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Federal R eserve Bank
OF DALLAS
ROBERT
AND

D. M c T E E R , J R .

PRESIOENT
CH IE F E X EC U TIV E

OFFICER

April 11, 1994

r

D A LLAS, TEXAS
75265-590 6

Notice 94-37
TO:

The Chief Executive Officer of each
member bank and others concerned in
the Eleventh Federal Reserve District
SUBJECT
Request for Public Comment
on a Proposal to Revise Regulation E
and a Proposal to Revise the Official Staff
Commentary to Regulation E
(Electronic Fund Transfers)
DETAILS

The Board of Governors of the Federal Reserve System is seeking
public comment on a proposal to simplify and update Regulation E, which
implements the Electronic Fund Transfer Act.
In keeping with the Bo a r d ’s Regulatory Planning and Review Program,
the proposed revisions focus on ways of easing the burdens imposed on finan­
cial institutions without diminishing consumer protections established by the
act. The proposal contains some substantive revisions, including changes to
the existing exemptions for securities or commodities transfers and for
preauthorized transfers to or from accounts at small institutions.
For the
most part, however, the revisions to Regulation E contain technical changes,
simplify the language and format of the regulation, and delete obsolete
provisions.
Major changes in the regulation would require that the act be
amended; therefore, the Board also solicits comment on legislative revisions
that could be achieved without significant advance impact on consumer
protections.
In conjunction with the proposed revisions to the regulation, the
Board has also proposed revisions to the official staff commentary.
The
commentary interprets the requirements of Regulation E in order to facilitate
compliance by financial institutions that offer electronic fund transfer
services to consumers.
The Board must receive comments by May 31, 1994. Comments should be
addressed to William W. Wiles, Secretary, Board of Governors of the Federal

For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal Reserve Bank of Dallas:
Dallas Office (800) 333-4460; El Paso Branch Intrastale (800) 592-1631, Interstate (800) 351-1012; Houston Branch Intrastate (800) 392-4162,
Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810.

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

- 2 -

Reserve System, 20th Street and Constitution Avenue, N.W., Washington, D.C.
20551. All comments on the proposed revisions to Regulation E should refer to
Docket No. R-0830. All comments on the proposed revisions to the official
staff commentary to Regulation E should refer to Docket No. R-0831.
ATTACHMENT
A copy of the B o a r d ’s notices as they appear on pages 10684-715,
Vol. 59, No. 44, of the Federal Register dated March 7, 1994, is attached.
MORE INFORMATION
For more information, please contact Eugene Coy at (214) 922-6201.
For additional copies of this B a n k ’s notice, please contact the Public Affairs
Department at (214) 922-5254.
Sincerely yours,

• fa * /' Q.

REQUEST FOR PUBLIC COMMENT
ON A PROPOSAL TO REVISE REGULATION E
AND THE
OFFICIAL STAFF COMMENTARY TO
REGULATION E (ELECTRONIC FUND TRANSFERS)
(DOCKETS R-0830 AND R-0831)

10684

Federal Register / Vol. 59, No. 44 / Monday, March 7, 1994 / Proposed Rules

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: Proposed rule.
SUMMARY: The Board is publishing for

comment a proposal to revise
Regulation E, which implements the
Electronic Fund Transfer Act. The
proposal stems from the Board’s review
of Regulation E pursuant to its policy of
periodically reviewing all of its
regulations. The Board’s review
considered ways the regulation could be
simplified to ease the burdens imposed
on financial institutions, consistent with
the Board’s responsibility for
implementing the act, and considered
also whether the regulation could more
effectively carry out the purposes of the
act. The proposal contains several
substantive revisions, including changes
to the existing exemptions for securities
or commodities transfers and for
preauthorized transfers to or from
accounts at small institutions. In
addition, the proposal includes changes
intended to make Regulation E more
consistent with the requirements of
other regulations governing deposit
.•accounts. The proposal also simplifies
the language and format of the
regulation, deleting obsolete provisions
and eliminating all of the footnotes. In
conjunction with the proposed revisions
to the regulation, the Board also has
proposed revisions to the staff
commentary published elsewhere in
today’s Federal Register.
DATES: Comments must be received on
or before May 31,1994.
ADDRESSES: Comments should refer to
Docket No. R-0830 and be mailed to
William W. Wiles, Secretary, Board of
Governors of the Federal Reserve
System, Washington, DC 20551. They
may also be delivered to the guard
station in the Eccles Building Courtyard
on 20th Street, NW. (between
Constitution Avenue and C Street)
between 8:45 a.m. and 5:15 p.m.
weekdays. Except as provided in the
Board’s rules regarding the availability
of information (12 CFR 261.8),
comments will be available for
inspection and copying by members of
the public in the Freedom of
Information Office, room MP-500 of the
Martin Building between 9:00 a.m. and
5:00 p.m. weekdays.
FOR FURTHER INFORMATION CONTACT: Jane
Jensen Gell, Mary Jane Seebach, Staff

Attorneys, or John Wood, Senior
Attorney, Division of Consumer and
Community Affairs, at (202) 452-2412
or (202) 452-3667. For the hearing
impaired only, Telecommunications
Device for the Deaf (TDD), Dorothea
Thompson, at (202) 452-3544,
SUPPLEMENTARY INFORMATION:

(1) 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.
The Board’s policy under its
Regulatory Planning and Review (RPR)
program calls for periodic review of
each Board regulation. The RPR
program has four goals: to clarify and
simplify the regulatory language; to
amend the regulation to reflect
technological and other developments;
to reduce undufc regulatory burden on
the industry; and to delete obsolete
provisions. In keeping with that policy,
the Board has made 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. ■
Based on its review, the Board now
proposes revisions to Regulation E.
While certain substantive revisions have
been made to the regulation (see the
section-by-section discussion below),
the proposal leaves most of the
regulatory provisions substantively
unchanged. The regulation closely
follows the language of the statute,
which contains detailed requirements in
most areas, and major changes to the

regulation are not possible unless the
act itself is amended. Therefore, the
Board is soliciting comment on whether
specific legislative revisions to the
EFTA are necessary and achievable
without imposing a significant adverse
impact on consumer protections.
The proposal simplifies the language
and format of each section of the
regulation to state the requirements
more clearly. All of the footnotes have
been either integrated into the text of
the regulation or moved to the proposed
staff commentary, making the regulation
itself less cumbersome to use. The
proposed 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. In addition
to commenting on the proposed
changes, the Board requests specific
suggestions, as well as rationale, for
additional changes to the regulation that
would facilitate compliance.
(2) Proposed Regulatory Revisions
The following discussion covers the
proposed revisions to Regulation E
section-by-section. In many cases, the
proposed changes would simplify or
clarify the current text, with no
substantive change in the regulatory
requirements; where these changes are
self-evident from reading the proposed
text itself, they are not discussed.
Section 205.1—Authority and Purpose
The proposal simplifies the current
section. Discussion of the Congressional
findings has been deleted. Coverage
issues currently addressed in § 205.1(b)
have been moved to § 205.3.
Section 205.2—Definitions
Paragraph (b)(2)
The proposal incorporates the
exemption for trust accounts (currently
§ 205.3(f)) into the definition of account.
The definition more closely tracks the
statutory language contained in section
903(2) of the EFTA.
Paragraph (d)—Business Day
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 currently requires that
each financial institution determine
when its offices are “carrying on
substantially all business functions.”
Using its exception authority under
section 904(c) of the EFTA, the Board
proposes to change the definition so that
it will mirror that used in Regulations
CC (12 CFR part 229) and DD (12 CFR

Federal Register / Vol. 59, No. 44 / Monday, March 7, 1994 / Proposed Rules
part 230). Those regulations define a
business day as a calendar day o th er.
than a Saturday, Sunday, or any legal
public holiday specified in 5 U.S.C.
6103(a). The Board believes compliance
with the multiple regulations that
govern deposit accounts would be
simplified if similar definitions were
used and solicits comment on whether
such a change will reduce burden
without adversely affecting consumer
protections.
Paragraph (g)—Financial Institution
The Board pro ptoses to simplify the
definition of financial institution
(currently § 205.2(i)) by eliminating
references to both state and federal
institutions. Instead, the definition
would include “a bank, savings
association, credit union, or any other
person that directly or indirectly holds
an account belonging to a consumer.’’
This is not intended as a substantive
change in coverage.
Paragraph (h)—Person
The proposal adds a definition of
“person,” incorporating language from
Regulations B (12 CFR 202.2(x)) and Z
(12 CFR 226.2(a)(22)). The term is used
in several places in the regulation, most
notably in § 205.3(a), defining the
regulation's coverage, and in § 205.10(e)
on compulsory use.
Section 205.3— Coverage
The proposal includes a new section
defining the regulation’s coverage. The
Board solicits comment on whether
having a self-contained section on
coverage would facilitate use of the
regulation.

and “unauthorized electronic fund
transfer” remain in the definitions
section.
Questions have arisen about
Regulation E coverage of smart cards.
Generally, smart cards are plastic cards
that have the capacity to either compute
or communicate information. At one
time, it was believed that smart card
systems were not subject to Regulation
E because no account existed within the
definition of the act or regulation. With
advances in smart card technology, that
assumption is less clear. Increasingly
more uses are available for smart cards.
The Board believes that smart cards are
subject to Regulation E if the cards are
used to access an account. A similar
analysis might be applied to valueadded or prepaid cards.
The determination about whether
smart cards and value-added cards tire
subject to the regulation has
implications both for the private and
public sectors. For example, any
determination made on coverage of
smart cards in the review could apply
to electronic benefit transfer system
programs. (See Docket No. R-0829
elsewhere in today’s Federal Register in
which the Board deferred to the review
of Regulation E for discussion of smart
cards and its implication on electronic
benefit transfer systems.) The Board
solicits comment on the coverage of
smart cards.
Paragraph (c)—Exclusions From
Coverage

The proposal’s expanded section on
coverage retains the exemptions
currently contained in § 205.3.
Including these exemptions with the
Paragraph (a)—General
definition of “electronic fund transfer"
The proposal clarifies that the
more closely tracks the statutory
regulation applies to any EFT that
provisions. In addition, the Board
authorizes a financial institution to
believes having both coverage and
debit or credit a consumer's account. It
exemption provisions in one section
also incorporates the discussion of
would facilitate the determination of
coverage currently addressed in
whether compliance with the regulation
§ 205.1(b).
is required. The paragraph contains
Paragraph (b)—Electronic Fund Transfer several proposed revisions to current
exemptions.
The definition of “electronic fund
transfer” (currently § 205.2(g)), which is Paragraph (c)(3)—Wire Transfers
central to determining coverage under
the regulation, has been moved into the
The proposal amends the exemption
coverage section. A minor change to the for wire transfers currently contained in
definition of an EFT makes clear that
§ 205.3(b) to clarify that it exempts
the term includes transfers initiated
transfers through Fedwire (or similar
through a computer or through magnetic wire transfer systems) and not all
tape. This change is proposed because a transfers through the Federal Reserve
strict reading of the current regulation
Communications System. The proposed
might lead to the unintended
amendment does not represent a
conclusion that an EFT does not include substantive change in the scope of the
transfers initiated through a computer
exemption. Rather, it would correct the
not involving tape. The definitions of
reference to more accurately reflect the
“preauthorized electronic fund transfer” statutory intent.

