 G Street NW, Washington, DC 20552.
    Instructions: The CFPB encourages the early submission of comments. 
All submissions should include the agency name and docket number. 
Because paper mail is subject to delay, commenters are encouraged to 
submit comments electronically. In general, all comments received will 
be posted without change to https://www.regulations.gov.
    All submissions, including attachments and other supporting 
materials, will become part of the public record and subject to public 
disclosure. Proprietary information or sensitive personal information, 
such as account numbers or Social Security numbers, or names of other 
individuals, should not be included. Submissions will not be edited to 
remove any identifying or contact information.

FOR FURTHER INFORMATION CONTACT: George Karithanom, Program Analyst, 
Office of Regulations at (202) 435-7700 or https://reginquiries.consumerfinance.gov. If you require this document in an 
alternative electronic format, please contact 
[email protected].

SUPPLEMENTARY INFORMATION: 

I. Background

A. The Passage and Evolution of the Electronic Fund Transfer Act

    Advances in automation brought about enormous innovation in the 
middle of the twentieth century with respect to the movement of funds. 
In 1969, Chemical Bank installed the first automated teller machine in 
Rockville Center, New York. New payment networks also launched, forming 
the foundation of mechanisms facilitating EFTs. However, adoption of 
these new technologies raised questions about the rights and 
liabilities of consumers who use EFT services, and the responsibilities 
of financial institutions that offer them. In particular, while 
financial firms would reap benefits from automation, consumer adoption 
might be stymied by concerns about and risks of errors and fraud.
    To provide fairness, efficiency, and confidence in burgeoning 
technologies to make payments outside of paper currency, coins, and 
paper checks, Congress enacted the Electronic Fund Transfer Act (EFTA) 
in 1978.\1\ To ensure that industry participants in electronic fund 
transfers (EFTs) had appropriate incentives to guard against errors and 
fraud, EFTA provides a considerable set of rights to consumers to 
dispute errors and limit their liability for unauthorized EFTs, among 
other things. To help vindicate the rights established in EFTA, 
Congress provided mechanisms for both public and private 
enforcement.\2\ In addition, courts have held that EFTA is a ``remedial 
statute accorded a broad, liberal construction in favor of the 
consumer.'' \3\
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    \1\ See Electronic Fund Transfers, Public Law 95-630, tit. XX, 
section 2001, 92 Stat. 3728 (1978); see also S. Rept. 95-1273 at 10 
(1978) (``EFT payment systems, which now involve billions of dollars 
annually and are growing in size, must have clearly defined rules to 
operate fairly, efficiently, and with public confidence.'').
    \2\ See 15 U.S.C. 1693m, 1693o.
    \3\ Clemmer v. Key Bank Nat. Ass'n, 539 F.3d 349, 353 (6th Cir. 
2008) (citation omitted); see also Curtis v. Propel Prop. Tax 
Funding, LLC, 915 F.3d 234, 239 (4th Cir. 2019).
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    The United States was among the first to adopt a framework like 
EFTA, providing greater certainty and protection for consumers, 
financial firms, and other participants in electronic fund transfer 
systems. In enacting that legislation, Congress recognized that 
electronic fund transfer services would continue to develop in the 
future. In particular, EFTA's legislative history demonstrates that 
Congress drafted the definitions used in the statute in a broad manner 
to ensure that EFTA was ``sufficiently flexible to accommodate the 
continued evolution of electronic fund transfer services.'' \4\ 
Congress also granted the Board of Governors of the Federal Reserve 
System (the Board) and later the CFPB the authority to issue 
regulations and guidance to implement the broad provisions of EFTA.\5\
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    \4\ Electronic Fund Transfer Act, H. Rept. 95-1315, at 5 (1978) 
(discussing definition of ``financial institution''); see also, 
e.g., S. Rept. 95-1273 at 25 (1978) (``The definition of `electronic 
fund transfer' is intended to give the Federal Reserve Board 
flexibility in determining whether new or developing electronic 
services should be covered by the act and, if so, to what 
extent.''); id. at 26 (noting that ``[t]he definitions of `financial 
institution' and `account' are deliberately broad so as to assure 
that all persons who offer equivalent EFT services involving any 
type of asset account are subject to the same standards and 
consumers owning such accounts are assured of uniform protection'').
    \5\ See 15 U.S.C. 1693b, 1693m(d).
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    The Board implemented EFTA through Regulation E shortly after the 
statute's passage in 1978.\6\ Over time, the Board and then the CFPB 
have amended and interpreted Regulation E in response to the emergence 
of new electronic payment instruments and systems, broader developments 
in the market, and new congressional legislation.\7\ Most recently, in 
2016, the

