19662 Federal Register / Vol. 61, No. 86 / Thursday, May 2, 1996 / Rules and Regulations

FEDERAL RESERVE SYSTEM

12 CFR Part 205

[Regulation E; Docket No. R–0830]

Electronic Fund Transfers

AGENCY: Board of Governors of the

Federal Reserve System.

ACTION: Final rule.

SUMMARY: The Board is publishing a

final rule to amend Regulation E, which

implements the Electronic Fund

Transfer Act. The amendments are a

result of the Board’s review of

Regulation E under its Regulatory

Planning and Review Program, which

calls for the periodic review of all Board

regulations. The final rule contains

some substantive amendments,

including changes to the existing

exemptions for securities or

commodities transfers. Primarily, the

final amendments simplify the language

and format of the regulation, and delete

obsolete provisions. Commenters

generally supported the Board’s

proposed amendments and offered

suggestions for additional changes,

some of which were adopted in the final

rule. In conjunction with the

amendments to the regulation, the

Board also has made amendments to the

staff commentary, published elsewhere

in today’s Federal Register.

DATES: Effective date. May 2, 1996.

Compliance date. Mandatory

compliance January 1, 1997.

FOR FURTHER INFORMATION CONTACT: Jane

Jensen Gell, Kyung Cho-Miller, Natalie

Taylor, or Michael Hentrel, Staff

Attorneys, Division of Consumer and

Community Affairs, at (202) 452–2412

or (202) 452–3667. For users of

Telecommunications Device for the Deaf

only, contact Dorothea Thompson, at

(202) 452–3544.

SUPPLEMENTARY INFORMATION:

I. Background

The Electronic Fund Transfer Act

(EFTA) (15 U.S.C. 1693), enacted in

1978, provides a basic framework

establishing the rights, liabilities, and

responsibilities of participants in

electronic fund transfer (EFT) systems.

The Federal Reserve Board was given

rulewriting authority to issue

implementing regulations. Types of

transfers covered by the act and

regulation include transfers initiated

through an automated teller machine

(ATM), point-of-sale terminal,

automated clearinghouse, telephone

bill-payment system, or home banking

program. The act and Regulation E (12

CFR part 205) provide rules that govern

these and other EFTs. The rules

prescribe restrictions on the unsolicited

issuance of ATM cards and other access

devices; disclosure of terms and

conditions of an EFT service;

documentation of EFTs by means of

terminal receipts and periodic account

statements; limitations on consumer

liability for unauthorized transfers;

procedures for error resolution; and

certain rights related to preauthorized

EFTs.

Board policy under its Regulatory

Planning and Review (RPR) program

calls for the periodic review of each

Board regulation. The RPR program has

four goals: to clarify and simplify

regulatory language; to amend

regulations to reflect technological and

other developments; to reduce undue

regulatory burden on the industry; and

to delete obsolete provisions. In keeping

with that policy, the Board conducted a

detailed review of Regulation E to

determine whether it can be simplified

to ease compliance burdens for financial

institutions, while meeting the Board’s

responsibility for implementing the

consumer protections of the EFTA. The

Board issued a proposed rule on March

7, 1994 (59 FR 10684).

Based on the comments received on

the proposal and on its own further

analysis, the Board has adopted a

revised Regulation E. While certain

substantive revisions have been made

(see the section-by-section discussion

below), the final rule leaves most of the

regulatory provisions substantively

unchanged. The regulation closely

follows the statute, which contains

detailed requirements in most areas;

major changes to the regulation are not

possible unless the act itself is

amended. The Board solicited comment

on whether specific legislative revisions

to the EFTA are necessary and

achievable without imposing a

significant adverse impact on consumer

protections. A number of commenters

provided recommendations. The Board

plans to convey these recommendations

to the Congress, as appropriate, as part

of a report that the Board will make

pursuant to section 303 of the

Community Development and

Regulatory Improvement Act of 1994.

The final rule simplifies the language

and format of each section of the

regulation to state the requirements

more clearly. All footnotes are either

integrated into the text of the regulation

or moved to the staff commentary,

making the regulation itself less

cumbersome to use. The final regulation

is shorter than current Regulation E by

about fifteen percent, a reduction largely

attributable to the deletion of obsolete

provisions and to the transfer of

explanatory material to the commentary.

Commenters offered specific

suggestions, as well as rationale, for

changes to the regulation (beyond those

proposed by the Board) that would

facilitate compliance. A number of these

suggestions have been incorporated in

the final rule. Also, unless otherwise

indicated below, the revisions that were

proposed in March 1994 have been

adopted in the final rule.

II. Regulatory Revisions

The following discussion covers the

revisions to Regulation E section-bysection. In many cases, the changes

simplify or clarify the current text, with

no substantive change in the regulatory

requirements; where the meaning of

these changes is evident from reading

the text itself, they are not discussed.

Section 205.1—Authority and purpose

This section has been simplified

without substantive change. The

discussion of congressional findings in

former paragraph (b) and contained in

§ 902(a) of the act has been deleted as

unnecessary. The paragraph relating to

the coverage of the act and regulation

has been moved to § 205.3.

Section 205.2—Definitions

2(b) Account

This paragraph incorporates in

paragraph (b)(2) the exemption for trust

accounts (former § 205.3(f)) to track

more closely the statutory language

contained in section 903(2) of the EFTA.

2(d) Business day

This paragraph defining business day

is unchanged.

The act and regulation define

business day as any day on which the

offices of the consumer’s financial

institution are open to the public for

carrying on substantially all business

functions. This requires that each

financial institution determine when its

offices are ‘‘carrying on substantially all

business functions.’’ The Board

proposed to use its authority under

section 904(c) of the EFTA to change the

definition to mirror the definitions used

in Regulations CC (12 CFR part 229) and

DD (12 CFR part 230). Those regulations

define a business day as a calendar day

other than a Saturday, Sunday, or any

legal public holiday specified in 5

U.S.C. 6103(a).

Some commenters supported the

proposed change; they believed that the

change would simplify compliance by

conforming the regulations governing

deposit accounts. Among these

commenters, however, several qualified

their support. Some believed that a

financial institution should not be
Federal Register / Vol. 61, No. 86 / Thursday, May 2, 1996 / Rules and Regulations 19663

required to investigate and resolve

errors on a day that the institution is not

open for business. These commenters

were concerned that they could have

fewer days to investigate and resolve

errors; they suggested using the

definition of ‘‘banking day’’ in

Regulation CC (the current definition of

‘‘business day’’ in Regulation E) to

compute the time period for resolving

disputes. Using multiple definitions—

including the existing definition for

certain purposes—would seem to

further complicate the regulation. Other

commenters opposed changing the

definition, mentioning the burden and

cost associated with changing

disclosures without corresponding

benefit. After further analysis, the Board

has retained the current definition.

2(f) Credit

The definition of credit, inadvertently

deleted from the proposal, has been

retained.

2(i) Financial institution

The definition of financial institution

(former § 205.2(i)) has been simplified

by eliminating references to both state

and federal institutions.

2(j) Person

A definition of ‘‘person’’ has been

added, incorporating language similar to

that in Regulation B (Equal Credit

Opportunity, 12 CFR 202.2(x)) and

Regulation Z (Truth in Lending, 12 CFR

226.2(a)(22)). The term is used in

several places in the regulation,

including § 205.3(a), which defines the

regulation’s coverage, § 205.10(e) on

compulsory use, and § 205.13(b) on

record retention.

Section 205.3—Coverage

This section (formerly captioned

Exemptions) incorporates the definition

of an EFT (formerly in § 205.2) and

consolidates in one place all the rules

dealing with coverage to facilitate

compliance. A proposal regarding

Regulation E coverage of stored-value

products and other emerging EFT

payment systems is published

separately in today’s Federal Register.

3(b) Electronic fund transfer

The definition of ‘‘electronic fund

transfer’’, which is central to

determining coverage under the

regulation, has been moved to paragraph

3(b). The definitions of ‘‘preauthorized

electronic fund transfer’’ and

‘‘unauthorized electronic fund transfer’’

remain in the definitions section.

3(c)(3) Wire or other similar transfers

The exemption for wire transfers in

former § 205.3(b) has been revised to

clarify that it exempts transfers through

Fedwire (or similar wire transfer

systems, such as CHIPS or S.W.I.F.T.)

and not all transfers through the Federal

Reserve Communications System such

as the automated clearinghouse. No

substantive change in the scope of the

exemption is intended.

Commenters generally favored the

proposed revision. One commenter

requested examples of transfers similar

to those through the Federal Reserve

Communications System that are

exempt from Regulation E. The

commentary addresses this issue. (See

comment 205.3(c)(3)–3.)

3(c)(4) Securities and commodities

transfers

The exemption for certain securities

and commodities transfers (formerly

§ 205.3(c)) is revised to more closely

parallel the statute. As revised, transfers

involving unregulated securities are

exempt from the EFTA if the purchase

or sale is transacted by a broker-dealer

regulated by the Securities and

Exchange Commission (SEC) or a

futures commission merchant regulated

by the Commodity Futures Trading

Commission (CFTC). The Board believes

that the regulation of broker-dealers and

futures commission merchants offers

sufficient protection of payment

transfers for consumers and that the

application of the protections in

Regulation E would only duplicate

available safeguards.

Paragraph (c)(4)(iii) extends the

exemption to all securities or

commodities held in book-entry form by

Federal Reserve Banks on behalf of the

Treasury Department and other federal

agencies (for example, Treasury Direct

issues). Previously a transfer to

purchase Treasury securities was

technically covered by Regulation E

because the securities were not

regulated by the SEC or the CFTC and,

when purchased from the Federal

Reserve Banks, were not purchased or

sold by a registered broker-dealer. The

Board believes there is adequate

regulation of transfers that involve

Federal Reserve Banks and federal

agencies, offering sufficient consumer

protection (see 31 CFR part 370,

regulations governing payments by the

automated clearing house method on

account of United States securities).

3(c)(6) Telephone initiated transfers

Former § 205.3(e) exempted any

transfer of funds initiated by a

telephone conversation between a

consumer and an officer or an employee

of a financial institution if the transfer

is not under a prearranged plan. To

accommodate telephone transfers

initiated by facsimile or through

telephone response machines, this

paragraph has been revised to replace

‘‘conversation’’ with the broader term

‘‘communications.’’ Also the phrase

‘‘officer and employee’’ has been

deleted as unnecessary.

3(c)(7) Small institutions

The asset-size cutoff for the small

institution exemption (formerly

contained in § 205.3(g)) has been

increased from $25 million to $100

million. Section 904(c) of the EFT gives

the Board authority to modify the

requirements imposed by the regulation

on small financial institutions if the

Board determines that such

modifications are necessary to alleviate

any undue compliance burden on small

institutions and that such modifications

are consistent with the purposes and

objective of the act. In 1982, the Board

exempted preauthorized transfers to or

from accounts at financial institutions

with assets of less than $25 million to

reduce compliance burdens for small

institutions that did not offer any other

EFT services.

The regulation exempts the

preauthorized transfers as a class of

EFTs, and not the financial institutions

themselves. A small financial institution

that provides EFT services besides

preauthorized transfers must comply

with the regulation for those other

services. For example, a small financial

institution that offers ATM services

must comply with Regulation E in

regard to the issuance of debit cards,

terminal receipts, periodic statements,

and other requirements. In addition, the

institution must comply with provisions

of the act that apply to the financial

institution’s conduct rather than to the

exempted transfers. For example, the

prohibition against compulsory use of

EFTs in section 913 of the act, in regard

to credit or employment, remains

applicable.

When the Board adopted the $25

million exemption in 1982, many small

institutions that did not offer EFT

services such as ATM access benefited

from the exemption. Given the growth

in assets of financial institutions in the

past ten years, increasing the asset-size

cutoff of the exemption to $100 million

could reduce burden without lessening

the extent of consumer protection

originally provided. Because many

small institutions now offer a variety of

EFT services, it appears that only a

limited number of institutions would be
19664 Federal Register / Vol. 61, No. 86 / Thursday, May 2, 1996 / Rules and Regulations

exempted from Regulation E under the

increase.

The Board solicited comment on the

proposed increase in the exemption

level and on other ways the burden on

small institutions could be reduced

without sacrificing the consumer

protections intended by the act. The

majority of the commenters agreed that

increasing the asset-size of the

exemption would reduce burden and

supported the proposal. Most

commenters supporting the proposal are

credit unions which do not offer EFTs

other than preauthorized transfers such

as payroll deductions. Other

commenters opposed the proposal,

stating that consumers should receive

the same treatment from all institutions

regardless of asset size.

Based on comments and further

analysis, the Board has increased the

asset-size cutoff to $100 million. In light

of current concerns about regulatory

burden, the Board believes that

increasing the asset-size cutoff will

provide relief to small institutions

offering limited EFT services, consistent

with the principles under which the

original exemption was granted.