10685

Paragraph (c)(4)—Securities and
Commodities Transfers
The Board proposes to revise the
exemption for certain securities and
commodities transfers. When the
current exemption was initially
adopted, the Board omitted the
requirement that the purchase or sale be
through a broker-dealer registered with
the Securities Exchange Commission
(SEC). The intent of this change was to
broaden the scope of the exemption to
include securities transactions made by
mutual funds and pension and profitsharing plans. The Board noted at the
time that existing federal laws and the
regulations of the SEC and the
Commodity Futures Trading
Commission (CFTC), although not
specifically promulgated for the
regulation of payment transfers,
provided protections to consumers that
were consistent with the requirements
of the EFTA and Regulation E.
As currently written, however, the
exemption does not extend to a transfer
for the purchase or sale of securities if
the securities (for example, municipal
securities) are not regulated by the SEC,
even if the transfer is executed by a
broker-dealer who is regulated by the
SEC In keeping with the statutory
language, the proposed change would
exempt transfers involving unregulated
securities if the purchase or sale is
transacted by a broker-dealer regulated
by the SEC or a futures commission
merchant regulated by the 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.
The Board proposes to extend 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). Currently a transfer to purchase
Treasury securities is technically
covered by Regulation E because it is
not regulated by the SEC or the CFTC
and, when purchased from the Federal
Reserve Banks, is 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).
The Board solicits comments on
whether these proposed changes strike

10686

Federal Register / Vol. 59, No. 44 / Monday, March 7, 1994 / Proposed Rules

the appropriate balance between
facilitating greater use of EFTs for
securities transactions and providing
adequate consumer protection.

Commercial Code (UCC) on the small
institution exemption. In the revised
commentary to Regulation E, the Board
clarifies that Article 4A is not applicable
to the preauthorized transfers that
Paragraph (c)(7)—Small Institutions
qualify for the small, institution
The Board proposes to increase the
exemption. Article 4A applies primarily
current-asset size cutoff of the small
to large-dollar commercial wire transfers
institution exemption in current
made, for example, via Fedwire, CHIPs,
§ 205.3(g). Section 904(c) of the EFTA
SWIFT, and Telex. Section 4A-108
gives the Board authority to modify the
excludes any transaction that is subject
requirements imposed by the regulation to the EFTA from coverage under
on small financial institutions if the
Article 4A. The question is whether the
Board determines that such
transfers initiated by small financial
modifications are necessary to alleviate
institutions that take advantage of the
%ny undue compliance burden on small regulatory exemption may be subject to
institutions and that such modifications the requirements of Article 4A as a
are consistent with the purposes and
consequence. For example, would a
objective of the act. In 1982, the Board
direct deposit to a consumer account at
exempted preauthorized transfers to or
a small bank be covered by Article 4A
from accounts at financial institutions
if exempt from Regulation E? The Board
with assets of less than $25 million. The regards these preauthorized transfers as
regulation exempts the preauthorized
remaining subject to certain
transfers as a class of transfers, and not
requirements of the EFTA, and therefore
the financial institutions themselves. A
not covered by Article 4A. The Board
small financial institution that provides solicits comment on whether specific
EFT services besides preauthorized
language is needed in the regulation to
transfers must comply with the
clarify this issue.
regulation for those other services. For
The Board proposes deleting footnote
example, a small financial institution
la, which refers to sections 913, 915,
that offers ATM services must comply
and 916 of the EFTA. Section 913 places
with Regulation E in regard to the
restrictions on the compulsory use of
issuance of debit cards, terminal
EFTs. For example, an institution may
receipts, periodic statements, and other
not condition the extension of credit on
requirements. In addition, the
repayment by preauthorized debit. The
institution must comply with provisions statutory language from section 913 has
of the act that apply to the financial
been incorporated in proposed
institution’s conduct rather than to the
§ 205.10(e). Sections 915 and 916
exempted transfers. For example, the
provide for civil and criminal liability,
prohibition against compulsory use of
respectively, for violations of the EFTA.
EFTs in section 913 of the act—in regard References to sections 915 and 916 are
to credit or employment (see discussion contained in proposed § 205.3(c)(5)(ii).
below in § 2Q5.10(e))—remains
The Board has also added crossapplicable.
references to § 205.10 and sections 915
When the Board adopted the
and 916 in the appropriate paragraphs
exemption in 1982, many small
to replace footnote la.
institutions that did not offer EFT
Section 205.4— General Disclosure
services such as ATM access benefitted
Requirements; Jointly Offered Services
from the exemption. Given the growth
in assets of financial institutions in the
Current § 205.4 describes certain
past ten years, increasing the asset-size
requirements under the regulation. The
cutoff of the exemption to $100 million
Board proposes to consolidate the
could reduce burden without lessening
general disclosure requirements
the extent of consumer protection
currently dispersed throughout the
originally provided. Because many
regulation in this section. In addition to
small institutions now offer a variety of adding paragraph (a), the proposal
EFT services, it appears that only a
contains various editorial changes
limited number of institutions would be including a reordering of the section; no
exempted from Regulation E under the
substantive change is intended.
proposed increase. The Board solicits
Paragraph (a)—Form of Disclosures
comment on the proposed increase in
The proposal incorporates the format
the exemption level. In addition, the
requirements for disclosures currently
Board requests comment on other ways
found in §§ 205.7(a) and 205.9. The
the burden on small institutions could
Board interprets these requirements as
be reduced without sacrificing the
generally applying to all disclosures, in
consumer protections intended by the
addition to the terminal receipts and
act.
periodic statements required by the
Questions have been raised about the
impact of Article 4A of the Uniform
regulation. The phrase “in a form the