[[Page 3724]]

CFPB issued a final rule to create comprehensive consumer protections 
for prepaid accounts under Regulation E.\8\ The CFPB noted in the rule 
that its analysis with respect to virtual currencies and related 
products and services was ongoing, and that the rule did not resolve 
issues with respect to the application of existing regulations or the 
prepaid rule to such products and services.\9\ The CFPB therefore 
treated comments addressing crypto-assets and related products and 
services as outside the scope of the rulemaking.\10\
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    \6\ See 44 FR 18468 (Mar. 28, 1979); 44 FR 59464 (Oct. 15, 
1979).
    \7\ See, e.g., 61 FR 19662, 19662 (May 2, 1996) (amending 
Regulation E as part of periodic review to ``reflect technological 
and other developments''); 62 FR 43467 (Aug. 14, 1997) (amending 
Regulation E with respect to government-administered EBT programs); 
71 FR 51437 (Aug. 30, 2006) (amending Regulation E with respect to 
payroll cards). The CFPB also issued new requirements in subpart B 
of Regulation E relating to remittance transfers in final rules 
issued in 2012 and 2013. See 78 FR 30662, 30662 (May 22, 2013) 
(summarizing 2012 and 2013 rules).
    \8\ 81 FR 83934 (Nov. 22, 2016). The prepaid rule also amended 
Regulation Z, which implements the Truth in Lending Act, to create 
consumer protections for prepaid accounts.
    \9\ Id. at 83978 (discussing ``virtual currencies'').
    \10\ Id.
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B. Facebook's 2019 Libra Proposal

    While most payment networks rely on significant network effects, 
like those that exist among banks and merchants through card networks, 
advances in mobile technology spawned new networks for payments. More 
recently, large technology firms have begun to explore additional ways 
to leverage their network effects to facilitate payments.
    In 2019, the technology firm Facebook announced the creation of a 
new global currency known as Libra.\11\ Libra was a proposed 
``stablecoin.'' \12\ Rather than offering Libra to the public for 
speculative trading, the goal of Libra was to provide a mechanism to 
make payments throughout the digital world.\13\ Users would transmit 
Libra through a Calibra wallet account, which would also be established 
by Facebook. A broad range of merchants, including app-based services, 
indicated that they would participate in the Libra scheme.\14\
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    \11\ See Mike Isaac & Nathaniel Popper, Facebook Plans Global 
Financial System Based on Cryptocurrency, N.Y. Times (June 18, 
2019), https://www.nytimes.com/2019/06/18/technology/facebook-cryptocurrency-libra.html.
    \12\ See Rebecca Nelson & David Perkins, Libra: A Facebook-led 
Cryptocurrency Initiative, Congressional Research Service (Oct. 21, 
2019), https://crsreports.congress.gov/product/pdf/IN/IN11183/2.
    \13\ See Libra, White Paper (June 18, 2019), https://web.archive.org/web/20190618085610/https://libra.org/en-US/white-paper/ (``[t]he mission for Libra is a simple global currency and 
financial infrastructure that empowers billions of people'').
    \14\ See PYMNTS, A Brief History of Libra (July 15, 2019), 
https://www.pymnts.com/cryptocurrency/2019/a-brief-history-of-facebook-libra/.
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    Regulators around the world charged with assuring compliance with 
privacy, consumer protection, and anti-money laundering laws raised 
concerns about many aspects of the Libra proposal.\15\ Central banks 
and authorities charged with ensuring stability of the financial system 
also sought clarity on how the Libra stablecoin would fit into existing 
regulatory frameworks.\16\
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    \15\ See Off. of the Priv. Comm'r of Can., Joint statement on 
global privacy expectations of the Libra network (Aug. 5, 2019), 
https://www.priv.gc.ca/en/opc-news/speeches-and-statements/2019/s-d_190805/; Foo Yun Chee, EU antitrust regulators raise concerns 
about Facebook's Libra currency: sources, Reuters (Aug. 21, 2019), 
https://www.reuters.com/article/technology/eu-antitrust-regulators-raise-concerns-about-facebooks-libra-currency-sources-idUSKCN1VB1C1/.
    \16\ See, e.g., Zachary Warmbrodt, Jerome Powell: Facebook's 
Libra poses potential risk to financial system, Politico (July 10, 
2019), https://www.politico.com/story/2019/07/10/jerome-powell-facebook-libra-1578306.
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    Ultimately, Libra was abandoned.\17\ However, questions surrounding 
the safety and utility of emerging forms of fund transfers for 
``personal, family, or household purposes'' operating outside of 
traditional bank and credit union accounts have persisted.\18\
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    \17\ Katie Paul, Facebook's cryptocurrency venture to wind down 
after asset sale to Silvergate, Reuters (Jan. 31, 2022), https://www.reuters.com/technology/facebooks-cryptocurrency-venture-wind-down-after-asset-sale-silvergate-2022-02-01.
    \18\ See CFPB, Prepared Remarks of CFPB Director Rohit Chopra at 
the Brookings Institution Event on Payments in a Digital Century 
(Oct. 6, 2023), https://www.consumerfinance.gov/about-us/newsroom/prepared-remarks-of-cfpb-director-rohit-chopra-at-the-brookings-institution-event-on-payments-in-a-digital-century/ (``Libra never 
became a new global currency. But the questions it provoked in the 
West for consumer and data protection regulators . . . live on.'').
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C. CFPB Research Into Emerging Payments