Questions have been raised about the

impact of Article 4A of the Uniform

Commercial Code (UCC) on the small

institution exemption. The revised

commentary to Regulation E clarifies

that Article 4A is not applicable to the

preauthorized transfers that qualify for

the small institution exemption. (See

comment 3(c)(7)–1.) Article 4A applies

primarily to large-dollar commercial

wire transfers made, for example, via

Fedwire, CHIPs, SWIFT, and Telex.

Section 4A–108 excludes any

transaction that is subject to the EFT

from coverage under Article 4A. The

question is whether the transfers

initiated by small financial institutions

that take advantage of the regulatory

exemption (such as for direct deposits)

may be subject to the requirements of

Article 4A as a consequence. The Board

regards these preauthorized transfers as

remaining subject to certain

requirements of the EFT, and therefore

not covered by Article 4A.

Footnote 1a which refers to sections

913, 915, and 916 of the EFT has been

deleted. Section 913 places restrictions

on the compulsory use of EFTs. For

example, an institution may not

condition the extension of credit on

repayment by preauthorized debit. The

statutory language from section 913 has

been incorporated in § 205.10(e).

References to sections 915 and 916

(concerning civil and criminal liability

for violations of the EFTA) are

contained in § 205.3(c)(5)(ii). The Board

has added cross-references to § 205.10

and sections 915 and 916 in the

appropriate paragraphs to replace

footnote 1a.

Section 205.4—General disclosure

requirements; jointly offered services

This section consolidates the general

disclosure requirements currently

dispersed throughout the regulation in

this section. In addition to adding

paragraph (a), the final rule contains

various editorial changes including a

reordering of the section; no substantive

change is intended.

4(a) Form of disclosures

The format requirements for

disclosures formerly found in

§§ 205.7(a) and 205.9 are incorporated

into this section. The Board interprets

these requirements as generally

applying to all disclosures and notices.

With the continuing emergence of

EFT payment technologies, the Board

has received inquiries about providing

disclosures required under the EFTA

and Regulation E to consumers in an

electronic form, in lieu of paper

documentation. The Board has

addressed this issue in the proposed

rulemaking on Regulation E published

elsewhere in today’s Federal Register.

4(e) Services offered jointly

This paragraph incorporates the

substance of former paragraph 4(a). The

Board has retained text concerning

disclosures within an institution’s

knowledge, which had been omitted in

the proposal as unnecessary. The Board

did not intend to make a substantive

change by omitting this language.

Section 205.5—Issuance of access

devices

The final rule makes editorial changes

to this section. The substance of

footnote 1b, which provided guidance

on issuance of an access device for a

joint account, has been moved to the

commentary.

The final rule deletes as obsolete

former § 205.5(a)(3), which

grandfathered renewals of pre-1979

access devices from the requirements of

the section. The explanatory language

from former § 202.5(b)(4)—providing

examples of the methods a financial

institution may use to verify a

consumer’s identity when validating an

access device—has been moved to the

commentary. (See comment 205.5(b)–4.)

The Board has moved the provisions

relating to the Truth in Lending Act

(TILA) from former § 205.5(c) to

§ 205.12, to simplify the regulation by

placing all references to TILA in the

same section.

Section 205.6—Liability of Consumer for

Unauthorized Transfers

Section 205.6 specifies the rules

governing consumer liability for

unauthorized use. To simplify the text

and make it easier to understand, the

Board has moved explanatory or

illustrative material to the commentary.

This includes examples of means of

identification that an institution may

provide to the consumer to whom an

access device is issued; part of former

§ 205.6(b)(3), on the relationship

between the various tiers of liability;

and former § 205.6(b)(4), about

extenuating circumstances that would

permit delayed notification by

consumers. The provisions in former

§ 205.6(d) concerning the relation to the

TILA now appear in § 205.12.

6(a) Conditions for liability

The former regulation appeared to

condition consumer liability for

unauthorized EFTs in all cases on the

issuance of an accepted access device

(§ 205.6(a)). The former commentary, on

the other hand, stated that if the

consumer failed to report an

unauthorized EFT within sixty days of

transmittal of the periodic statement

reflecting the transfer, the consumer

could be subject to liability for

subsequent transfers, even if the

unauthorized transfer did not involve an

access device.

Paragraph 6(a) is revised to clarify

that a consumer can be held liable for

unauthorized EFTs that do not involve

an access device, but only those that

occur sixty days after transmittal of the

periodic statement reflecting an

unauthorized transfer. Some

commenters believed that a sixty-day

period was unreasonable and suggested

an alternative time period ranging from

thirty to forty-five days; such a revision,

however, would require a statutory

change.

Section 205.6(a)(3) requires that only

three of the disclosures from § 205.7 to

be provided before a consumer can be

held liable for unauthorized transfers.

The Board proposed to require that a

financial institution provide all of the

disclosures required by § 205.7 in order

to impose liability, given that

institutions must initially provide all of

the disclosures to comply with

§ 205.7(b).

Commenters were split on whether

this change would increase the risk of

liability for institutions. Some agreed

with the Board that the proposed

requirement would not increase

compliance burden. Others believed

that the requirement could have adverse

consequences due to inadvertent
Federal Register / Vol. 61, No. 86 / Thursday, May 2, 1996 / Rules and Regulations 19665

disclosure errors unrelated to

consumers’ liability. Upon further

analysis, the Board has retained the

current rule.

6(b) Limitations on amount of liability

Paragraph (b) incorporates the

substance of former paragraphs (b)

(limitations on amount of liability) and

(c) (notice to financial institution). The

final rule more clearly sets forth each of

the three tiers of a consumer’s liability

($50, $500, or unlimited).

Section 205.7—Initial disclosures

The final rule includes format and

editorial changes to this section to

provide greater clarity. No substantive

changes are intended. The format

requirements in former paragraph (a)

have been moved to § 205.4(a).

The provision in former § 205.7(a)(1),

giving financial institutions the option

of informing the consumer about the

advisability of promptly reporting lost

or stolen access devices, has been

moved to comment 7(b)(1)–3 of the

commentary.

The Board has moved the error

resolution notice from former

§ 205.7(a)(10) to appendix A (Model

Form A–3), to streamline the regulation

and place all model disclosures

together. The final rule deletes as

obsolete former § 205.7(b) regarding

disclosures for accounts that predate the

statute.

7(a)(3) Business days

Because the Board did not adopted

the proposed definition of business day,

as discussed under § 205.2(d), the

disclosure requirement has been

retained.

Section 205.8—Change in terms notice;

error resolution notice

The Board has restructured § 205.8

and added subheadings to make it easier

to follow.

8(a)(1) Prior notice required

Section 905(b) of the EFTA requires a

financial institution to notify a

consumer in writing at least 21 days

before the effective date of an adverse

change in certain terms or conditions

contained in the initial disclosures. The

Truth in Savings Act (TISA) (12 U.S.C.

4301) also requires institutions to

provide a change-in-terms notice for

deposit accounts. Section 266(c) of TISA

requires a notice 30 days before the

effective date of any adverse change in

terms or conditions. The official staff

commentary of Regulation DD (Truth in

Savings) provides that if a changed term

also triggers a change in terms notice

under Regulation E, the institution may

use the timing rules of Regulation E for

sending the notice to affected

consumers (see 59 FR 5543, February 7,

1994).

The Board proposed to use its

exception authority under the EFTA to

extend the timing of the change-in-terms

notice in Regulation E from 21 to 30

days to parallel Regulation DD and

facilitate compliance with both

regulations. The Board solicited

comment on whether it is preferable to

retain the flexibility offered by the two

different timing requirements. Most

commenters opposed extending the

timing requirement to 30 days because

the extension would in many cases

double the period of notice before a

change in terms could be implemented

without a special mailing. The Board

believes the proposed change might

unnecessarily increase regulatory

burden and, accordingly, has retained

the 21-day notice requirement.

8(a)(2) Prior notice exception

Prior notice is not required when an

immediate change in terms is needed to

maintain or restore the security of an

EFT system or account. If a change is

made permanent, however, a financial

institution must notify the consumer

‘‘on or with the next regularly

scheduled periodic statement or within

30 days’’ of the change if disclosure

would not raise security concerns. In

certain circumstances, periodic

statements are sent on a quarterly basis,

and thus the consumer might not

receive notification of a change for up

to ninety days after the change occurs.

The Board proposed to require written

notice within 45 days of the change.

Most commenters opposed the proposal.

The majority believe the revision would

result in increased costs and regulatory

burden. Where financial institutions

send quarterly periodic statements, or

where no EFT has been made during a

statement cycle, notice of the change in

terms would have to be provided in a

separate mailing. Some commenters

asked the Board to clarify whether the

notice is triggered by the date of the

initial change or the date the change

becomes permanent; it is the latter.

Based on the comments and upon

further analysis, the Board has retained

the current rule. The notice provided to

consumers reflects a change in terms

that has already been made. Since many

institutions send statements monthly, in

many cases consumers will obtain

notice in or around 45 days after the

change. In all instances, notice will be

provided within 90 days. Given the

likelihood that a section 8(a)(2) change

is rare, and that most notices will be

provided within 45 days (and all no

later than 90 days), the minimal

consumer benefit associated with the

change is outweighed by the potential

compliance cost to financial

institutions.

8(b) Error resolution notice

To streamline the regulation and

place all model disclosure forms in one

location, the abbreviated error

resolution notice in former § 205.8(b)—

which an institution may give with each

periodic statement in place of the longer

annual notice—has been moved to

appendix A (Model Form A–3).

Language has been added to clarify that

financial institutions may use a form

substantially similar to the model form.

Section 205.9—Receipts at electronic

terminals; periodic statements

This section contains a number of

editorial revisions and several

substantive changes. New paragraphs

and headings have been added to better

organize the text concerning the content

of disclosures.

Disclosure format requirements, and

former paragraph (e) concerning use of

abbreviations, have been moved to

§ 205.4. Former footnote 2, which

permits a financial institution to make

receipts available through a third party,

has been moved to the commentary.

Two obsolete paragraphs, (f) and (g),

which dealt with receipts from

terminals purchased prior to 1980 and

delayed effective dates for certain

periodic statements have been deleted.

9(a)(1)—Amount

The former regulation allowed

financial institutions other than the

account-holding institution to include a

charge for the transfer in the total

amount of the transfer, provided the

amount of the charge is disclosed on the

receipt and on a sign posted on or at the

terminal. The final rule permits all

financial institutions (including the

account-holding institution) to include

the charge in the total amount of the

transfer, if the appropriate disclosures

are made; and permits institutions to

display the fee on or at the terminal—

meaning either on a sign posted at the

terminal or on the terminal screen itself.

Some commenters requested

clarification as to whether disclosure of

a transaction fee on the receipt or at the

terminal would substitute for disclosure

of the fee under § 205.7(a)(5), initial

disclosures. Institutions holding a

consumer’s account must continue to

disclose transaction fees under

§ 205.7(a)(5), as well as on the receipt

and at the terminal.

The Board solicited comment on

whether consumers would need
19666 Federal Register / Vol. 61, No. 86 / Thursday, May 2, 1996 / Rules and Regulations

protections if the fee is displayed on the

screen, for example, allowing the

consumer to cancel the transaction after

the fee is disclosed. Commenters

generally believed that displaying the

fee on a screen provided adequate

notice, as long as consumers are

provided with the option to cancel the

transaction after receiving notice. This

interpretation is reflected in comment

9(a)(1)-1 of the staff commentary.

9(a)(3)—Type

The examples included in former

paragraph (a)(3) have been moved to the

commentary.

9(a)(4)—Identification

In a previous rulemaking, the Board

deleted the requirement that a financial

institution ‘‘uniquely’’ identify the

consumer. See 55 FR 15032 (March 22,

1995). The final rule, effective April 24,

1995, no longer requires that terminal

receipts uniquely identify the consumer,

the consumer’s account, or the

consumer’s card. The change allows

institutions to truncate the number on

the receipt and helps protect consumers

and financial institutions against

fraudulent withdrawals.

9(a)(5)—Terminal location

This paragraph incorporates the

substance of former § 205.9(b)(1)(iv), the

rules regarding terminal identification

on receipts; former footnote 5 and much

of the explanatory material on

describing locations has been moved to

the commentary.

The Board had proposed to delete the

exception in footnote 5 allowing

institutions (1) to omit the name of the

city and state if all of the terminals

owned or operated by the financial

institution providing the statement are

located in the same city, or if the system

in which the financial institution’s

terminal participates is located in the

same city and (2) to omit the state if all

of the terminals are located in the same

state. Since most institutions that offer

ATM access belong to networks

operating on an interstate basis, the

Board believed that few, if any, financial

institutions would be able to take

advantage of the exception provided by

the footnote. The Board solicited

comment on whether the exception is

still used by institutions. Many

commenters stated that credit unions

and ‘‘closed systems’’ frequently used at

universities continue to benefit from

this exception because such institutions

do not belong to interstate networks.