consumer may keep” would replace the
wording “the financial institution shall
make available to the consumer a
written receipt of the
transfer(s) * *
currently contained
in § 205.9(a). The proposed change is
consistent with language in Regulation
Z (12 CFR 226.17(a)) and Regulation DD
(12 CFR 230.3(a)), for example. The
Board does not consider this to be a
substantive change, as the proposed
language is drawn from the current
commentary.
The paragraph also incorporates
language currently in § 205.9(e) that
permits an institution to use commonly
accepted or readily understandable
abbreviations in complying with the
documentation requirements of the
regulation.
Section 205.5—Issuance of Access
Devices
The proposal contains extensive
editorial changes to this section,
including the addition of headings to
help-distinguish the rules for solicited
and unsolicited issuance of access
devices.
The proposal deletes the obsolete
language in current § 205.5(a)(3), a
paragraph that grandfathered renewals
of pre-1979 access devices from the
requirements of the section. In addition,
the Board proposes to move the
provisions relating to the Truth in
Lending Act (TILA) contained in current
§ 205.5(c) to proposed § 205.12 to
simplify the regulation by placing all
references to TILA in the same section.
(See the discussion of § 205.12 below.)
Footnote lb, which provides guidance
on issuance of an access device for a
joint account, has been deleted from the
regulation and moved to the
commentary.
Section 205.6—Liability o f Consumer for
Unauthorized Transfers
Section 205.6 specifies the rules
governing consumer liability for
unauthorized use. The proposal
significantly revises the section in an
effort to simplify the text and make it
easier to understand.
The Board proposes moving
explanatory or illustrative material to
the commentary. This includes the
parenthetical in current § 205.6(a)(2),
which provides examples of how a
financial institution may identify the
consumer to whom an access device is
issued; § 205.6(b)(3), which explains the
relationship between the various tiers of
liability; and examples of extenuating
circumstances that would permit
delayed notification by consumers in
current § 205.6(b)(4). The provisions in
current § 205.6(d) concerning the

Federal Register / Vol. 59, No. 44 / Monday, March 7, 1994 / Proposed Rules
relation to the TILA now appear in
proposed § 205.12.
Paragraph (a)—Conditions for Liability
The current regulation appears to
condition consumer liability solely on
the issuance of an accepted access
device (§ 205.6(a)). The commentary, on
the other hand, states that if the
consumer fails to report an
unauthorized EFT within 60 days of
transmittal of the periodic statement
reflecting the transfer, the consumer
could be subject to liability for
subsequent transfers (Q6-1). The Board
interprets section 909 of the EFTA as
precluding consumer liability for
unauthorized transfers not involving an
access device until 60 days after
transmittal of the periodic statement
reflecting the transfer. At that time, the
consumer could be subject to unlimited
liability for those transfers occurring
after the 60 days.
The proposal incorporates the current
commentary position that a consumer
could be held liable for unauthorized
EFTs that did not involve an access
device. The Board believes a consumer
cannot, however, be held liable for
unauthorized transfers occurring before
the 60-day period expires.
The proposed section slightly alters
the current rule by requiring that a
financial institution provide all of the
disclosures required by § 205.7 in order
to impose liability on the consumer.
Currently § 205.6(a)(3) requires that only
three of the disclosures from § 205.7 be
provided before a consumer can be held
liable for unauthorized transfers. The
Board believes this proposed change
would not impose a significant
additional burden as institutions must
initially provide all of the disclosures to
comply with § 205.7(b). The Board
solicits comment on whether this
change increases the risk of liability for
institutions.

the section easier to understand. Format
requirements have been moved to
proposed § 205.4(a).
Tne provision in current § 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 the commentary.
The Board proposes to move the error
resolution notice from current
§ 205.7(a)(10) to appendix A (Model
Form A-3), to streamline the regulation
and place all model disclosures
together.
The proposal deletes as obsolete
current § 205.7(b) regarding disclosures
for accounts that predate the statute.

10687

coincide with the timing requirements
of Regulation DD in order to facilitate
compliance with the requirements of
both regulations. The Board solicits
comment on whether it is preferable to
retain the flexibility offered by the two
different timing requirements.
Paragraph (a)(2)—Prior Notice
Exception