    While there has been considerable attention paid to 
cryptocurrencies acquired for speculation and other purposes, the CFPB 
has conducted research to evaluate emerging forms of payments, fund 
transfers, and digital technologies for ``personal, family, or 
household purposes.'' For example, in 2021, the CFPB launched an 
inquiry into the payment products and services offered by large 
technology firms and by widely used digital payment applications.\19\ 
There were many insights from the research, including developments in 
how firms were offering accounts for storing and transmitting funds. 
While firms primarily offered the ability to transfer funds by relying 
on balances in a consumer's bank or credit union account, many of the 
firms offered stored balance products, where funds held in an account 
were not necessarily deposited in a traditional insured account. There 
were indicia that some of the firms were actively developing 
proprietary products, including stablecoins similar to Libra.
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    \19\ Press Release, CFPB, CFPB Orders Tech Giants to Turn Over 
Information on their Payment System Plans (Oct. 21, 2021), https://www.consumerfinance.gov/about-us/newsroom/cfpb-orders-tech-giants-to-turn-over-information-on-their-payment-system-plans/.
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    Because gaming platforms served as early adopters of technologies 
that inevitably become more broadly adopted, the CFPB also undertook a 
study of payments in fund transfers used on such platforms.\20\ In a 
report from April 2024, the CFPB detailed some of the business 
practices on how game players convert U.S. dollars into virtual 
currencies. The payment systems on these gaming platforms have rapidly 
evolved. Rather than relying on a business model in which players make 
a one-time payment to buy or play the game, some gaming platforms have 
developed elaborate economies where the platforms accept U.S. dollars 
in exchange for virtual currency that can be transacted among players 
and other platform participants, and even exchanged back to U.S. 
dollars in certain circumstances. The report described how players and 
other platform participants maintain an account where these virtual 
currencies are stored, and how some consumers have experienced the loss 
of assets in these accounts through hacking attempts, account theft, 
scams, and unauthorized transactions. The developments described in the 
report raise questions about responsibilities and liabilities when 
errors or fraud take place.
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    \20\ See CFPB, Banking in video games and virtual worlds (Apr. 
4, 2024), https://www.consumerfinance.gov/data-research/research-reports/issue-spotlight-video-games/.
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    The CFPB has also conducted research into online services that 
offer betting on sporting events and casino games.\21\ Some of these 
services allow bettors to maintain accounts that allow individuals to 
make a range of electronic transfers, including to and from linked 
accounts. These accounts may be denominated in U.S. dollars, or in 
proprietary currencies.
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    \21\ Id. (``Third-party websites also facilitate a growing skin 
gambling industry that supports wagering skins, similar to casino 
chips, in virtual games such as blackjack, roulette, or craps. . . . 
competitive gaming contests, also known as esports, and games 
between professional sports teams. Winnings can be converted to fiat 
currency or other forms of virtual currency and withdrawn for a fee 
directly to the player's digital wallet.'')
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    Recognizing that many arrangements, such as stablecoins and virtual 
currencies, constitute alternative electronic fund transfer mechanisms, 
private sector participants have made certain determinations about how 
to treat transactions to obtain these currencies. For example, many 
large credit card issuers categorize purchases of virtual currencies as 
``cash

[[Page 3725]]

advances,'' reflecting the money-like nature of the funds held in these 
accounts.