Thus, the Board has retained the

exception but moved it to the

commentary. (See comment

205.9(a)(5)(iv)–1.)

The rules regarding terminal

identification on the receipt have been

slightly modified. Former

§ 205.9(b)(1)(iv)(C) allowed financial

institutions to identify the terminal

location by using the name of the entity

at whose place of business the terminal

is located or the entity that owns or

operates the terminal (such as the

financial institution). Footnote 7

required, however, that if the financial

institution owns or operates terminals at

more than one location, the terminal

location must be identified on the

periodic statement in accordance with

former 9(b)(1)(iv) (A) or (B) and had to

provide either a street address or a

generally accepted name for the

location. If an institution owned only

one terminal (and did not belong to a

network), however, it could identify the

terminal using its own name under

paragraph 9(b)(1)(iv)(C). The final rule

omits the footnote, removing the

limitation so that the receipt and the

periodic statement may provide the

terminal location by giving the name of

the institution if it is other than the

account-holding institution. The Board

believes this change makes the

provision available to more institutions,

since very few institutions own and

operate only one terminal and do not

belong to a network. Commenters

generally believed this change would

not adversely reduce consumer

information.

9(a)(6) Third party transfer

Paragraph (a)(6), which requires

disclosure of the name of any third

party to or from whom funds are

transferred, has been revised; guidance

on the use of codes as identification or

the exception to the requirement when

the name of the payee cannot be

duplicated by the terminal has been

incorporated into the commentary. (See

comment 205.9(a)(6)–1.)

9(b) Periodic statements

9(b)(1)—Transaction information

For each transfer initiated at an

electronic terminal, paragraph (b)(1)(iv)

requires financial institutions to

disclose on the periodic statement the

location of the terminal as it appeared

on the receipt provided under

§ 205.9(a). Under the former rule, if a

code or terminal number on the receipt

was used to identify the location, both

the code and a description of the

location, as specified in § 205.9(b)(1)(iv)

had to be disclosed on the periodic

statement. The final rule does not

require a restatement of the code in

addition to the location description.

Commenters generally supported this

revision, noting that the code was of

little use and that rules of the National

Association of Automated Clearing

Houses already require codes to be

retained by the institution which would

allow consumers to get the code upon

request. The substance of footnote 4a,

which provided that a financial

institution need not identify the

terminal location for transactions that

involve the deposit of cash, checks,

drafts, or similar paper instruments at

electronic terminals, has been

incorporated into paragraph (b)(1)(iv).

Former footnote 4 permitted financial

institutions to provide transaction

information on documents that

accompany the periodic statement; and

permits the use of codes, if explained on

either the statement or the

accompanying documents. Former

footnote 9 allowed an institution to omit

the identification of third parties from

periodic statements if their names

appear on checks, drafts, or similar

paper instruments deposited to the

consumer’s account at an electronic

terminal. The substance of former

footnotes 4 and 9 has been moved to the

commentary. (See comments 205.9(b)–6

and 205.9(b)(1)(v)–6.)

9(b)(3)—Fees

The reference in former § 205.9(b)(3)

that a periodic statement required by

Regulation E need not disclose any

finance charge imposed under 12 CFR

226.7(f) has been moved to the

commentary. (See comment 205.9(b)(3)–

3.)

The Board solicited comment on

whether regulatory compliance burden

would be eased if the fee disclosure

requirements in Regulations E and DD

were identical. Many commenters

preferred having the option of

complying with Regulation E or

Regulation DD. The Board has retained

the existing fee disclosure requirements.

9(c) Exceptions to the periodic

statement requirements for certain

accounts

The final rule incorporates current

paragraphs (c), (d), (h), and footnote 9a

in § 205.9(c), pertaining to intrainstitutional transfers and the

circumstances in which a periodic

statement for EFT transactions is not

required (for example, for a passbook

account that can be accessed

electronically only by preauthorized

transfers to the account) or is not

required on a monthly cycle. Some

editorial changes have been made in the

final rule that differ slightly from the

proposal but no substantive change is

intended.
Federal Register / Vol. 61, No. 86 / Thursday, May 2, 1996 / Rules and Regulations 19667

9(d)—Documentation for foreigninitiated transfers

Paragraph (d) incorporates the

substance of former paragraph (i)

without substantive change.

Section 205.10—Preauthorized transfers

Section 205.10 sets forth general

requirements for preauthorized

transfers. The Board has reformatted

and made editorial changes to this

section. Substantive changes are

discussed below.

10(a) Preauthorized transfers to

consumer’s account

10(a)(3)—Crediting

This paragraph (formerly paragraph

10(a)(2)) provides that when a

consumer’s account will be credited by

a preauthorized EFT from the same

payor at least once every 60 days, an

institution must credit the funds to the

account as of the day the funds for the

transfer are received. The Board

believed that this provision was not

necessary since other regulations

address both when funds must be made

available to the consumer and when

interest must be paid on the deposit (see

Regulation CC, 12 CFR part 229;

Treasury regulations, 31 CFR part 210;

and ACH association rules). The Board

solicited comment on its proposed

deletion of paragraph 10(a)(2).

Most commenters agreed that

Regulation CC, NACHA rules governing

automated clearing house transactions,

and Treasury direct-deposit rules

adequately covered this issue and

supported the Board’s proposal to delete

the requirement. Several commenters

requested that a reference to the other

rules and regulations be added to the

paragraph 10(a)(2). One commenter

distinguished the requirements under

paragraph 10(a)(2) from those under

other rules and regulations, noting that

paragraph 10(a)(2) addressed crediting

and that the NACHA rules, for example,

address the availability of funds for

withdrawal. The commenter

recommended retaining the current

language.

Upon further analysis, the Board

believes that the requirement under

current paragraph 10(a)(2) is, in fact,

different from those required by other

regulations and has retained the current

rule in paragraph 10(a)(3).

10(b) Written authorization for

preauthorized transfers from

consumer’s account

Under the former rule, preauthorized

EFTs from a consumer’s account may be

authorized by the consumer only in

writing (typically a signed paper

document); a copy of the authorization

must be given to the consumer. To

address developments in electronic

services such as home banking, the

Board has more broadly interpreted a

written authorization to include

electronic authorizations which are

‘‘similarly authenticated’’ by the

consumer. The Board believes this

broader interpretation is consistent with

the requirement in section 907 of the

EFTA that the authorization be in

writing.

This change would, for example,

allow preauthorized transfers in an

electronic payment system to be

authenticated by a ‘‘digital signature’’ or

a security code. The Board believes that

these are options that may provide the

same assurance as a signature in a

paper-based system. To meet the

requirement that an authorization be in

writing, the electronic agreement would

have to be displayed on a computer

screen (or other visual display) that

enables the consumer to read the

communication. The person that obtains

the authorization must provide an

electronic or hard copy to the consumer.

These interpretations are codified in the

commentary.

10(e) Compulsory use

This paragraph incorporates section

913 of the EFTA, which places certain

restrictions on compulsory use of EFTs

as a condition of credit, employment, or

receipt of government benefits. This

paragraph also clarifies that the

provision applies to persons such as

employers, and not just to financial

institutions. In the former regulation,

the prohibition against compulsory use

was referenced in footnote 1a.

Section 205.11—Procedures for

resolving errors

The Board has reformatted this

section and made editorial revisions to

simplify the language and facilitate

compliance. The one substantive

change, discussed below, allows a

financial institution three business days

to provide notice after it has determined

that an error has occurred.

The substance of three footnotes has

been moved to the commentary:

footnote 10, permitting an institution to

prescribe procedures for giving an error

notice; footnote 11, defining an

agreement for purposes of § 205.14; and

footnote 12, allowing institutions to use

a periodic statement to inform

consumers that no error has occurred.

The substance of former paragraphs

(d)(1), (3); (e)(1); and (g) has been moved

to the commentary. Paragraph (e) on

reasserting errors replaces former

paragraph (h). Former paragraph (i),

rules relating to the TILA, has been

moved to § 205.12.

11(c) Time limits and extent of

investigation

Paragraph 11(c) combines former

paragraphs 11(c) and 11(d)(2)

concerning investigation of errors. The

regulation requires a financial

institution to provide the consumer

with a written explanation, within the

prescribed time period (either 10

business days or 45 calendar days), if an

error occurred. If an error did not occur

and the financial institution is operating

under the 45-day rule, the institution

has three additional days to notify the

consumer of its findings. Section 908 of

the EFTA makes clear the extra time is

available when no error occurred, but is

silent on the availability of extra time

when an error is found.

To facilitate compliance, the Board

has used its exception authority under

section 904(c) to permit institutions to

give notice within three business days

of concluding its investigation

regardless of the procedure being

followed and whether or not an error

has been found. The statutory language

contained in section 908(d) lends itself

to such an interpretation, and the Board

believes the change will facilitate

compliance with the section without

any significant loss of consumer

protection.

Commenters requested that the Board

consider extending the time periods for

investigations of errors on new accounts

based on concerns about fraud and

misrepresentation. The Board has

published a proposed rule elsewhere in

today’s Federal Register that would

change the timing for error resolution on

new accounts.

11(d) Procedures if financial institution

determines no error or different error

occurred

This paragraph simplifies and

replaces former paragraph 11(f).

Section 205.12—Relation to other laws

This section contains the various

references to the Truth in Lending Act

(TILA) and Regulation Z formerly

dispersed throughout Regulation E. The

section also includes the standards

applied by the Board in granting a state

law preemption or in making an

exemption determination.

12(a) Relation to Truth in Lending

All references from §§ 205.5, 205.6,

and 205.11 to compliance with both the

TILA and the EFTA are consolidated in

this paragraph to facilitate compliance.
19668 Federal Register / Vol. 61, No. 86 / Thursday, May 2, 1996 / Rules and Regulations

12(b) Preemption of inconsistent state

laws

Former § 205.12 (a) and (b) are

incorporated in paragraph (b). Former

§ 205.12(c), which establishes

procedures for preemption, has been

deleted from the regulation. The

procedures for requesting a preemption

determination are available from the

Board upon request.

12(c) State exemptions

Paragraph (c) (formerly (d)) contains

the rules the Board applies in granting

a state exemption.

Section 205.13—Administrative

enforcement; record retention

Former § 205.13 contained

information about administrative

enforcement, issuance of staff

interpretations, and record retention.

Much of this information has been

moved to the appendices, with the

exception of the provision on record

retention. Specifically, former paragraph

(a) listed the federal agencies charged

with administrative enforcement of the

act and regulation; revised paragraph (a)

merely cross-references Appendix B,

which lists the federal enforcement

agencies in greater detail. Former

paragraph (b) dealt with issuance of staff

interpretations; this material has been

updated to describe the staff

commentary process that replaced the

old interpretation letters, and has been

moved to new Appendix C. Former

paragraph (c), record retention, has been

redesignated paragraph (b).

13(b) Record retention

Only certain provisions of the act and

regulation apply to persons other than

financial institutions (for example, the

compulsory use provisions of section

913, which apply to employers,

creditors, and government agencies).

The proposal would have limited the

record retention requirements to

financial institutions, rather than

covering ‘‘any person subject to the act

and regulation.’’ The majority of the

commenters addressing this issue

opposed the proposed change, arguing

that the same record retention

requirement should apply to all persons

subject to the regulation, and that the

proposed change could adversely affect

enforcement. The Board has retained the

current rule; the record retention

requirements continue to apply to all

persons subject to the act and

regulation.

Section 205.14—Electronic fund transfer

service provider not holding consumer’s

account

Substantial editorial revisions have

been made to this section to simplify the

text.

14(a) Electronic fund transfer service

providers subject to regulation

Revised paragraph (a) deals expressly

with the entities subject to section

205.14, and identifies entities more

clearly by setting forth the conditions

for coverage under section 205.14 in

separate subparagraphs.

14(b) Compliance by electronic fund

transfer service provider

This paragraph contains much of the

material that appeared in former

paragraph (a), and sets forth the

compliance responsibilities of a nonaccount-holding service provider. The

material has been revised and

reorganized for greater clarity, without

substantive change.

14(c) Compliance by account-holding

institution

This paragraph sets forth the

compliance responsibilities of the

account-holding institution, and is

substantively unchanged from former

paragraph (b). Former footnote 13,

regarding delayed effective dates, has

been deleted as obsolete. The substance

of former paragraph (c), providing

guidance on when there is an agreement

between a service provider and an

account-holding institution, has been

moved to the commentary.

Section 205.15—Electronic fund transfer

of government benefits

In March 1994, the Board issued a

final rule relating to the coverage by the

EFTA and Regulation E of government

benefits that federal, state, and local

governments disburse to recipients by

means of electronic benefit transfer

(EBT) programs, adding a new section

205.15 to Regulation E (59 FR 10678,

March 7, 1994). This section is

unchanged from the one originally

issued.