Currently, 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
Paragraph (a)(3)—Business Days
would not raise security concerns. In
As described in the supplemental
certain circumstances, periodic
information to paragraph (d), the Board
statements are sent on a quarterly basis,
proposes to change the definition of
and thus the consumer might not
business day to mean a calendar day
receive notification for up to ninety
other than a Saturday, Sunday, or any
days after the change. The Board
legal public holiday specified in 5
proposes to substitute a more specific
U.S.C. 6103(a). Accordingly, initial
timing rule for this subsequent notice.
disclosures would have to include the
Under the proposal, if the change is
revised definition of business day to
made permanent, a financial institution
assist consumers in understanding the
must provide written notice within 45
timing provisions of the liability and
days of the change unless disclosure
error resolution rules Under the
raised security concerns. The Board
regulation.
requests comment on the proposed
Section 205.8—Change in Terms Notice; timing requirement.
Error Resolution Notice
Paragraph (b)—Error Resolution Notice
The proposal makes two substantive
The Board proposes to mov.e the
changes in this section. In addition, the
Board proposes to restructure the
alternate error resolution notice, which
requirements of § 205.8 and add
an institution may give with each
periodic statement in place of the longer
subheadings to make it easier to
annual notice, from current § 205.8(b) to
understand.
appendix A (Model Form A-3). This
Paragraph (a)(1)—Prior Notice Required
will streamline the regulation and place
Section 905(b) of the EFTA requires a all model disclosures in one location.
financial institution to notify a
consumer in writing at least twenty-one Section 205.9—Receipts at Electronic
Terminals; Periodic Statements
days before the effective date of certain
adverse changes in terms or conditions
The proposed section contains a
contained in the initial disclosures. The number of editorial revisions and two
Paragraph (b)—Limitations on Amount
Truth in Savings Act (TISA) (12 U.S.C.
substantive changes. New paragraphs
of Liability
4301) also requires institutions to
and headings have been added to better
provide a change in terms notice for
Proposed paragraph (b) incorporates
organize the text concerning the timing
deposit accounts. Section 266(c) of TISA and contents of disclosures. As noted
the substance of current paragraphs (b)
requires a notice 30 days before the
(limitations on amount of liability) and
earlier, disclosure format requirements
effective date of any adverse change in
(c) (notice to financial institution). In
have been moved to § 205.4. Current
terms or conditions. In the proposed
addition, the proposal spells out more
paragraph (e), concerning use of
official staff interpretation of Regulation abbreviations, was also moved to
clearly each of the three tiers of a
DD, the Board stated that if a financial
consumer’s liability ($50, $500, or
§205.4.
unlimited). Subheadings provide further institution changes a term that also
The Board proposes to move footnote
triggers a change in terms notice under
clarification.
2, which permits a financial institution
Regulation E, the institution may use
Section 205.7—Initial Disclosures
to make receipts available through a
the timing rules of Regulation E for
third party, to the commentary.
The proposal includes structural and
sending the notice to affected
editorial changes to this section. To
The proposal deletes two obsolete
consumers (see 59 FR 5543, February 7,
provide greater clarity, text has been
paragraphs, (f) and (g), which dealt with
1994). The Board proposes to use its
receipts from terminals purchased prior
organized into separate paragraphs on
exception authority under the EFTA to
timing and content of disclosures, and
extend the timing of the change-in-terms to 1980 and delayed effective dates for
subheadings havebeen added to make
certain periodic statements.
notice in Regulation E to 30 days to

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Federal Register / Vol. 59, No. 44 / Monday, March 7, 1994 / Proposed Rules

Paragraph (a)(1)—Amount
The current regulation allows
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 proposal makes two
changes. First, it would permit 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. Second, it would permit
institutions to display the fee on or at
the terminal—meaning either on a sign
or on the ATM screen itself. The Board
solicits comment on whether consumers
would need added protections if the fee
is displayed on the screen, for example,
allowing the consumer to cancel the
transaction after the fee is disclosed.

Paragraph (a)(5)—Terminal Location

This paragraph incorporates the
substance of current § 205.9(b)(l)(iv).
The detail contained in the current
regulation which specifies appropriate
location descriptions has been moved to
the commentary.
The proposal deletes footnotes 5, 6,
and 8 from the regulation. Footnote 5
allows institutions to omit the name of
the state on terminal receipts for
transfers occurring at terminals within
50 miles of the institution’s main office.
Footnotes 6 and 8 refer back to the text
of footnote 5. The proposal incorporates
this exception into the regulatory text.
Footnote 5 also allows institutions to
omit the name of the city and state if all
of the terminals are located in the same
city, and to omit the name of the state
if all of the terminals are located in the
same state. These exceptions have been
deleted as obsolete, since most
Paragraph (a)(3)—Type
institutions that offer ATM access
This paragraph corresponds to current belong to networks operating on an
paragraph (a)(3) regarding disclosure of interstate basis. Accordingly, few if any
financial institutions are able to take
types of transfer and accounts. The
advantage of the exception provided by
examples included in the current
the footnote. The Board solicits
paragraph have been moved to the
comment on whether these latter
proposed commentary.
exceptions are still used by institutions.
Currently the regulation requires that
The rules regarding terminal
a financial institution uniquely identify
identification on the receipt have been
each account on the terminal receipt if
more than one account of the same type slightly modified. Section
205.9(b)(l)(iv)(C) allows financial
may be accessed by a single access
institutions to identify the terminal
device. Footnote 3 provided an
location by using the name of the entity
exception for instances in which the
at whose place of business the terminal
terminal is incapable of uniquely
is located, including identifying the
identifying each account, as well as for
name of the financial institution.
transactions at terminals purchased or
ordered by the financial institution prior Footnote 7 requires, however, that if the
institution owns or operates terminals at
to 1980. The portion of the footnote
more than one location, the terminal
which permits financial institutions to
location must be identified on the
exclude identification of the type of
periodic statement. Therefore, if an
account if the access device may access
only one account at a terminal has been institution owns only one terminal (and
does not belong to a network) it could
incorporated into the text of the
proposed regulation at § 205.9(a)(3). The identify the terminal using its own
name. The proposal provides that the
remainder of the footnote has been
receipt and the periodic statement may
deleted as obsolete.
provide the terminal location by giving
Paragraph (a)(4)—Identification
the name of the institution if it is other
Currently, the regulation requires that than the account-holding institution. In
the previous example, the institution
financial institutions disclose on
would have to provide either a street
terminal receipts a number or code that
address or a generally accepted name for
uniquely identifies the consumer
the location. The Board believes this
initiating the transfer, the consumer’s
change makes the provision available to
account(s), or the access device used to
more institutions, since very few
initiate the transfer (§ 205.9(a)(4)). The
institutions own and operate only one
Board proposes to delete the reference
terminal and do not belong to a
to a number or code that uniquely
network. The Board solicits comment on
identifies the “consumer initiating the
whether this imposes a burden on small
transfer” as superfluous. The Board
institutions, and also on whether the
believes that the remaining
change adversely reduces consumer
identification requirements sufficiently
identify the consumer.
information.