D. 2021 Report on Stablecoins

    In November 2021, the President's Working Group on Financial 
Markets (consisting of the Secretary of the Treasury, the Chairperson 
of the Board of Governors of the Federal Reserve System, the 
Chairperson of the Securities and Exchange Commission, and the 
Chairperson of the Commodity Futures Trading Commission), in 
conjunction with the Federal Deposit Insurance Commission and the 
Office of the Comptroller of the Currency, issued a report on 
stablecoins.\22\ The report described certain financial stability 
concerns, as well as issues related to the issuance of stablecoins by 
banks and nonbanks. The report did not include a specific assessment on 
consumer protection issues, but noted that existing laws (including 
EFTA) accord certain consumer protections to payments services used by 
consumers.\23\ The report further urged regulators to continue to 
coordinate on these issues and for Congress to consider legislation on 
a prudential framework for so-called ``payment stablecoins.'' \24\
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    \22\ See President's Working Grp. on Fin. Mkts., Fed. Deposit 
Ins. Corp.& Off. of the Comptroller of the Currency, Report on 
Stablecoins (Nov. 2021), https://home.treasury.gov/system/files/136/StableCoinReport_Nov1_508.pdf.
    \23\ Id. at 18.
    \24\ Id. at 2, 16-18.
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    Consistent with the report, the CFPB has coordinated with 
regulators on issues with respect to stablecoins and emerging 
payments.\25\ There has been considerable legislative discussion on 
many aspects of stablecoins and digital assets, but these discussions 
have primarily focused on stablecoins' status under the securities and 
commodities trading laws, rather than their potential use as a payment 
mechanism.
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    \25\ See CFPB, Statement of CFPB Director Chopra on Stablecoin 
Report (Nov. 1, 2021), https://www.consumerfinance.gov/about-us/newsroom/statement-cfpb-director-chopra-stablecoin-report/.
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E. Rationale for Development of Interpretive Rule

    The CFPB is concerned that if market participants do not apply EFTA 
and Regulation E in a consistent manner, consumers making electronic 
fund transfers using accounts established primarily for personal, 
family, or household purposes might face challenges in vindicating 
their rights in the event of unauthorized transfers and other errors. 
The CFPB is also concerned that inconsistent application of EFTA and 
Regulation E might put certain providers at an unfair, competitive 
disadvantage.
    While the application of Federal consumer financial protection 
laws, such as EFTA, to new methods of payments is often developed 
through case-by-case adjudications by courts, consumers and market 
participants may face conflicting guidance from case law. Consistent 
with the CFPB's mandate to promote fair, transparent, and competitive 
markets, as well as its mandate to advance the underlying goal of EFTA 
to create confidence in electronic fund transfer mechanisms by 
establishing a framework of rights, liabilities, and 
responsibilities,\26\ this proposed interpretive rule, if adopted, 
would provide a consistent framework for the applicability of EFTA and 
Regulation E with respect to a range of emerging payment mechanisms. 
The proposed interpretive rule seeks to synthesize the range of 
insights developed by the CFPB in recent years derived from research 
and coordination to outline how market participants can develop 
beneficial products and services in compliance with EFTA and Regulation 
E, by ensuring that similar products are treated similarly under the 
law.
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    \26\ See 12 U.S.C. 5511(a); 15 U.S.C. 1693(b).
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II. Proposed Interpretive Rule

    The text of the proposed interpretive rule is as follows.