Appendix A—Model Disclosure Clauses

and Forms

The model forms contained in the

former regulation have been

consolidated in Appendix A. As noted

earlier, the error resolution notices in

former §§ 205.7(a)(10) and 205.8(b) have

been moved from the regulation to

Appendix A to streamline the regulation

(see Model Form A–3).

Appendix B—Administrative

enforcement

Appendix B lists the federal

enforcement agencies responsible for

enforcing Regulation E for particular

classes of institutions.

Appendix C—Issuance of staff

interpretations

The final rule adds a new appendix C

to replace former § 205.13(b) pertaining

to staff interpretations of Regulation E.

The Board will continue to rely on the

publication of interpretations in the

official staff commentary as the primary

means of interpreting the regulation. In

keeping with the practice that has been

in place for years, the final rule deletes

any reference to unofficial staff

interpretations that are in writing,

limiting written interpretations to those

that appear in the staff commentary, as

revised. The Board believes this to be

the most efficient and useful way to

facilitate compliance.

III. Regulatory Flexibility Analysis

The Board’s Office of the Secretary

has prepared an economic impact

statement on the amendment to

Regulation E. A copy of the analysis

may be obtained from Publications

Services, Board of Governors of the

Federal Reserve System, Washington,

D.C. 20551, at (202) 452–3245.

IV. Paperwork Reduction Act

In accordance with section 3506 of

the Paperwork Reduction Act of 1995

(44 U.S.C. Ch. 35; 5 CFR 1320 Appendix

A.1), the Board reviewed the rule under

the authority delegated to the Board by

the Office of Management and Budget.

No comments specifically addressing

the burden estimate were received.

The collection of information

requirements in this regulation are

found in 12 CFR Part 205. This

information is mandatory (15 U.S.C.

1693 et seq.) to ensure adequate

disclosure of basic terms, costs, and

rights relating to electronic fund transfer

(EFT) services provided to consumers.

The respondents/recordkeepers are forprofit financial institutions, including

small businesses. Records must be

retained for twenty-four months.

Regulation E applies to all types of

financial institutions, not just state

member banks. However, under

Paperwork Reduction Act regulations,

the Federal Reserve accounts for the

burden of the paperwork associated

with the regulation only for state

member banks. Other agencies account

for the Regulation E paperwork burden

on their respective constituencies.

Please contact the appropriate agency
Federal Register / Vol. 61, No. 86 / Thursday, May 2, 1996 / Rules and Regulations 19669

for an estimate of this proposed

regulation’s affect on other institutions.

The revisions are expected to decrease

the associated paperwork burden on

state member banks. It is estimated that

25 percent of small state member banks

have no covered activities other than

preauthorized transfers. Thus the

Federal Reserve estimates that raising

the asset-size cutoff from $25 million to

$100 million will decrease the number

of covered state member banks from

1,000 to 873. The estimated burden per

response ranges from fifteen seconds

(for an ATM receipt) to 30 minutes (for

notice of revised error resolution rules).

The Federal Reserve estimates the

average frequency of response to be

85,800 responses per respondent each

year. Thus, the total amount of annual

burden is estimated to be 474,804 hours,

a decrease of 13 percent from 543,447

hours.

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 Board amends 12 CFR

part 205 as set forth below:

PART 205—ELECTRONIC FUND

TRANSFERS (REGULATION E)

1. The authority citation for part 205

continues to read as follows:

Authority: 15 U.S.C. 1693.

2. The table of contents for part 205

is revised to read as follows:

Sec.

205.1 Authority and purpose.

205.2 Definitions.

205.3 Coverage.

205.4 General disclosure requirements;

jointly offered services.

205.5 Issuance of access devices.

205.6 Liability of consumer for

unauthorized transfers.

205.7 Initial disclosures.

205.8 Change in terms notice; error

resolution notice.

205.9 Receipts at electronic terminals;

periodic statements.

205.10 Preauthorized transfers.

205.11 Procedures for resolving errors.

205.12 Relation to other laws.

205.13 Administrative enforcement; record

retention.

205.14 Electronic fund transfer service

provider not holding consumer’s

account.

205.15 Electronic fund transfer of

government benefits.

Appendix A to Part 205—Model Disclosure

Clauses and Forms

Appendix B to Part 205—Federal

Enforcement Agencies

Appendix C to Part 205—Issuance of Staff

Interpretations

Supplement 1 to Part 205—Official Staff

Interpretations

3. Sections 205.1 through 205.15 are

revised to read as follows:

§ 205.1 Authority and purpose.

(a) Authority. The regulation in this

part, known as Regulation E, is issued

by the Board of Governors of the Federal

Reserve System pursuant to the

Electronic Fund Transfer Act (15 U.S.C.

1693 et seq.). The information-collection

requirements have been approved by the

Office of Management and Budget under

44 U.S.C. 3501 et seq. and have been

assigned OMB No. 7100–0200.

(b) Purpose. This part carries out the

purposes of the Electronic Fund

Transfer Act, which establishes the

basic rights, liabilities, and

responsibilities of consumers who use

electronic fund transfer services and of

financial institutions that offer these

services. The primary objective of the

act and this part is the protection of

individual consumers engaging in

electronic fund transfers.

§ 205.2 Definitions.

For purposes of this part, the

following definitions apply:

(a)(1) Access device means a card,

code, or other means of access to a

consumer’s account, or any combination

thereof, that may be used by the

consumer to initiate electronic fund

transfers.

(2) An access device becomes an

accepted access device when the

consumer:

(i) Requests and receives, or signs, or

uses (or authorizes another to use) the

access device to transfer money between

accounts or to obtain money, property,

or services;

(ii) Requests validation of an access

device issued on an unsolicited basis; or

(iii) Receives an access device in

renewal of, or in substitution for, an

accepted access device from either the

financial institution that initially issued

the device or a successor.

(b)(1) Account means a demand

deposit (checking), savings, or other

consumer asset account (other than an

occasional or incidental credit balance

in a credit plan) held directly or

indirectly by a financial institution and

established primarily for personal,

family, or household purposes.

(2) The term does not include an

account held by a financial institution

under a bona fide trust agreement.

(c) Act means the Electronic Fund

Transfer Act (title IX of the Consumer

Credit Protection Act, 15 U.S.C. 1693 et

seq.).

(d) Business day means any day on

which the offices of the consumer’s

financial institution are open to the

public for carrying on substantially all

business functions.

(e) Consumer means a natural person.

(f) Credit means the right granted by

a financial institution to a consumer to

defer payment of debt, incur debt and

defer its payment, or purchase property

or services and defer payment therefor.

(g) Electronic fund transfer is defined

in § 205.3.

(h) Electronic terminal means an

electronic device, other than a

telephone operated by a consumer,

through which a consumer may initiate

an electronic fund transfer. The term

includes, but is not limited to, point-ofsale terminals, automated teller

machines, and cash dispensing

machines.

(i) Financial institution means a bank,

savings association, credit union, or any

other person that directly or indirectly

holds an account belonging to a

consumer, or that issues an access

device and agrees with a consumer to

provide electronic fund transfer

services.

(j) Person means a natural person or

an organization, including a

corporation, government agency, estate,

trust, partnership, proprietorship,

cooperative, or association.

(k) Preauthorized electronic fund

transfer means an electronic fund

transfer authorized in advance to recur

at substantially regular intervals.

(l) State means any state, territory, or

possession of the United States; the

District of Columbia; the

Commonwealth of Puerto Rico; or any

political subdivision of the above in this

paragraph (l).

(m) Unauthorized electronic fund

transfer means an electronic fund

transfer from a consumer’s account

initiated by a person other than the

consumer without actual authority to

initiate the transfer and from which the

consumer receives no benefit. The term

does not include an electronic fund

transfer initiated:

(1) By a person who was furnished the

access device to the consumer’s account

by the consumer, unless the consumer

has notified the financial institution that

transfers by that person are no longer

authorized;

(2) With fraudulent intent by the

consumer or any person acting in

concert with the consumer; or

(3) By the financial institution or its

employee.

§ 205.3 Coverage.

(a) General. This part applies to any

electronic fund transfer that authorizes

a financial institution to debit or credit

a consumer’s account. Generally, this
19670 Federal Register / Vol. 61, No. 86 / Thursday, May 2, 1996 / Rules and Regulations

part applies to financial institutions. For

purposes of §§ 205.10 (b), (d), and (e)

and 205.13, this part applies to any

person.

(b) Electronic fund transfer. The term

electronic fund transfer means any

transfer of funds that is initiated

through an electronic terminal,

telephone, computer, or magnetic tape

for the purpose of ordering, instructing,

or authorizing a financial institution to

debit or credit an account. The term

includes, but is not limited to:

(1) Point-of-sale transfers;

(2) Automated teller machine

transfers;

(3) Direct deposits or withdrawals of

funds;

(4) Transfers initiated by telephone;

and

(5) Transfers resulting from debit card

transactions, whether or not initiated

through an electronic terminal.

(c) Exclusions from coverage. The

term electronic fund transfer does not

include:

(1) Checks. Any transfer of funds

originated by check, draft, or similar

paper instrument; or any payment made

by check, draft, or similar paper

instrument at an electronic terminal.

(2) Check guarantee or authorization.

Any transfer of funds that guarantees

payment or authorizes acceptance of a

check, draft, or similar paper instrument

but that does not directly result in a

debit or credit to a consumer’s account.

(3) Wire or other similar transfers.

Any transfer of funds through Fedwire

or through a similar wire transfer system

that is used primarily for transfers

between financial institutions or

between businesses.

(4) Securities and commodities

transfers. Any transfer of funds the

primary purpose of which is the

purchase or sale of a security or

commodity, if the security or

commodity is:

(i) Regulated by the Securities and

Exchange Commission or the

Commodity Futures Trading

Commission;

(ii) Purchased or sold through a

broker-dealer regulated by the Securities

and Exchange Commission or through a

futures commission merchant regulated

by the Commodity Futures Trading

Commission; or

(iii) Held in book-entry form by a

Federal Reserve Bank or federal agency.

(5) Automatic transfers by accountholding institution. Any transfer of

funds under an agreement between a

consumer and a financial institution

which provides that the institution will

initiate individual transfers without a

specific request from the consumer:

(i) Between a consumer’s accounts

within the financial institution;

(ii) From a consumer’s account to an

account of a member of the consumer’s

family held in the same financial

institution; or

(iii) Between a consumer’s account

and an account of the financial

institution, except that these transfers

remain subject to § 205.10(e) regarding

compulsory use and sections 915 and

916 of the act regarding civil and

criminal liability.

(6) Telephone-initiated transfers. Any

transfer of funds that:

(i) Is initiated by a telephone

communication between a consumer

and a financial institution making the

transfer; and

(ii) Does not take place under a

telephone bill-payment or other written

plan in which periodic or recurring

transfers are contemplated.

(7) Small institutions. Any

preauthorized transfer to or from an

account if the assets of the accountholding financial institution were $100

million or less on the preceding

December 31. If assets of the accountholding institution subsequently exceed

$100 million, the institution’s

exemption for preauthorized transfers

terminates one year from the end of the

calendar year in which the assets exceed

$100 million. Preauthorized transfers

exempt under this paragraph (c)(7)

remain subject to § 205.10(e) regarding

compulsory use and sections 915 and

916 of the act regarding civil and

criminal liability.

§ 205.4 General disclosure requirements;

jointly offered services.

(a) Form of disclosures. Disclosures

required under this part shall be clear

and readily understandable, in writing,

and in a form the consumer may keep.

A financial institution may use

commonly accepted or readily

understandable abbreviations in

complying with the disclosure

requirements of this part.

(b) Additional information;

disclosures required by other laws. A

financial institution may include

additional information and may

combine disclosures required by other

laws (such as the Truth in Lending Act

(15 U.S.C. 1601 et seq.) or the Truth in

Savings Act (12 U.S.C. 4301 et seq.))

with the disclosures required by this

part.

(c) [Reserved]

(d) Multiple accounts and account

holders—(1) Multiple accounts. A

financial institution may combine the

required disclosures into a single

statement for a consumer who holds

more than one account at the

institution.

(2) Multiple account holders. For joint

accounts held by two or more

consumers, a financial institution need

provide only one set of the required

disclosures and may provide them to

any of the account holders.

(e) Services offered jointly. Financial

institutions that provide electronic fund

transfer services jointly may contract

among themselves to comply with the

requirements that this part imposes on

any or all of them. An institution need

make only the disclosures required by

§§ 205.7 and 205.8 that are within its

knowledge and within the purview of

its relationship with the consumer for

whom it holds an account.

§ 205.5 Issuance of access devices.