Paragraph (a)(6)—Third Party Transfer
Proposed paragraph (a)(6)
incorporates the substance of current
paragraph (a)(6). The excluded
language, describing the use of codes or
circumstances when the name of the
payee cannot be duplicated by the
terminal, has been incorporated into the
proposed commentary.
Paragraph (b)—Periodic Statements
Paragraph (b)(1)—Transaction
information
The regulation requires financial
institutions to disclose on the periodic
statement either the location of the
terminal as it appeared on the receipt or,
if a code or terminal number was used
to identify the location, both the code
and a description of the location as
specified in the regulation
(§ 205.9(b)(l)(iv)). The proposed
regulation simplifies the rule by not
requiring a restatement of the code in
addition to the location description (see
the discussion in paragraph (a)(5)
above). Proposed paragraph (b)(l)(iv)
also incorporates the substance of
footnote 4a, which provides 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.
Footnote 4 currently permits financial
institutions to provide certain
information on documents that
accompany the periodic statement; and
it permits the use of codes, if explained
on either the statement or the
accompanying documents. The footnote
has been deleted and the substance
moved to the proposed commentary.
Footnote 9 allows 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 footnote has been deleted
and the substance moved to the
proposed commentary
Paragraph (b)(3)—Fees
Currently, § 205.9(b)(3) makes clear
that a periodic statement required by
Regulation E need not disclose any
finance charge imposed under 12 CFR
226.7(f). The proposal eliminates the
reference from the regulation, and
moves the substance to the commentary.
Regulation DD requires institutions
that provide periodic statements to
itemize by type and amount certain fees
imposed during the statement period
(§ 230.6(a)(3)). Currently, § 205.9(b)(3) of
Regulation E requires the disclosure of
any fee that was assessed against the

Federal Register / Vol. 59, No. 44 / Monday, March 7, 1994 / Proposed Rules
account during the period for EFTs. The Paragraph (b)—Written Authorization
commentary to Regulation E (Q9-31)
for Preauthorized Transfers From
allows fees to be shown as a total dollar Consumer’s Account
figure or to be itemized In part or in full,
The requirement that preauthorized
at the institution’s option. Under
EFTs from a consumer’s account be
Regulation DD, the Board has provided
authorized by the consumer only in
that institutions may follow the more
writing has been revised. The
flexible rules in Regulation E for fees
requirement for the consumer’s
associated with EFTs even though
authorization to be a writing has been
Regulation DD otherwise requires a
expanded to include authorizations
more specific disclosure. The Board
solicits comment on whether regulatory which are “similarly authenticated” by
burden would be eased if the disclosure the consumer. This proposed expansion
addresses developments in electronic
requirement in Regulation E mirrored
services, such as home banking. The
the requirement in Regulation DD (see
broader interpretation of a “writing”
12 CFR 230.6(a)(3)).
would include, for example, electronic
Paragraph (c)—Exceptions to the
authorization by the consumer recorded
Periodic Statement Requirements for
on a computer memory unit. The Board
Certain Accounts
believes this broader interpretation is
consistent with the requirement in
The proposal incorporates current
section 907 of the EFTA that the
paragraphs (c), (d), (h), and footnote 9a
in revised § 205.9(c), pertaining to those authorization be in writing. The Board
solicits comment on whether additional
circumstances in which a periodic
safeguards Eire necessary to protect
statement is not required (for example,
consumers in this situation. In addition,
for a passbook account that can be
the Board solicits comment on other
accessed electronically only by
examples that might constitute
preauthorized transfers to the account).
‘‘similarly authenticated” for purposes
No substantive change is intended.
of this section. The Board notes that the
Paragraph (d)—Documentation for
revised requirement for a signed writing
Foreign-Initiated Transfers
makes clear that only the consumer
Proposed paragraph (d) incorporates
could produce the written authorization
the essence of current paragraph (i)
and not, for example, a third-party
without substantive change.
merchant on behalf of the consumer.
Section 205.10—Preauthorized
Paragraph (e)—Compulsory Use
Transfers
Section 913 of the statute places
The Board has reformatted this
certain restrictions on compulsory use
section and has added subheadings. The of EFTs as a condition of credit,
proposed section contains a substantive employment, or receipt of government
change from the current regulation and
benefits. The current regulation
a new paragraph on compulsory use.
mentions the prohibition against
Paragraph (a)—Preauthorized Transfers
compulsory use in footnote la, which
to Consumer’s Account
references a financial institution’s
continuing duty to comply with section
Section 205.10 sets forth general
913. The proposed paragraph is a
requirements for preauthorized
counterpart to the statutory provision
transfers. The regulation currently
and would clarify that the provision
requires that when a consumer’s
applies to other persons (such as
account will be credited by a
employers) and not just to financial
preauthorized transfer from the same
institutions.
payor at least once every 60 days, the
institution must credit the funds to the
Section 205.11—Procedures for
account as of the day the funds are
Resolving Errors
received; this requirement would be
The Board proposes to reformat this
deleted from the regulation as obsolete.
section and add subheadings to
The Board believes that mandating
facilitate compliance. The editorial
when funds must be credited to an
revisions, with one exception, are not
account is no longer necessary since
intended to make substantive changes.
other regulations address both when
fimds must be made available to the
Provisions contained in three
consumer and when interest must be
footnotes have been moved to the
paid on the deposit (see Regulation CC,
proposed commentary: Footnote 10,
12 CFR part 229; Treasury regulations,
which permits an institution to
31 CFR part 210; and ACH association
prescribe procedures for giving an error
rules). The Board solicits comment on
notice; footnote 11, which defines an
whether there is a need to maintain the
agreement for purposes of § 205.14; and
requirement in the regulation.
footnote 12, which allows institutions to