A. Legal Analysis

    EFTA and Regulation E apply to an electronic fund transfer (EFT) 
that authorizes a ``financial institution'' to debit or credit a 
consumer's account.\27\ The term ``electronic fund transfer'' generally 
means any transfer of ``funds'' that is initiated through an electronic 
terminal, telephone, computer, or magnetic tape for the purpose of 
ordering, instructing, or authorizing a financial institution to debit 
or credit a consumer's account.\28\
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    \27\ 12 CFR 1005.3(a).
    \28\ EFTA section 903(7); 15 U.S.C. 1693a(7).
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1. ``Financial Institution''
    The term ``financial institution'' under EFTA, as implemented in 
Regulation E, means a bank, savings association, credit union, or any 
other person that directly or indirectly holds an account belonging to 
a consumer, or that issues an access device and agrees with a consumer 
to provide EFT services.\29\ It is well-established that financial 
institutions include nonbank entities that directly or indirectly hold 
an account belonging to a consumer, or that issue an access device and 
agree with a consumer to provide EFT services.\30\
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    \29\ 12 CFR 1005.2(i). Regulation E defines ``access device'' as 
a card, code, or other means of access to a consumer's account, or 
any combination thereof, that may be used by the consumer to 
initiate electronic fund transfers. 12 CFR 1005.2(a)(1).
    \30\ See, e.g., S. Rept. 95-1273 at 26 (``The term `financial 
institution' is defined to mean traditional depository institutions 
as well as any other person who directly or indirectly holds a 
consumer's account.''); Electronic Fund Transfer Act, H. Rept. 95-
1315, at 5 (1978) (``Section 903(h) of the bill defines the term 
`financial institution' to include not only traditional depository 
institutions that are normally considered to be financial 
institutions but also `. . . any other person who, . . . indirectly, 
holds a consumer account belonging to an individual; . . . .' This 
language is intended by the Committee to assure that the legislation 
remains sufficiently flexible to accommodate the continued evolution 
of electronic fund transfer services.''); see also 81 FR 83934 at 
83964 (noting that the prepaid rule's ``requirements apply equally 
to depositories and non-depositories alike'').
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2. ``Funds''
    The term ``funds'' is not specifically defined in EFTA or 
Regulation E, but has been broadly construed to cover a broad array of 
assets, beyond those held in a traditional bank or credit union 
account. Specifically, at the time of EFTA's enactment in 1978, as well 
as today, the term was and is broadly understood to cover much more 
than the U.S. dollar and other fiat currencies.
    For example, one leading court decision from before the enactment 
of EFTA recognized that the dictionary defined ``funds'' ``as 
`available pecuniary resources ordinarily including cash and negotiable 
paper' '' and that ``in a legal context the courts have also taken it 
to include property of value which may be converted into cash.'' \31\ 
Another decision from that time stated that the term `` `[f]unds' 
includes moneys, and much more, such as notes, bills, checks, drafts, 
stocks, and bonds. In other words the general term can and does include 
not only currency but also other types of pecuniary resources which are 
readily converted into cash.'' \32\
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    \31\ Keene v. Keene, 371 P.2d 329, 332 (Cal. 1962) (quoting 
definition of ``funds'' in Webster's New International Dictionary 
921 (3d ed. 1961)); see also Funds, Webster's New International 
Dictionary 921 (3d ed. 1961) (defining ``funds'' as ``available 
pecuniary resources ordinarily including cash and negotiable paper 
that can be converted to cash at any time without loss'').
    \32\ In re Plich's Est., 348 P.2d 706, 708-09 (Colo. 1960); see 
also, e.g., Zamora v. United States, 369 F.2d 855, 859 (10th Cir. 
1966) (``The word `funds' is broader than but in its usual sense 
includes `moneys.' '').
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    Similarly, Black's Law Dictionary at that time defined ``fund'' as 
``[a] generic term and all-embracing as compared with [the] term 
`money,' etc., which is

[[Page 3726]]