(a) Solicited issuance. Except as

provided in paragraph (b) of this

section, a financial institution may issue

an access device to a consumer only:

(1) In response to an oral or written

request for the device; or

(2) As a renewal of, or in substitution

for, an accepted access device whether

issued by the institution or a successor.

(b) Unsolicited issuance. A financial

institution may distribute an access

device to a consumer on an unsolicited

basis if the access device is:

(1) Not validated, meaning that the

institution has not yet performed all the

procedures that would enable a

consumer to initiate an electronic fund

transfer using the access device;

(2) Accompanied by a clear

explanation that the access device is not

validated and how the consumer may

dispose of it if validation is not desired;

(3) Accompanied by the disclosures

required by § 205.7, of the consumer’s

rights and liabilities that will apply if

the access device is validated; and

(4) Validated only in response to the

consumer’s oral or written request for

validation, after the institution has

verified the consumer’s identity by a

reasonable means.

§ 205.6 Liability of consumer for

unauthorized transfers.

(a) Conditions for liability. A

consumer may be held liable, within the

limitations described in paragraph (b) of

this section, for an unauthorized

electronic fund transfer involving the

consumer’s account only if the financial

institution has provided the disclosures

required by § 205.7(b)(1), (2), and (3). If

the unauthorized transfer involved an

access device, it must be an accepted

access device and the financial

institution must have provided a means

to identify the consumer to whom it was

issued.

(b) Limitations on amount of liability.

A consumer’s liability for an
Federal Register / Vol. 61, No. 86 / Thursday, May 2, 1996 / Rules and Regulations 19671

unauthorized electronic fund transfer or

a series of related unauthorized transfers

shall be determined as follows:

(1) Timely notice given. If the

consumer notifies the financial

institution within two business days

after learning of the loss or theft of the

access device, the consumer’s liability

shall not exceed the lesser of $50 or the

amount of unauthorized transfers that

occur before notice to the financial

institution.

(2) Timely notice not given. If the

consumer fails to notify the financial

institution within two business days

after learning of the loss or theft of the

access device, the consumer’s liability

shall not exceed the lesser of $500 or the

sum of:

(i) $50 or the amount of unauthorized

transfers that occur within the two

business days, whichever is less; and

(ii) The amount of unauthorized

transfers that occur after the close of two

business days and before notice to the

institution, provided the institution

establishes that these transfers would

not have occurred had the consumer

notified the institution within that twoday period.

(3) Periodic statement; timely notice

not given. A consumer must report an

unauthorized electronic fund transfer

that appears on a periodic statement

within 60 days of the financial

institution’s transmittal of the statement

to avoid liability for subsequent

transfers. If the consumer fails to do so,

the consumer’s liability shall not exceed

the amount of the unauthorized

transfers that occur after the close of the

60 days and before notice to the

institution, and that the institution

establishes would not have occurred

had the consumer notified the

institution within the 60-day period.

When an access device is involved in

the unauthorized transfer, the consumer

may be liable for other amounts set forth

in paragraphs (b)(1) or (b)(2) of this

section, as applicable.

(4) Extension of time limits. If the

consumer’s delay in notifying the

financial institution was due to

extenuating circumstances, the

institution shall extend the times

specified above to a reasonable period.

(5) Notice to financial institution. (i)

Notice to a financial institution is given

when a consumer takes steps reasonably

necessary to provide the institution with

the pertinent information, whether or

not a particular employee or agent of the

institution actually receives the

information.

(ii) The consumer may notify the

institution in person, by telephone, or in

writing.

(iii) Written notice is considered

given at the time the consumer mails the

notice or delivers it for transmission to

the institution by any other usual

means. Notice may be considered

constructively given when the

institution becomes aware of

circumstances leading to the reasonable

belief that an unauthorized transfer to or

from the consumer’s account has been

or may be made.

(6) Liability under state law or

agreement. If state law or an agreement

between the consumer and the financial

institution imposes less liability than is

provided by this section, the consumer’s

liability shall not exceed the amount

imposed under the state law or

agreement.

§ 205.7 Initial disclosures.

(a) Timing of disclosures. A financial

institution shall make the disclosures

required by this section at the time a

consumer contracts for an electronic

fund transfer service or before the first

electronic fund transfer is made

involving the consumer’s account.

(b) Content of disclosures. A financial

institution shall provide the following

disclosures, as applicable:

(1) Liability of consumer. A summary

of the consumer’s liability, under

§ 205.6 or under state or other

applicable law or agreement, for

unauthorized electronic fund transfers.

(2) Telephone number and address.

The telephone number and address of

the person or office to be notified when

the consumer believes that an

unauthorized electronic fund transfer

has been or may be made.

(3) Business days. The financial

institution’s business days.

(4) Types of transfers; limitations. The

type of electronic fund transfers that the

consumer may make and any limitations

on the frequency and dollar amount of

transfers. Details of the limitations need

not be disclosed if confidentiality is

essential to maintain the security of the

electronic fund transfer system.

(5) Fees. Any fees imposed by the

financial institution for electronic fund

transfers or for the right to make

transfers.

(6) Documentation. A summary of the

consumer’s right to receipts and

periodic statements, as provided in

§ 205.9, and notices regarding

preauthorized transfers as provided in

§§ 205.10(a), and 205.10(d).

(7) Stop payment. A summary of the

consumer’s right to stop payment of a

preauthorized electronic fund transfer

and the procedure for placing a stoppayment order, as provided in

§ 205.10(c).

(8) Liability of institution. A summary

of the financial institution’s liability to

the consumer under section 910 of the

act for failure to make or to stop certain

transfers.

(9) Confidentiality. The circumstances

under which, in the ordinary course of

business, the financial institution may

provide information concerning the

consumer’s account to third parties.

(10) Error resolution. A notice that is

substantially similar to Model Form A–

3 as set out in Appendix A of this part

concerning error resolution.

§ 205.8 Change in terms notice; error

resolution notice.

(a) Change in terms notice—(1) Prior

notice required. A financial institution

shall mail or deliver a written notice to

the consumer, at least 21 days before the

effective date, of any change in a term

or condition required to be disclosed

under § 205.7(b) if the change would

result in:

(i) Increased fees for the consumer;

(ii) Increased liability for the

consumer;

(iii) Fewer types of available

electronic fund transfers; or

(iv) Stricter limitations on the

frequency or dollar amount of transfers.

(2) Prior notice exception. A financial

institution need not give prior notice if

an immediate change in terms or

conditions is necessary to maintain or

restore the security of an account or an

electronic fund transfer system. If the

institution makes such a change

permanent and disclosure would not

jeopardize the security of the account or

system, the institution shall notify the

consumer in writing on or with the next

regularly scheduled periodic statement

or within 30 days of making the change

permanent.

(b) Error resolution notice. For

accounts to or from which electronic

fund transfers can be made, a financial

institution shall mail or deliver to the

consumer, at least once each calendar

year, an error resolution notice

substantially similar to the model form

set forth in Appendix A of this part

(Model Form A–3). Alternatively, an

institution may include an abbreviated

notice substantially similar to the model

form error resolution notice set forth in

Appendix A of this part (Model Form

A–3), on or with each periodic

statement required by § 205.9(b).

§ 205.9 Receipts at electronic terminals;

periodic statements.

(a) Receipts at electronic terminals. A

financial institution shall make a receipt

available to a consumer at the time the

consumer initiates an electronic fund

transfer at an electronic terminal. The
19672 Federal Register / Vol. 61, No. 86 / Thursday, May 2, 1996 / Rules and Regulations

receipt shall set forth the following

information, as applicable:

(1) Amount. The amount of the

transfer. A transaction fee may be

included in this amount, provided the

amount of the fee is disclosed on the

receipt and displayed on or at the

terminal.

(2) Date. The date the consumer

initiates the transfer.

(3) Type. The type of transfer and the

type of the consumer’s account(s) to or

from which funds are transferred. The

type of account may be omitted if the

access device used is able to access only

one account at that terminal.

(4) Identification. A number or code

that identifies the consumer’s account

or accounts, or the access device used

to initiate the transfer. The number or

code need not exceed four digits or

letters to comply with the requirements

of this paragraph (a)(4).

(5) Terminal location. The location of

the terminal where the transfer is

initiated, or an identification such as a

code or terminal number. Except in

limited circumstances where all

terminals are located in the same city or

state, if the location is disclosed, it shall

include the city and state or foreign

country and one of the following:

(i) The street address; or

(ii) A generally accepted name for the

specific location; or

(iii) The name of the owner or

operator of the terminal if other than the

account-holding institution.

(6) Third party transfer. The name of

any third party to or from whom funds

are transferred.

(b) Periodic statements. For an

account to or from which electronic

fund transfers can be made, a financial

institution shall send a periodic

statement for each monthly cycle in

which an electronic fund transfer has

occurred; and shall send a periodic

statement at least quarterly if no transfer

has occurred. The statement shall set

forth the following information, as

applicable:

(1) Transaction information. For each

electronic fund transfer occurring

during the cycle:

(i) The amount of the transfer;

(ii) The date the transfer was credited

or debited to the consumer’s account;

(iii) The type of transfer and type of

account to or from which funds were

transferred;

(iv) For a transfer initiated by the

consumer at an electronic terminal

(except for a deposit of cash or a check,

draft, or similar paper instrument), the

terminal location described in

paragraph (a)(5) of this section; and

(v) The name of any third party to or

from whom funds were transferred.

(2) Account number. The number of

the account.

(3) Fees. The amount of any fees

assessed against the account during the

statement period for electronic fund

transfers, for the right to make transfers,

or for account maintenance.

(4) Account balances. The balance in

the account at the beginning and at the

close of the statement period.

(5) Address and telephone number for

inquiries. The address and telephone

number to be used for inquiries or

notice of errors, preceded by ‘‘Direct

inquiries to’’ or similar language. The

address and telephone number provided

on an error resolution notice under

§ 205.8(b) given on or with the

statement satisfies this requirement.

(6) Telephone number for

preauthorized transfers. A telephone

number the consumer may call to

ascertain whether preauthorized

transfers to the consumer’s account have

occurred, if the financial institution

uses the telephone-notice option under

§ 205.10(a)(1)(iii).

(c) Exceptions to the periodic

statement requirement for certain

accounts—(1) Preauthorized transfers to

accounts. For accounts that may be

accessed only by preauthorized transfers

to the account the following rules apply:

(i) Passbook accounts. For passbook

accounts, the financial institution need

not provide a periodic statement if the

institution updates the passbook upon

presentation or enters on a separate

document the amount and date of each

electronic fund transfer since the

passbook was last presented.

(ii) Other accounts. For accounts

other than passbook accounts, the

financial institution must send a

periodic statement at least quarterly.

(2) Intra-institutional transfers. For an

electronic fund transfer initiated by the

consumer between two accounts of the

consumer in the same institution,

documenting the transfer on a periodic

statement for one of the two accounts

satisfies the periodic statement

requirement.

(3) Relationship between paragraphs

(c)(1) and (c)(2) of this section. An

account that is accessed by

preauthorized transfers to the account

described in paragraph (c)(1) of this

section and by intra-institutional

transfers described in paragraph (c)(2) of

this section, but by no other type of

electronic fund transfers, qualifies for

the exceptions provided by paragraph

(c)(1) of this section .

(d) Documentation for foreigninitiated transfers. The failure by a

financial institution to provide a

terminal receipt for an electronic fund

transfer or to document the transfer on

a periodic statement does not violate

this part if:

(1) The transfer is not initiated within

a state; and

(2) The financial institution treats an

inquiry for clarification or

documentation as a notice of error in

accordance with § 205.11.

§ 205.10 Preauthorized transfers.

(a) Preauthorized transfers to

consumer’s account—(1) Notice by

financial institution. When a person

initiates preauthorized electronic fund

transfers to a consumer’s account at

least once every 60 days, the accountholding financial institution shall

provide notice to the consumer by:

(i) Positive notice. Providing oral or

written notice of the transfer within two

business days after the transfer occurs;

or

(ii) Negative notice. Providing oral or

written notice, within two business days

after the date on which the transfer was

scheduled to occur, that the transfer did

not occur; or

(iii) Readily-available telephone line.

Providing a readily available telephone

line that the consumer may call to

determine whether the transfer occurred

and disclosing the telephone number on

the initial disclosure of account terms

and on each periodic statement.

(2) Notice by payor. A financial

institution need not provide notice of a

transfer if the payor gives the consumer

positive notice that the transfer has been

initiated.

(3) Crediting. A financial institution

that receives a preauthorized transfer of

the type described in paragraph (a)(1) of

this section shall credit the amount of

the transfer as of the date the funds for

the transfer are received.

(b) Written authorization for

preauthorized transfers from

consumer’s account. Preauthorized

electronic fund transfers from a

consumer’s account may be authorized

only by a writing signed or similarly

authenticated by the consumer. The

person that obtains the authorization

shall provide a copy to the consumer.