10689

use a periodic statement to inform
consumers that no error has occurred.
The provisions in current paragraph
(i) relating to the TILA have been moved
to proposed §,205.12.
Paragraph (c)—Time Limits and Extent
of Investigation
Proposed paragraph (c) combines
current paragraphs (c) and (d)(2) of
§ 205.11 concerning investigation of
errors. The regulation currently 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 45calendar-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 (see the
discussion in paragraph (e) below).
To facilitate compliance, the Board
proposes to use 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.
Paragraph (d)—Procedures if Financial
Institution Determines No Error or
Different Error Occurred
As discussed in the preceding
paragraph, the Board proposes to allow
institutions to provide notice within
three business days of concluding an
investigation, regardless of which time
period is being followed.
Section 205.12—Relation to Other Laws
The proposed section contains the
various references to the TILA and
Regulation Z currently 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.
Paragraph (a)—Relation to Truth in
Lending
The Board proposes to consolidate all
references from §§ 205.5, 205.6, and
205.11 to compliance with both the
TILA and the EFTA in a single
paragraph. The Board believes

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Federal Register / Vol. 59, No. 44 / Monday, March 7, 1994 / Proposed Rules

consolidating these references in one
section will facilitate compliance.

contained in a new § 205.15, in this
proposal.

Reserve System, Washington, DC 20551,
or by telephone at (202) 452-3245.

Paragraph fb)—Preemption of
Inconsistent State Laws

Appendix A—Model Disclosure
Clauses and Forms

Current § 205.12(a) and (b) are
incorporated in proposed paragraph (b),
with numerous editorial revisions.

Most of the model disclosure clauses
contained in appendix A remain
unchanged. As noted earlier, the error
resolution notices currently contained
in §§ 205.7 and 205.8 have been moved
from the regulation into appendix A to
streamline the regulation (see Model
Form A-3).

List of Subjects in 12 CFR Part 205
Banks, banking, Consumer protection,
Electronic fund transfers, Reporting and
recordkeeping requirements.

Paragraph (c)—State Exemptions
Proposed paragraph (c) contains the
rules the Board applies in granting a
state exemption.
Section 205.13—Administrative
Enforcement; Record Retention
Current § 205.13 contains information
about administrative enforcement,
issuance of staff interpretations, and
record retention. With the exception of
the record retention requirements, the
proposal moves much of this
information to the appendices.

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 proposal includes a new
appendix to replace current § 205.13(b)
Paragraph (b)—Record Retention
pertaining to requests for and issuance
Certain provisions of the act and
of staff interpretations of Regulation E.
regulation apply to persons other than
Much of the information contained in
financial institutions (for example, the
the current regulation, describing
compulsory use provisions of section
issuance of staff interpretations, has
913, which apply to all employers). The been deleted. The Board will continue
proposal differs from the current rule by to rely on the publication of
limiting the record retention
interpretations in the official staff
requirements to financial institutions,
commentary as the primary means of
rather than covering “any person subject interpreting the regulation. Specifically,
to the act and regulation.” The Board
and in keeping with the practice that
solicits comment on whether this
has been in place for years, the proposal
proposed change will produce an
deletes any reference to unofficial staff
adverse impact on enforcement
interpretations that are in writing,
activities.
limiting written interpretations to those
that appear in the staff commentary, as
Section 205.14—Electronic Fund
revised. The Board believes this to be
Transfer Service Provider Not Holding
the most efficient and useful way to
Consumer’s Account
facilitate compliance.
The Board proposes substantial
(3) Form of Comment Letters
editorial revisions to this section to
simplify the text. Text has been
Comment letters should refer to
reorganized into appropriate categories
Docket No. R-0830. The Board requests
and subheadings added for greater
that, when possible, comments be
clarity. Footnote 13 regarding delayed
prepared using a standard typeface with
effective dates has been deleted as
a type size of 10 or 12 characters per
obsolete. The Board solicits comment on inch. This will enable the Board to
other ways the section could be
convert the text into machine-readable
simplified to facilitate compliance with
form through electronic scanning, and
the regulation.
will facilitate automated retrieval of
comments for review. Comments may
Section 205.15—Electronic Fund
also be submitted on computer
Transfer o f Government Benefits
diskettes, using either the 3.5" or 5.25"
The Board has issued a final rule in
size, in any DOS-compatible format.
regard to the coverage by the EFTA and
Comments on computer diskettes must
Regulation E of government benefits that be accompanied by a hard copy version.
federal, state, and local governments
(4) Economic Impact Statement
disburse to recipients by means of
The Board’s Division of Research and
electronic benefit transfer (EBT)
Statistics has prepared an economic
programs. (See Docket No. R-0829
impact statement on the proposed
elsewhere in today’s Federal Register.)
regulation. A copy of the analysis may
Having just issued that final rule, the
be obtained from Publications Services,
Board is not incorporating the
Board of Governors of the Federal
provisions governing EBT programs,

Text of Proposed Revisions
For the reasons set forth in the
preamble, the Board proposes to amend
12 CFR part 205 as follows:
PART 205—ELECTRONIC FUND
TRANSFERS (REGULATION E)

1. The authority citation for part 205
would be revised to read as follows:
Authority: 15 U.S.C. 1693.

2. Sections 205.1 through 205.14 are
revised to read as follows:
§ 205.1

Authority and purpose.