specific.'' \33\ Modern dictionaries (both legal and general-use) 
similarly define ``funds'' in reference to pecuniary resources and 
further define ``pecuniary'' as ``concerning or involving money'' or 
``of or relating to money.'' \34\ The term ``money'' means ``something 
generally accepted as a medium of exchange, a measure of value, or a 
means of payment.'' \35\
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    \33\ Fund, Black's Law Dictionary (4th ed.1957); see also Funds, 
Black's Law Dictionary (4th ed.1957) (``Moneys and much more, such 
as notes, bills, checks, drafts, stocks and bonds, and in broader 
meaning may include property of every kind.'').
    \34\ Funds, Collins English Dictionary, https://www.collinsdictionary.com/us/dictionary/english/funds (last visited 
Dec. 11, 2024); Pecuniary, Collins English Dictionary, https://www.collinsdictionary.com/us/dictionary/english/pecuniary (last 
visited Dec. 16, 2024); Funds, Merriam-Webster Dictionary, https://www.merriam-webster.com/dictionary/money (last visited Dec. 11, 
2024); Pecuniary, Merriam-Webster Dictionary, https://www.merriam-webster.com/dictionary/pecuniary (last visited Dec. 16, 2024).
    \35\ Money, Merriam-Webster Dictionary, https://www.merriam-webster.com/dictionary/money (last visited Dec. 11, 2024).
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    Based on the plain language used in EFTA and the reasoning of 
judicial decisions, as well as the CFPB's experience in market 
monitoring, it has long been clear that the term ``funds'' in EFTA is 
not limited to fiat currency like U.S. dollars. The CFPB interprets the 
term ``funds'' to include assets that act or are used like money, in 
the sense that they are accepted as a medium of exchange, a measure of 
value, or a means of payment. Under this interpretation, the term 
``funds'' would include stablecoins, as well as any other similarly-
situated fungible assets that either operate as a medium of exchange or 
as a means of paying for goods or services.\36\
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    \36\ Whether a specific digital asset is included in the term 
``funds'' for purposes of EFTA and Regulation E is fact specific, 
and there are likely some digital assets that are not ``funds'' 
because, for example, they cannot be used to make payments or cannot 
be readily exchanged for fiat currency. For example, most 
nonfungible tokens (``NFTs'') are unlikely to be ``funds.''
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    In addition, the fact that the asset may fluctuate in value does 
not exempt it from this definition. Several courts interpreting 
``funds'' in the context of Federal money transmitter and money 
laundering statutes have similarly held that the term ``funds'' is not 
limited to fiat currency and encompasses other types of assets, 
including widely held currencies like Bitcoin.\37\ A Federal district 
court also recently held that cryptocurrency, as a ``digital form of 
liquid, monetary assets,'' unambiguously constitutes ``funds'' under 
EFTA.\38\ These interpretations of ``funds'' accord with Congress's 
intent by ensuring that consumers are adequately protected and have 
access to the benefits of innovative electronic fund transfer systems 
and technology.
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    \37\ See, e.g., United States v. Day, 700 F.3d 713, 726 (4th 
Cir. 2012) (holding that ``gold can constitute `funds' under the . . 
. statute where it is moved as a liquid, monetary asset''); United 
States v. Iossifov, 45 F.4th 899, 913 (6th Cir. 2022), cert. denied, 
143 S. Ct. 812 (2023) (holding that the ordinary meaning of 
``funds'' is ``available pecuniary resources,'' and noting that 
courts have ``unanimously determined that Bitcoin'' is encompassed 
by the terms ``funds'' and ``monetary instrument''); United States 
v. Murgio, 209 F. Supp. 3d 698, 707 (S.D.N.Y. 2016) (``[t]he 
ordinary meaning of `funds' . . . is `available pecuniary resources' 
'') (citation omitted); United States v. Budovsky, No. 13CR368 DLC, 
2015 WL 5602853 (S.D.N.Y. Sept. 23, 2015) (assigning ``funds'' its 
ordinary meaning, ``assets that `can be used to pay for things in 
the colloquial sense,' '' and holding that ``funds'' encompassed the 
digital currency at issue); see also United States v. Harmon, 474 F. 
Supp. 3d 76 (D.D.C. 2020).
    \38\ Rider v. Uphold HQ Inc., 657 F. Supp. 3d 491, 498 (S.D.N.Y. 
2023).
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3. ``Account'' and ``Other Consumer Asset Account''
    Given the breadth of the term ``funds,'' the applicability of EFTA 
and Regulation E will often turn on the definition of ``account'' in 
EFTA and Regulation E.
    EFTA section 903(2) defines ``account'' to mean ``a demand deposit, 
savings deposit, or other asset account . . . as described in 
regulations of the [CFPB], established primarily for personal, family, 
or household purposes,'' subject to limited exceptions. The legislative 
history confirms that Congress intended EFTA to cover more than 
checking or savings accounts, noting that EFTA's definition of 
``account'' is intended to be broad enough ``to assure that all persons 
who offer equivalent EFT services involving any type of asset account 
are subject to the same standards and consumers owning such accounts 
are assured of uniform protections.'' \39\ The legislative history also 
explained that the term ``account'' was intended to go beyond a 
consumer's checking or savings account. It provided several examples of 
nonbank asset accounts that were within EFTA's coverage because they 
could potentially be used to make electronic payments from consumer 
accounts.\40\
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    \39\ S. Rept. 95-915 at 9.
    \40\ Id. at 4, 9 (providing as examples mutual fund accounts 
that provide an EFT card that can be used to make payments, money 
market mutual fund accounts, and positive balances in margin 
accounts at a stock brokerage).

    Both EFTA and Regulation E generally define ``account'' to mean:
    [A] demand deposit (checking), savings, or other consumer asset 
account (other than an occasional or incidental credit balance in a 
credit plan) held directly or indirectly by a financial institution 
and established primarily for personal, family, or household 
purposes.\41\
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    \41\ 12 CFR 1005.2(b)(1); see also 15 U.S.C. 1693a(2).