(c) Consumer’s right to stop

payment—(1) Notice. A consumer may

stop payment of a preauthorized

electronic fund transfer from the

consumer’s account by notifying the

financial institution orally or in writing

at least three business days before the

scheduled date of the transfer.

(2) Written confirmation. The

financial institution may require the

consumer to give written confirmation

of a stop-payment order within 14 days

of an oral notification. An institution

that requires written confirmation shall

inform the consumer of the requirement
Federal Register / Vol. 61, No. 86 / Thursday, May 2, 1996 / Rules and Regulations 19673

and provide the address where

confirmation must be sent when the

consumer gives the oral notification. An

oral stop-payment order ceases to be

binding after 14 days if the consumer

fails to provide the required written

confirmation.

(d) Notice of transfers varying in

amount—(1) Notice. When a

preauthorized electronic fund transfer

from the consumer’s account will vary

in amount from the previous transfer

under the same authorization or from

the preauthorized amount, the

designated payee or the financial

institution shall send the consumer

written notice of the amount and date of

the transfer at least 10 days before the

scheduled date of transfer.

(2) Range. The designated payee or

the institution shall inform the

consumer of the right to receive notice

of all varying transfers, but may give the

consumer the option of receiving notice

only when a transfer falls outside a

specified range of amounts or only

when a transfer differs from the most

recent transfer by more than an agreedupon amount.

(e) Compulsory use—(1) Credit. No

financial institution or other person may

condition an extension of credit to a

consumer on the consumer’s repayment

by preauthorized electronic fund

transfers, except for credit extended

under an overdraft credit plan or

extended to maintain a specified

minimum balance in the consumer’s

account.

(2) Employment or government

benefit. No financial institution or other

person may require a consumer to

establish an account for receipt of

electronic fund transfers with a

particular institution as a condition of

employment or receipt of a government

benefit.

§ 205.11 Procedures for resolving errors.

(a) Definition of error—(1) Types of

transfers or inquiries covered. The term

error means:

(i) An unauthorized electronic fund

transfer;

(ii) An incorrect electronic fund

transfer to or from the consumer’s

account;

(iii) The omission of an electronic

fund transfer from a periodic statement;

(iv) A computational or bookkeeping

error made by the financial institution

relating to an electronic fund transfer;

(v) The consumer’s receipt of an

incorrect amount of money from an

electronic terminal;

(vi) An electronic fund transfer not

identified in accordance with §§ 205.9

or 205.10(a); or

(vii) The consumer’s request for

documentation required by §§ 205.9 or

205.10(a) or for additional information

or clarification concerning an electronic

fund transfer, including a request the

consumer makes to determine whether

an error exists under paragraphs (a)(1)

(i) through (vi) of this section.

(2) Types of inquiries not covered.

The term error does not include:

(i) A routine inquiry about the

consumer’s account balance;

(ii) A request for information for tax

or other recordkeeping purposes; or

(iii) A request for duplicate copies of

documentation.

(b) Notice of error from consumer—(1)

Timing; contents. A financial institution

shall comply with the requirements of

this section with respect to any oral or

written notice of error from the

consumer that:

(i) Is received by the institution no

later than 60 days after the institution

sends the periodic statement or provides

the passbook documentation, required

by § 205.9, on which the alleged error is

first reflected;

(ii) Enables the institution to identify

the consumer’s name and account

number; and

(iii) Indicates why the consumer

believes an error exists and includes to

the extent possible the type, date, and

amount of the error, except for requests

described in paragraph (a)(1)(vii) of this

section.

(2) Written confirmation. A financial

institution may require the consumer to

give written confirmation of an error

within 10 business days of an oral

notice. An institution that requires

written confirmation shall inform the

consumer of the requirement and

provide the address where confirmation

must be sent when the consumer gives

the oral notification.

(3) Request for documentation or

clarifications. When a notice of error is

based on documentation or clarification

that the consumer requested under

paragraph (a)(1)(vii) of this section, the

consumer’s notice of error is timely if

received by the financial institution no

later than 60 days after the institution

sends the information requested.

(c) Time limits and extent of

investigation—(1) Ten-day period. A

financial institution shall investigate

promptly and, except as otherwise

provided in this paragraph (c), shall

determine whether an error occurred

within 10 business days of receiving a

notice of error. The institution shall

report the results to the consumer

within three business days after

completing its investigation. The

institution shall correct the error within

one business day after determining that

an error occurred.

(2) Forty-five day period. If the

financial institution is unable to

complete its investigation within 10

business days, the institution may take

up to 45 days from receipt of a notice

of error to investigate and determine

whether an error occurred, provided the

institution does the following:

(i) Provisionally credits the

consumer’s account in the amount of

the alleged error (including interest

where applicable) within 10 business

days of receiving the error notice. If the

financial institution has a reasonable

basis for believing that an unauthorized

electronic fund transfer has occurred

and the institution has satisfied the

requirements of § 205.6(a), the

institution may withhold a maximum of

$50 from the amount credited. An

institution need not provisionally credit

the consumer’s account if:

(A) The institution requires but does

not receive written confirmation within

10 business days of an oral notice of

error; or

(B) The alleged error involves an

account that is subject to Regulation T

(Securities Credit by Brokers and

Dealers, 12 CFR part 220);

(ii) Informs the consumer, within two

business days after the provisional

crediting, of the amount and date of the

provisional crediting and gives the

consumer full use of the funds during

the investigation;

(iii) Corrects the error, if any, within

one business day after determining that

an error occurred; and

(iv) Reports the results to the

consumer within three business days

after completing its investigation

(including, if applicable, notice that a

provisional credit has been made final).

(3) Extension of time periods. The

applicable time periods in this

paragraph (c)(3) are 20 business days in

place of 10 business days, and 90 days

in place of 45 days, if a notice of error

involves an electronic fund transfer that:

(i) Was not initiated within a state; or

(ii) Resulted from a point-of-sale debit

card transaction.

(4) Investigation. With the exception

of transfers covered by § 205.14, a

financial institution’s review of its own

records regarding an alleged error

satisfies the requirements of this section

if:

(i) The alleged error concerns a

transfer to or from a third party; and

(ii) There is no agreement between the

institution and the third party for the

type of electronic fund transfer

involved.

(d) Procedures if financial institution

determines no error or different error
19674 Federal Register / Vol. 61, No. 86 / Thursday, May 2, 1996 / Rules and Regulations

occurred. In addition to following the

procedures specified in paragraph (c) of

this section, the financial institution

shall follow the procedures set forth in

this paragraph (d) if it determines that

no error occurred or that an error

occurred in a manner or amount

different from that described by the

consumer:

(1) Written explanation. The

institution’s report of the results of its

investigation shall include a written

explanation of the institution’s findings

and shall note the consumer’s right to

request the documents that the

institution relied on in making its

determination. Upon request, the

institution shall promptly provide

copies of the documents.

(2) Debiting provisional credit. Upon

debiting a provisionally credited

amount, the financial institution shall:

(i) Notify the consumer of the date

and amount of the debiting;

(ii) Notify the consumer that the

institution will honor checks, drafts, or

similar instruments payable to third

parties and preauthorized transfers from

the consumer’s account (without charge

to the consumer as a result of an

overdraft) for five business days after

the notification. The institution shall

honor items as specified in the notice,

but need honor only items that it would

have paid if the provisionally credited

funds had not been debited.

(e) Reassertion of error. A financial

institution that has fully complied with

the error resolution requirements has no

further responsibilities under this

section should the consumer later

reassert the same error, except in the

case of an error asserted by the

consumer following receipt of

information provided under paragraph

(a)(1)(vii) of this section.

§ 205.12 Relation to other laws.

(a) Relation to Truth in Lending. (1)

The Electronic Fund Transfer Act and

this part govern:

(i) The addition to an accepted credit

card, as defined in Regulation Z (12 CFR

226.12(a)(2), footnote 21), of the

capability to initiate electronic fund

transfers;

(ii) The issuance of an access device

that permits credit extensions (under a

preexisting agreement between a

consumer and a financial institution)

only when the consumer’s account is

overdrawn or to maintain a specified

minimum balance in the consumer’s

account; and

(iii) A consumer’s liability for an

unauthorized electronic fund transfer

and the investigation of errors involving

an extension of credit that occurs under

an agreement between the consumer

and a financial institution to extend

credit when the consumer’s account is

overdrawn or to maintain a specified

minimum balance in the consumer’s

account.

(2) The Truth in Lending Act and

Regulation Z (12 CFR part 226), which

prohibit the unsolicited issuance of

credit cards, govern:

(i) The addition of a credit feature to

an accepted access device; and

(ii) Except as provided in paragraph

(a)(1)(ii) of this section, the issuance of

a credit card that is also an access

device.

(b) Preemption of inconsistent state

laws—(1) Inconsistent requirements.

The Board shall determine, upon its

own motion or upon the request of a

state, financial institution, or other

interested party, whether the act and

this part preempt state law relating to

electronic fund transfers. Only state

laws that are inconsistent with the act

and this part are preempted and then

only to the extent of the inconsistency.

A state law is not inconsistent with the

act and this part if it is more protective

of consumers.

(2) Standards for determination. State

law is inconsistent with the

requirements of the act and this part if

it:

(i) Requires or permits a practice or

act prohibited by the federal law;

(ii) Provides for consumer liability for

unauthorized electronic fund transfers

that exceeds the limits imposed by the

federal law;

(iii) Allows longer time periods than

the federal law for investigating and

correcting alleged errors, or does not

require the financial institution to credit

the consumer’s account during an error

investigation in accordance with

§ 205.11(c)(2)(i); or

(iv) Requires initial disclosures,

periodic statements, or receipts that are

different in content from those required

by the federal law except to the extent

that the disclosures relate to consumer

rights granted by the state law and not

by the federal law.

(c) State exemptions—(1) General

rule. Any state may apply for an

exemption from the requirements of the

act or this part for any class of electronic

fund transfers within the state. The

Board shall grant an exemption if it

determines that:

(i) Under state law the class of

electronic fund transfers is subject to

requirements substantially similar to

those imposed by the federal law; and

(ii) There is adequate provision for

state enforcement.

(2) Exception. To assure that the

federal and state courts continue to have

concurrent jurisdiction, and to aid in

implementing the act:

(i) No exemption shall extend to the

civil liability provisions of section 915

of the act; and

(ii) When the Board grants an

exemption, the state law requirements

shall constitute the requirements of the

federal law for purposes of section 915

of the act, except for state law

requirements not imposed by the federal

law.

§ 205.13 Administrative enforcement;

record retention.

(a) Enforcement by federal agencies.

Compliance with this part is enforced

by the agencies listed in Appendix B of

this part.

(b) Record retention. (1) Any person

subject to the act and this part shall

retain evidence of compliance with the

requirements imposed by the act and

this part for a period of not less than

two years from the date disclosures are

required to be made or action is

required to be taken.

(2) Any person subject to the act and

this part having actual notice that it is

the subject of an investigation or an

enforcement proceeding by its

enforcement agency, or having been

served with notice of an action filed

under sections 910, 915, or 916(a) of the

act, shall retain the records that pertain

to the investigation, action, or

proceeding until final disposition of the

matter unless an earlier time is allowed

by court or agency order.

§ 205.14 Electronic fund transfer service

provider not holding consumer’s account.

(a) Provider of electronic fund transfer

service. A person that provides an

electronic fund transfer service to a

consumer but that does not hold the

consumer’s account is subject to all

requirements of this part if the person:

(1) Issues a debit card (or other access

device) that the consumer can use to

access the consumer’s account held by

a financial institution; and

(2) Has no agreement with the

account-holding institution regarding

such access.

(b) Compliance by service provider. In

addition to the requirements generally

applicable under this part, the service

provider shall comply with the

following special rules:

(1) Disclosures and documentation.

The service provider shall give the

disclosures and documentation required

by §§ 205.7, 205.8, and 205.9 that are

within the purview of its relationship

with the consumer. The service provider

need not furnish the periodic statement

required by § 205.9(b) if the following

conditions are met:
Federal Register / Vol. 61, No. 86 / Thursday, May 2, 1996 / Rules and Regulations 19675

(i) The debit card (or other access

device) issued to the consumer bears the

service provider’s name and an address

or telephone number for making

inquiries or giving notice of error;

(ii) The consumer receives a notice

concerning use of the debit card that is

substantially similar to the notice

contained in Appendix A of this part;

(iii) The consumer receives, on or

with the receipts required by § 205.9(a),

the address and telephone number to be

used for an inquiry, to give notice of an

error, or to report the loss or theft of the

debit card;

(iv) The service provider transmits to

the account-holding institution the

information specified in § 205.9(b)(1), in

the format prescribed by the automated

clearinghouse system used to clear the

fund transfers;

(v) The service provider extends the

time period for notice of loss or theft of

a debit card, set forth in § 205.6(b) (1)

and (2), from two business days to four

business days after the consumer learns

of the loss or theft; and extends the time

periods for reporting unauthorized

transfers or errors, set forth in

§§ 205.6(b)(3) and 205.11(b)(1)(i), from

60 days to 90 days following the

transmittal of a periodic statement by

the account-holding institution.