    Essentially, ``other consumer asset accounts'' include prepaid 
accounts,\42\ and other asset accounts established primarily for a 
consumer's individual, family, or household use, that are not checking 
accounts or savings accounts, but into which funds can be deposited by 
the consumer or on their behalf and which have features of deposit or 
savings accounts. Such features include, but are not limited to: paying 
for goods or services from multiple merchants, ability to withdraw 
funds or obtain cash, or conducting person-to-person transfers.\43\ 
Depending on the facts and circumstances, the following could be 
considered ``accounts'' under EFTA: video game accounts used to 
purchase virtual items from multiple game developers or players; 
virtual currency wallets that can be used to buy goods and services or 
make person-to-person transfers; and credit card rewards points 
accounts that allow consumers to buy points that can be used to 
purchase goods from multiple merchants.
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    \42\ See 12 CFR 1005.2(b)(3). Whether a particular product meets 
the definition of ``prepaid account'' in Regulation E depends on the 
features of the product and is outside the scope of this 
interpretive rule.
    \43\ See 12 CFR 1005.2(b)(1). Whether a particular account 
sufficiently resembles a checking or savings account, and thus 
qualifies as an ``other consumer asset account'' for purposes of 
Regulation E, will depend on the account's specific features.
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    This interpretation of the term ``other consumer asset account'' is 
consistent with the legislative history discussed above, and 
longstanding provisions in both Regulation E's regulatory text and the 
Official Staff Interpretations to Regulation E, where certain types of 
accounts that are functionally similar to checking and savings accounts 
are Regulation E ``accounts.'' Examples include club accounts,\44\ 
retail repurchase agreements,\45\ margin accounts,\46\ as well as any 
securities and commodities accounts that are functionally similar to 
checking or savings accounts.\47\
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    \44\ Regulation E comment 2(b)-1.i.
    \45\ Regulation E comment 2(b)-1.ii.
    \46\ 12 CFR 1005.11(c)(2)(i)(B).
    \47\ 12 CFR 1005.3(c)(4); Regulation E comment 3(c)(4)-3.i; see 
also, 61 FR 19680 (May 2, 1996).
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4. Exceptions for Securities and Commodities
    EFTA and Regulation E both contain specific securities and 
commodities exceptions to the definition of EFT.\48\ As implemented in 
Regulation E, these specific exceptions include any transfer

[[Page 3727]]

of funds the primary purpose of which is the purchase or sale of a 
security or commodity if, among other things, the security or commodity 
is regulated by the Securities and Exchange Commission (SEC) or the 
Commodity Futures Trading Commission (CFTC) or purchased or sold 
through a broker-dealer regulated by the SEC or through a futures 
commissions merchant regulated by the CFTC.\49\ This exception is 
limited to EFTs which have as their primary purpose the purchase or 
sale of commodities or securities, and does not reach instances where 
securities or commodities are used as ``funds'' in an ``account'' to 
purchase goods or services.\50\
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    \48\ EFTA section 903(7); 15 U.S.C. 1693a(7); 12 CFR 1005.3(c).
    \49\ 12 CFR 1005.3(c)(4).
    \50\ See S. Rept. 95-915 at 4 (explaining that EFTA would cover, 
for example, instances where a mutual fund issues ``an EFT card 
which would draw on the consumer's fund shares. Each time the card 
would be used, the fund could instantaneously redeem shares 
necessary to cover a payment and transfer the funds to the payee'').
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    Put another way, EFTA generally does not apply to the purchase or 
sale of a stock or bond.\51\ But it could apply if a stock, bond, or 
other form of funds in an investment account--including funds and 
accounts also regulated by the SEC or CFTC--is used to purchase goods 
or services from a retailer. Indeed, the longstanding Official 
Commentary to Regulation E makes clear that EFTs from a securities 
account to purchase goods or services or obtain cash are regulated 
under EFTA.\52\
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    \51\ Nero v. Uphold HQ Inc., 688 F. Supp. 3d 134, 144 (S.D.N.Y. 
2023). (``[P]ersonal asset accounts that are investment accounts 
like the money market mutual fund accounts identified in the Senate 
Report or [certain] cryptocurrency accounts . . . , are accounts 
covered by the EFTA. This is true even though a transaction from 
those accounts may not be subject to the EFTA in the event it is a 
transaction for the purchase or sale of a security regulated by the 
SEC.'')
    \52\ Regulation E comment 3(c)(4)-3.i; see also, 61 FR 19680 
(May 2, 1996). The SEC has authority to enforce EFTA against broker-
dealers that are subject to the Securities Exchange Act. 15 U.S.C. 
1693o(a)(4). This interpretive rule is not intended to limit the 
authority of the SEC under the Securities Exchange Act or the CFTC 
under the Commodities Exchange Act.
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5. Consumer Protections Under EFTA and Regulation E
    Financial institutions have a number of legal obligations under 
EFTA and Regulation E. Among the most important are error resolution 
and limits on consumers' liability for unauthorized EFTs, and well as 
initial and ongoing disclosures. A financial institution has 
investigation and error resolution obligations under Regulation E when 
a consumer notifies the financial institution of an error, with limited 
exceptions.\53\ EFTA and Regulation E define the term ``error'' to 
include, among other things, ``an unauthorized electronic fund 
transfer.'' \54\ Subject to certain exceptions, Regulation E defines an 
unauthorized EFT to mean an EFT from a consumer's account initiated by 
a person other than the consumer without actual authority to initiate 
the transfer and from which the consumer receives no benefit.\55\ 
Unauthorized EFTs include transfers initiated by a person who obtained 
a consumer's access device through fraud or robbery and consumer 
transfers at an ATM that were induced by force. Another example of an 
unauthorized EFT is when a bad actor obtains a consumer's account 
credential through computer hacking or other forms of cyber theft and 
uses that credential to steal funds.\56\ EFTA and Regulation E place 
limits on a consumer's liability for unauthorized EFTs, based on a 
number of factors.
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    \53\ 15 U.S.C. 1693f(a); 12 CFR 1005.11(b). Regulation E also 
tailored certain error resolution obligations for prepaid accounts. 
12 CFR 1005.18(e).
    \54\ 15 U.S.C. 1693f(f)(1); 12 CFR 1005.11(a)(1)(i).
    \55\ However, the CFPB reiterates here that nothing in this 
proposed interpretive rule would change the existing statutory or 
regulatory exceptions to the definition of EFT.
    \56\ 12 CFR 1005.2(m); Regulation E comments 2(m)-3 and 4; see 
also CFPB, Electronic Fund Transfers FAQs, https://www.consumerfinance.gov/compliance/compliance-resources/deposit-accounts-resources/electronic-fund-transfers/electronic-fund-transfers-faqs/#unauthorized-eft (last visited Dec. 2, 2024).
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    A financial institution must provide initial disclosures of the 
terms and conditions of EFT services before the first EFT is made or at 
the time the consumer contracts for an EFT service.\57\ The disclosures 
must include a summary of various consumer rights under Regulation E, 
including the consumer's liability for unauthorized EFTs, the types of 
EFTs the consumer may make, limits on the frequency or dollar amount, 
fees charged by the financial institution, and the error-resolution 
procedures. Regulation E also requires a financial institution to 
provide regular, periodic statements, and change-in-terms notices.\58\ 
Regulation E contains model forms and clauses with respect to the 
required disclosures.\59\ Note that accounts that separately meet the 
definition of a gift card would have different obligations under the 
Gift Card Rule and generally would not be subject to the remainder of 
subpart A of Regulation E.\60\
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    \57\ EFTA section 905; 15 U.S.C. 1693c; see generally 12 CFR 
1005.7.
    \58\ 12 CFR 1005.8 and 1005.9(b).
    \59\ See generally 12 CFR part 1005, app. A.
    \60\ See 12 CFR 1005.20; see also 81 FR 83934 at 83977 
(discussing interaction of the Gift Card Rule and the Prepaid Rule).
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    In sum, market participants offering new types of payment 
mechanisms to facilitate electronic fund transfers should understand 
whether their account meets the definition of ``other consumer asset 
account,'' including whether it is established for ``personal, family, 
or household purposes.''

III. Regulatory Matters

    This is a proposed interpretive rule issued under the CFPB's 
authority to interpret EFTA and Regulation E, including under section 
1022(b)(1) of the Consumer Financial Protection Act of 2010, which 
authorizes guidance as may be necessary or appropriate to enable the 
CFPB to administer and carry out the purposes and objectives of Federal 
consumer financial laws.\61\ While not required under the 
Administrative Procedure Act (APA), the CFPB is soliciting comments on 
the proposal and may make revisions when it issues a final interpretive 
rule as appropriate in light of feedback received.
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    \61\ 12 U.S.C. 5512(b)(1).
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    By operation of EFTA section 916(d), no provision of EFTA sections 
916 or 917 imposing liability would apply to any act done or omitted in 
good faith in conformity with the final interpretive rule, 
notwithstanding that after such act or omission has occurred, the final 
interpretive rule is amended, rescinded, or determined by judicial or 
other authority to be invalid for any reason.\62\
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    \62\ 15 U.S.C. 1693m(d).
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    The CFPB has determined that this proposed interpretive rule, if 
finalized, would not impose any new or revise any existing 
recordkeeping, reporting, or disclosure requirements on covered 
entities or members of the public that would be collections of 
information requiring approval by the Office of Management and Budget 
under the Paperwork Reduction Act.\63\
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    \63\ 44 U.S.C. 3501 through 3521.

Rohit Chopra,
Director, Consumer Financial Protection Bureau.
[FR Doc. 2025-00565 Filed 1-14-25; 8:45 am]
BILLING CODE 4810-AM-P
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