(2) Error resolution. (i) The service

provider shall extend by a reasonable

time the period in which notice of an

error must be received, specified in

§ 205.11(b)(1)(i), if a delay resulted from

an initial attempt by the consumer to

notify the account-holding institution.

(ii) The service provider shall disclose

to the consumer the date on which it

initiates a transfer to effect a provisional

credit in accordance with

§ 205.11(c)(2)(ii).

(iii) If the service provider determines

an error occurred, it shall transfer funds

to or from the consumer’s account, in

the appropriate amount and within the

applicable time period, in accordance

with § 205.11(c)(2)(i).

(iv) If funds were provisionally

credited and the service provider

determines no error occurred, it may

reverse the credit. The service provider

shall notify the account-holding

institution of the period during which

the account-holding institution must

honor debits to the account in

accordance with § 205.11(d)(2)(ii). If an

overdraft results, the service provider

shall promptly reimburse the accountholding institution in the amount of the

overdraft.

(c) Compliance by account-holding

institution. The account-holding

institution need not comply with the

requirements of the act and this part

with respect to electronic fund transfers

initiated through the service provider

except as follows:

(1) Documentation. The accountholding institution shall provide a

periodic statement that describes each

electronic fund transfer initiated by the

consumer with the access device issued

by the service provider. The accountholding institution has no liability for

the failure to comply with this

requirement if the service provider did

not provide the necessary information;

and

(2) Error resolution. Upon request, the

account-holding institution shall

provide information or copies of

documents needed by the service

provider to investigate errors or to

furnish copies of documents to the

consumer. The account-holding

institution shall also honor debits to the

account in accordance with

§ 205.11(d)(2)(ii).

§ 205.15 Electronic fund transfer of

government benefits.

(a) Government agency subject to

regulation. (1) A government agency is

deemed to be a financial institution for

purposes of the act and this part if

directly or indirectly it issues an access

device to a consumer for use in

initiating an electronic fund transfer of

government benefits from an account.

The agency shall comply with all

applicable requirements of the act and

this part except as provided in this

section.

(2) For purposes of this section, the

term account means an account

established by a government agency for

distributing government benefits to a

consumer electronically, such as

through automated teller machines or

point-of-sale terminals.

(b) Issuance of access devices. For

purposes of this section, a consumer is

deemed to request an access device

when the consumer applies for

government benefits that the agency

disburses or will disburse by means of

an electronic fund transfer. The agency

shall verify the identity of the consumer

receiving the device by reasonable

means before the device is activated.

(c) Alternative to periodic statement.

A government agency need not furnish

the periodic statement required by

§ 205.9(b) if the agency makes available

to the consumer:

(1) The consumer’s account balance,

through a readily available telephone

line and at a terminal (such as by

providing balance information at a

balance-inquiry terminal or providing it,

routinely or upon request, on a terminal

receipt at the time of an electronic fund

transfer); and

(2) A written history of the

consumer’s account transactions that is

provided promptly in response to an

oral or written request and that covers

at least 60 days preceding the date of a

request by the consumer.

(d) Modified requirements. A

government agency that does not

furnish periodic statements, in

accordance with paragraph (c) of this

section, shall comply with the following

special rules:

(1) Initial disclosures. The agency

shall modify the disclosures under

§ 205.7(b) by disclosing:

(i) Account balance. The means by

which the consumer may obtain

information concerning the account

balance, including a telephone number.

The agency provides a notice

substantially similar to the notice

contained in paragraph A–5 in

Appendix A of this part.

(ii) Written account history. A

summary of the consumer’s right to

receive a written account history upon

request, in place of the periodic

statement required by § 205.7(b)(6), and

the telephone number to call to request

an account history. This disclosure may

be made by providing a notice

substantially similar to the notice

contained in paragraph A–5 in

Appendix A of this part.

(iii) Error resolution. A notice

concerning error resolution that is

substantially similar to the notice

contained in paragraph A–5 in

Appendix A of this part, in place of the

notice required by § 205.7(b)(10).

(2) Annual error resolution notice.

The agency shall provide an annual

notice concerning error resolution that

is substantially similar to the notice

contained in paragraph A–5 in appendix

A, in place of the notice required by

§ 205.8(b).

(3) Limitations on liability. For

purposes of § 205.6(b)(3), regarding a 60-

day period for reporting any

unauthorized transfer that appears on a

periodic statement, the 60-day period

shall begin with transmittal of a written

account history or other account

information provided to the consumer

under paragraph (c) of this section.

(4) Error resolution. The agency shall

comply with the requirements of

§ 205.11 in response to an oral or

written notice of an error from the

consumer that is received no later than

60 days after the consumer obtains the

written account history or other account

information, under paragraph (c) of this

section, in which the error is first

reflected.

4. Appendices A and B are revised

and Appendix C is added to read as

follows:
19676 Federal Register / Vol. 61, No. 86 / Thursday, May 2, 1996 / Rules and Regulations

Appendix A to Part 205—Model

Disclosure Clauses and Forms

Table of Contents

A–1—MODEL CLAUSES FOR UNSOLICITED

ISSUANCE (§ 205.5(b)(2))

A–2—MODEL CLAUSES FOR INITIAL

DISCLOSURES (§ 205.7(b))

A–3—MODEL FORMS FOR ERROR

RESOLUTION NOTICE (§§ 205.7(b)(10)

and 205.8(b))

A–4—MODEL FORM FOR SERVICEPROVIDING INSTITUTIONS

(§ 205.14(b)(1)(ii))

A–5—MODEL FORMS FOR GOVERNMENT

AGENCIES (§ 205.15(d) (1) and (2))

A–1—MODEL CLAUSES FOR

UNSOLICITED ISSUANCE (§ 205.5(b)(2))

(a) Accounts using cards. You cannot use

the enclosed card to transfer money into or

out of your account until we have validated

it. If you do not want to use the card, please

(destroy it at once by cutting it in half).

[Financial institution may add validation

instructions here.]

(b) Accounts using codes. You cannot use

the enclosed code to transfer money into or

out of your account until we have validated

it. If you do not want to use the code, please

(destroy this notice at once).

[Financial institution may add validation

instructions here.]

A–2—MODEL CLAUSES FOR INITIAL

DISCLOSURES (§ 205.7(b))

(a) Consumer Liability (§ 205.7(b)(1)). (Tell

us AT ONCE if you believe your [card] [code]

has been lost or stolen. Telephoning is the

best way of keeping your possible losses

down. You could lose all the money in your

account (plus your maximum overdraft line

of credit). If you tell us within 2 business

days, you can lose no more than $50 if

someone used your [card][code] without your

permission. (If you believe your [card] [code]

has been lost or stolen, and you tell us within

2 business days after you learn of the loss or

theft, you can lose no more than $50 if

someone used your [card] [code] without

your permission.)

If you do NOT tell us within 2 business

days after you learn of the loss or theft of

your [card] [code], and we can prove we

could have stopped someone from using your

[card] [code] without your permission if you

had told us, you could lose as much as $500.

Also, if your statement shows transfers that

you did not make, tell us at once. If you do

not tell us within 60 days after the statement

was mailed to you, you may not get back any

money you lost after the 60 days if we can

prove that we could have stopped someone

from taking the money if you had told us in

time.

If a good reason (such as a long trip or a

hospital stay) kept you from telling us, we

will extend the time periods.

(b) Contact in event of unauthorized

transfer (§ 205.7(b)(2)). If you believe your

[card] [code] has been lost or stolen or that

someone has transferred or may transfer

money from your account without your

permission, call:

[Telephone number]

or write:

[Name of person or office to be notified]

[Address]

(c) Business days (§ 205.7(b)(3)). For

purposes of these disclosures, our business

days are (Monday through Friday) (Monday

through Saturday) (any day including

Saturdays and Sundays). Holidays are (not)

included.

(d) Transfer types and limitations

(§ 205.7(b)(4))—(1) Account access. You may

use your [card][code] to:

(i) Withdraw cash from your [checking] [or]

[savings] account.

(ii) Make deposits to your [checking] [or]

[savings] account.

(iii) Transfer funds between your checking

and savings accounts whenever you request.

(iv) Pay for purchases at places that have

agreed to accept the [card] [code].

(v) Pay bills directly [by telephone] from

your [checking] [or] [savings] account in the

amounts and on the days you request.

Some of these services may not be

available at all terminals.

(2) Limitations on frequency of transfers.—

(i) You may make only [insert number, e.g.,

3] cash withdrawals from our terminals each

[insert time period, e.g., week].

(ii) You can use your telephone billpayment service to pay [insert number] bills

each [insert time period] [telephone call].

(iii) You can use our point-of-sale transfer

service for [insert number] transactions each

[insert time period].

(iv) For security reasons, there are limits on

the number of transfers you can make using

our [terminals] [telephone bill-payment

service] [point-of-sale transfer service].

(3) Limitations on dollar amounts of

transfers—(i) You may withdraw up to [insert

dollar amount] from our terminals each

[insert time period] time you use the [card]

[code].

(ii) You may buy up to [insert dollar

amount] worth of goods or services each

[insert time period] time you use the [card]

[code] in our point-of-sale transfer service.

(e) Fees (§ 205.7(b)(5))—(1) Per transfer

charge. We will charge you [insert dollar

amount] for each transfer you make using our

[automated teller machines] [telephone billpayment service] [point-of-sale transfer

service].

(2) Fixed charge. We will charge you

[insert dollar amount] each [insert time

period] for our [automated teller machine

service] [telephone bill-payment service]

[point-of-sale transfer service].

(3) Average or minimum balance charge.

We will only charge you for using our

[automated teller machines] [telephone billpayment service] [point-of-sale transfer

service] if the [average] [minimum] balance

in your [checking account] [savings account]

[accounts] falls below [insert dollar amount].

If it does, we will charge you [insert dollar

amount] each [transfer] [insert time period].

(f) Confidentiality (§ 205.7(b)(9)). We will

disclose information to third parties about

your account or the transfers you make:

(i) Where it is necessary for completing

transfers, or

(ii) In order to verify the existence and

condition of your account for a third party,

such as a credit bureau or merchant, or

(iii) In order to comply with government

agency or court orders, or

(iv) If you give us your written permission.

(g) Documentation (§ 205.7(b)(6))—(1)

Terminal transfers. You can get a receipt at

the time you make any transfer to or from

your account using one of our [automated

teller machines] [or] [point-of-sale terminals].

(2) Preauthorized credits. If you have

arranged to have direct deposits made to your

account at least once every 60 days from the

same person or company, (we will let you

know if the deposit is [not] made.) [the

person or company making the deposit will

tell you every time they send us the money]

[you can call us at (insert telephone number)

to find out whether or not the deposit has

been made].

(3) Periodic statements. You will get a

[monthly] [quarterly] account statement

(unless there are no transfers in a particular

month. In any case you will get the statement

at least quarterly).

(4) Passbook account where the only

possible electronic fund transfers are

preauthorized credits. If you bring your

passbook to us, we will record any electronic

deposits that were made to your account

since the last time you brought in your

passbook.

(h) Preauthorized payments (§ 205.7(b) (6),

(7) and (8); § 205.10(d))—(1) Right to stop

payment and procedure for doing so. If you

have told us in advance to make regular

payments out of your account, you can stop

any of these payments. Here’s how:

Call us at [insert telephone number], or

write us at [insert address], in time for us to

receive your request 3 business days or more

before the payment is scheduled to be made.

If you call, we may also require you to put

your request in writing and get it to us within

14 days after you call. (We will charge you

[insert amount] for each stop-payment order

you give.)

(2) Notice of varying amounts. If these

regular payments may vary in amount, [we]

[the person you are going to pay] will tell

you, 10 days before each payment, when it

will be made and how much it will be. (You

may choose instead to get this notice only

when the payment would differ by more than

a certain amount from the previous payment,

or when the amount would fall outside

certain limits that you set.)

(3) Liability for failure to stop payment of

preauthorized transfer. If you order us to stop

one of these payments 3 business days or

more before the transfer is scheduled, and we

do not do so, we will be liable for your losses

or damages.

(i) Financial institution’s liability

(§ 205.7(b)(8)). If we do not complete a

transfer to or from your account on time or

in the correct amount according to our

agreement with you, we will be liable for

your losses or damages. However, there are

some exceptions. We will not be liable, for

instance:

(1) If, through no fault of ours, you do not

have enough money in your account to make

the transfer.

(2) If the transfer would go over the credit

limit on your overdraft line.

(3) If the automated teller machine where

you are making the transfer does not have

enough cash.
Federal Register / Vol. 61, No. 86 / Thursday, May 2, 1996 / Rules and Regulations 19677

(4) If the [terminal] [system] was not

working properly and you knew about the

breakdown when you started the transfer.

(5) If circumstances beyond our control

(such as fire or flood) prevent the transfer,

despite reasonable precautions that we have

taken.

(6) There may be other exceptions stated in

our agreement with you.

A–3—MODEL FORMS FOR ERROR

RESOLUTION NOTICE (§§ 205.7(b)(10) and

205.8(b))

(a) Initial and annual error resolution notice

(§§ 205.7(b)(10) and 205.8(b))

In Case of Errors or Questions About Your

Electronic Transfers, Telephone us at [insert

telephone number] or Write us at [insert

address] as soon as you can, if you think your

statement or receipt is wrong or if you need

more information about a transfer listed on

the statement or receipt. We must hear from

you no later than 60 days after we sent the

FIRST statement on which the problem or

error appeared.

(1) Tell us your name and account number

(if any).

(2) Describe the error or the transfer you

are unsure about, and explain as clearly as

you can why you believe it is an error or why

you need more information.

(3) Tell us the dollar amount of the

suspected error.

If you tell us orally, we may require that

you send us your complaint or question in

writing within 10 business days.

We will tell you the results of our

investigation within 10 business days after

we hear from you and will correct any error

promptly. If we need more time, however, we

may take up to 45 days to investigate your

complaint or question. If we decide to do

this, we will credit your account within 10

business days for the amount you think is in

error, so that you will have the use of the

money during the time it takes us to

complete our investigation. If we ask you to

put your complaint or question in writing

and we do not receive it within 10 business

days, we may not credit your account.

If we decide that there was no error, we

will send you a written explanation within

three business days after we finish our

investigation. You may ask for copies of the

documents that we used in our investigation.

(b) Error resolution notice on periodic

statements § 205.8(b)

In Case of Errors or Questions About Your

Electronic Transfers, Telephone us at [insert

telephone number] or Write us at [insert

address] as soon as you can, if you think your

statement or receipt is wrong or if you need

more information about a transfer on the

statement or receipt. We must hear from you

no later than 60 days after we sent you the

FIRST statement on which the error or

problem appeared.

(1) Tell us your name and account number

(if any).

(2) Describe the error or the transfer you

are unsure about, and explain as clearly as

you can why you believe it is an error or why

you need more information.

(3) Tell us the dollar amount of the

suspected error.

We will investigate your complaint and

will correct any error promptly. If we take

more than 10 business days to do this, we

will credit your account for the amount you

think is in error, so that you will have the

use of the money during the time it takes us

to complete our investigation.

A–4—MODEL FORM FOR SERVICEPROVIDING INSTITUTIONS

(§ 205.14(b)(1)(ii))

ALL QUESTIONS ABOUT

TRANSACTIONS MADE WITH YOUR

(NAME OF CARD) CARD MUST BE

DIRECTED TO US (NAME OF SERVICE

PROVIDER), AND NOT TO THE BANK OR

OTHER FINANCIAL INSTITUTION WHERE

YOU HAVE YOUR ACCOUNT. We are

responsible for the [name of service] service

and for resolving any errors in transactions

made with your [name of card] card.

We will not send you a periodic statement

listing transactions that you make using your

[name of card] card. The transactions will

appear only on the statement issued by your

bank or other financial institution. SAVE

THE RECEIPTS YOU ARE GIVEN WHEN

YOU USE YOUR [NAME OF CARD] CARD,

AND CHECK THEM AGAINST THE

ACCOUNT STATEMENT YOU RECEIVE

FROM YOUR BANK OR OTHER FINANCIAL

INSTITUTION. If you have any questions

about one of these transactions, call or write

us at [telephone number and address] [the

telephone number and address indicated

below].

IF YOUR [NAME OF CARD] CARD IS

LOST OR STOLEN, NOTIFY US AT ONCE

by calling or writing to us at [telephone

number and address].

A–5—MODEL FORMS FOR GOVERNMENT

AGENCIES (§ 205.15(d) (1) and (2))

(1) Disclosure by government agencies of

information about obtaining account

balances and account histories § 205.15(d)(1)

(i) and (ii)

You may obtain information about the

amount of benefits you have remaining by

calling [telephone number]. That information

is also available [on the receipt you get when

you make a transfer with your card at (an

ATM) (a POS terminal)] [when you make a

balance inquiry at an ATM][when you make

a balance inquiry at specified locations].

You also have the right to receive a written

summary of transactions for the 60 days

preceding your request by calling [telephone

number]. [Optional: Or you may request the

summary by contacting your caseworker.]

(2) Disclosure of error resolution procedures

for government agencies that do not provide

periodic statements (§ 205.15 (d)(1)(iii) and

(d)(2))

In Case of Errors or Questions About Your

Electronic Transfers Telephone us at

[telephone number] or Write us at [address]

as soon as you can, if you think an error has

occurred in your [EBT][agency’s name for

program] account. We must hear from you no

later than 60 days after you learn of the error.

You will need to tell us:

• Your name and [case] [file] number.

• Why you believe there is an error, and

the dollar amount involved.

• Approximately when the error took

place.

If you tell us orally, we may require that

you send us your complaint or question in

writing within 10 business days. We will

generally complete our investigation within

10 business days and correct any error

promptly. In some cases, an investigation

may take longer, but you will have the use

of the funds in question after the 10 business

days. 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 during the investigation.

For errors involving transactions at pointof-sale terminals in food stores, the periods

referred to above are 20 business days instead

of 10 business days.

If we decide that there was no error, we

will send you a written explanation within

three business days after we finish our

investigation. 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].

Appendix B to Part 205—Federal

Enforcement Agencies

The following list indicates which Federal

agency enforces Regulation E (12 CFR part

205) for particular classes of institutions. Any

questions concerning compliance by a

particular institution should be directed to

the appropriate enforcing agency. Terms that

are not defined in the Federal Deposit

Insurance Act (12 U.S.C. 1813(s)) shall have

the meaning given to them in the

International Banking Act of 1978 (12 U.S.C.

3101).

National banks, and Federal branches and

Federal agencies of foreign banks

District office of the Office of the

Comptroller of the Currency where the

institution is located.

State member banks, branches and agencies

of foreign banks (other than Federal

branches, Federal agencies, and insured state

branches of foreign banks), commercial

lending companies owned or controlled by

foreign banks, and organizations operating

under section 25 or 25(a) of the Federal

Reserve Act

Federal Reserve Bank serving the District

in which the institution is located.

Nonmember insured banks and insured state

branches of foreign banks

Federal Deposit Insurance Corporation

regional director for the region in which the

institution is located.

Savings institutions insured under the

Savings Association Insurance Fund of the

FDIC and federally-chartered savings banks

insured under the Bank Insurance Fund of

the FDIC (but not including state-chartered

savings banks insured under the Bank

Insurance Fund)

Office of Thrift Supervision Regional

Director for the region in which the

institution is located.
19678 Federal Register / Vol. 61, No. 86 / Thursday, May 2, 1996 / Rules and Regulations

Federal Credit Unions

Division of Consumer Affairs, National

Credit Union Administration, 1775 Duke

Street, Alexandria, Virginia 22314–3428

Air Carriers

Assistant General Counsel for Aviation

Enforcement and Proceedings, Department of

Transportation, 400 Seventh Street, S.W.,

Washington, D.C. 20590.

Brokers and Dealers

Division of Market Regulation, Securities

and Exchange Commission, Washington, D.C.

20549.

Retailers, Consumer Finance Companies,

Certain Other Financial Institutions, and all

others not covered above

Federal Trade Commission, Electronic

Fund Transfers, Washington, D.C. 20580.

Appendix C to Part 205—Issuance of

Staff Interpretations

Official Staff Interpretations

Pursuant to section 915(d) of the act,

the Board has designated the director

and other officials of the Division of

Consumer and Community Affairs as

officials ‘‘duly authorized’’ to issue, at

their discretion, official staff

interpretations of this part. Except in

unusual circumstances, such

interpretations will not be issued

separately but will be incorporated in an

official commentary to this part, which

will be amended periodically.

Requests for Issuance of Official Staff

Interpretations

A request for an official staff

interpretation shall be in writing and

addressed to the Director, Division of

Consumer and Community Affairs,

Board of Governors of the Federal

Reserve System, Washington, D.C.

20551. The request shall contain a

complete statement of all relevant facts

concerning the issue, including copies

of all pertinent documents.

Scope of Interpretations

No staff interpretations will be issued

approving financial institutions’ forms

or statements. This restriction does not

apply to forms or statements whose use

is required or sanctioned by a

government agency.

By order of the Board of Governors of the

Federal Reserve System, April 19, 1996.

William W. Wiles,

Secretary of the Board.

[FR Doc. 96–10179 Filed 5–1–96; 8:45 am]

BILLING CODE 6210–01–P

FEDERAL RESERVE SYSTEM

12 CFR Part 205

[Regulation E; Docket No. R–0831]

Electronic Fund Transfers

AGENCY: Board of Governors of the

Federal Reserve System.

ACTION: Official Staff Interpretation.

SUMMARY: The Board is publishing final

revisions to its official staff commentary

to Regulation E (which implements the

Electronic Fund Transfer Act), as part of

the Board’s review of the regulation.

The commentary applies and interprets

the requirements of Regulation E to

facilitate compliance by financial

institutions that offer electronic fund

transfer services to consumers. The

revisions change the question-andanswer format to a narrative one to

make the commentary easier to use and

to conform it with the format of the

Board’s other staff commentaries. In

conjunction with revisions to

Regulation E adopted by the Board and

published elsewhere in today’s Federal

Register, the revised commentary also

includes interpretative provisions

previously contained in the regulation

that were more explanatory in nature

and additional interpretations on

matters not previously addressed.

DATES: Effective date. May 2, 1996.

Compliance date. Mandatory

compliance January 1, 1997.

FOR FURTHER INFORMATION CONTACT: Jane

Jensen Gell, Kyung Cho-Miller, Michael

Hentrel, or Natalie E. Taylor, Staff

Attorneys, Division of Consumer and

Community Affairs, Board of Governors

of the Federal Reserve System,

Washington, D.C. 20551, at (202) 452–

2412 or (202) 452–3667. For the hearing

impaired only, contact Dorothea

Thompson, Telecommunications Device

for the Deaf (TDD), at (202) 452–3544.

SUPPLEMENTARY INFORMATION:

I. Background

The Electronic Fund Transfer Act

(EFTA) (15 U.S.C. 1693), 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).

The Board has revised Regulation E

under its Regulatory Planning and

Review Program, which calls for the

periodic review of all Board regulations.

In 1981, the Board published an official

staff commentary to Regulation E. The

commentary substitutes for individual

staff interpretations and is designed to

facilitate compliance and provide

protection from civil liability, under

section 915(d)(1) of the act, for financial

institutions that act in conformity with

it.

The question-and-answer format of

the former commentary was designed to

make compliance easier by providing

specific answers, in nontechnical

language, to frequently asked questions.

However, that format usually relied on

specific factual situations and often

restricted the scope of an interpretation.

The Board has adopted a narrative

format, similar to other commentaries

issued by the Board, to provide more

general applicability.

The order of comments in the final

commentary corresponds with the new

sections in the revised regulation.

Throughout the commentary, reference

to ‘‘this section’’ or ‘‘this paragraph’’

means the section or paragraph in the

regulation that is the subject of the

comment. Each comment in the

commentary is identified by a number

and the regulatory section or paragraph

that it interprets. The commentary

incorporates text that was moved from

the regulation because it is more

explanatory than regulatory in nature. A

number of comments have been deleted

as obsolete.

II. Section-by-Section Analysis

The section-by-section descriptions

highlight certain provisions that differ

from the former commentary and certain

portions of the former regulation that

have been moved to the commentary.

Comments in the former commentary

are referred to as ‘‘questions’’ and are

cited by the section number and the

number of the question. For example,

Q2–11 is the citation for question

number 11 in the commentary to

§ 205.2. As the substance of many

questions does not change in the new

format, those comments are not

specifically discussed. A summary at

the beginning of the section-by-section

analysis matches the old question to the

new commentary provisions. The

summary also lists questions that have

been deleted from the commentary,

comments that are new, and comments

that have been moved to other sections.

Section 205.2—Definitions

New Old

(a)–1 .......................... Q2–1

(b)(1)–1 ...................... Q2–2, Q2–3, Q2–4,

Q2–5, Q2–5.5

(b)(2)–1 ...................... Q3–21

(b)(2)–2 ...................... Q3–20

(d)–1 .......................... Q2–8

(d)–2 .......................... Q2–6

(d)–3 .......................... Q2–9