(a) Authority. This part 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 regulation 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

Federal Register / Vol. 59, No. 44 / Monday, March 7, 1994 / Proposed Rules
consumer asset account (other than an
occasional or incidental credit balance
in a credit plan) hekl directly or
indirectly by a financial institution and
established primarily for personal,
family, or household purposes.
(2) The term does not include an
account be Id 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 A d, IS U.S.C 1693 et
seq.I.
(d) Business day ateans any day other
than a Saturday, a Sunday, or any of the
legal public holidays specified in S
U.S.C 6103(a).
(e) Consumer means a natural person.
(f) 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.
(g) 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.
(h) Person means a natural person or
an organization, including a
corporation., government agency, estate,
trust, partnership, proprietorship,
cooperative, or association.
PreauthorizBd electronic fund
transfer means an electronic fund
transfer authorised in advance to recur
at substantially regular intervals.
(f) State means any state, territory , or
possession of the United States, the
District of Columbia, the
CorrrmoD'weahh of Puerto Rico, or any
political subdivision of the above.
(k) Unauthorized electronic fu n d
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 arrting in
concert with the consumer; or
{3} By the financial institution c r its
employees.

10691

§205.3 Coverage.
consumer and a financial institution
which provides that the instituting) will
(a) General. This part applies to any
initiate individual transfers without a
electronic fund transfer that authorizes
specific request from the consumer
a finnnraBl institution to debit or credit
(i) Between a consumer’s accounts
a consumer’s account. Generally, the
part applies to financial institutions. For within the financial institution;
(ii) From a consumer's account to an
purposes of §§205.10(b), (d), (e) and
account of a member o f the consumer's
205.13 of this part, the part applies to
family held in the same financial
any person.
institution; or
(b) Electronic fund transfer. The term
(iii) Between a consumer's account
electronic fund transfer means any
and an account of the financial
transfer of funds that is initiated
institution, except that these transfers
through an electronic terminal,
remain subject to § 205.10(e) of this part
telephone, computer, or magnetic tape
regarding compulsory use and sections
for the purpose of ordering, instructing,
915 and 916 of the act regarding civil
or authorizing a financial institution to
and criminal liability.
debit or credit an account The term
(6) Telephone-initiated transfers. Any
includes, but is not limited to:
transfer of funds that:
(1) Pointof-sale transfers;
(i) Is initiated by a telephone
(2) Automated teller machine
conversation between a consumer and
transfers;
an officer or employee of a financial
(3) Direct deposits or withdrawals of
institution; and
funds;
(ii) Does not take place under a
{4) Transfers initiated by telephone;
telephone bill-peyment plan or other
and
(5) Transfers resulting from debit card written agreement in which periodic or
recurring transfers are contemplated.
transactions, whether or not initiated
(7) Small institutions. Any
through an electronic terminal.
preauthorized transfer to or from an
(c) Exclusions from coverage. The
account if the assets of the accountterm electronic fund transfer does not
include:
holding financial institution are 3100
(1) Checks. Any transfer of funds
million or less on the preceding
originated by check, draft, or similar
December 31. If asserts of the accountpaper instrument; or any payment made holding institution subsequently exceed
by check, draft, or similar paper
$100 million, the institution's
instrument at an electronic terminal.
exemption for preauthoriced transfers
t2) Check guarantee or authorization
terminates one year from die end of the
services. Any transfer of funds that
calendar year in which the assets exceed
guarantees payment or authorizes
$100 million. Preauthorined transfers
acceptance of a check, draft, or similar
exempt under this paragraph remain
paper instrument which does not
subject to § 205.10(e) of this part
directly result in a debit or credit to a
regarding compulsory use and sections
consumer's account
915 and 916 of the act regarding cavil
(3) Wire transfers. Any transfer of
and criminal liability.
funds through Fedwire or through a
similar wire transfer system that is used § 205.4 General disclosure requirements;
primarily for transfers between financial Jointly offered services.
(a) Form o f disclosures. Disclosures
institutions or between businesses.
required under this part shall be clear
(4) Securities and commodities
ami readily understandable, in writing,
transfers. Any transfer of funds the
and in a form the consumer may keep
primary purpose of which is the
A financial institution may use
purchase or sale of a security or
commonly accepted o r readily
commodity, if the security or
understandable abbreviations in
commodity is:
complying with the disclosure
(i) Regulated by the Securities and
requirements of die p a rt
Exchange Commission or the
(b) Additional information;
Commodity Futures Trading
disclosures required by other laws.
Commission-,
Information or disclosures required by
{ii) Purchased or sold through a
broker-dealer regulated by the Securities other laws (such as the Truth in Lending
and Exchange Commission or through a Act or the Truth In Savings Act) may be
futures commission merchant regulated combined with the disclosures required
by this part.
by the Commodity Futures Trading
(c) Multiple accounts and account
Commission; or
holders—(1) Multiple accounts. If a
(iii) Held in book-entry form by a
Federal Reserve Bank or federal agency. consumer holds more than one account
at a financial institution, the institution
(5) Automatic transfers b y acoovntmay combine the required disclosures
holding institution. Any transfer of
into a single statement.
funds under an agreement between a

10692

Federal Register / Vol. 59, No. 44 / Monday, March 7, 1994 / Proposed Rules

(2) Multiple account holders. For joint to identify the consumer to whom it was
issued.
accounts held by two or more
consumers, the financial institution
(b) Limitations on amount o f liability.
The extent of a consumer’s liability for
need provide only one set of the
required disclosures and it may provide an unauthorized electronic fund transfer
them to any of the account holders.
or a series of related unauthorized
(d) Services offered jointly. Financial transfers shall be determined as follows:
institutions that provide electronic fund
(1) Timely notice given. If the
transfer services jointly may contract
consumer notifies the financial
among themselves to comply with the
institution within two business days
requirements that this regulation
after learning of the loss or theft of the
imposes on any or all of them. An
access device, the consumer’s liability
institution that provides electronic fund shall not exceed the lesser of $50 or the
transfer services under an agreement
amount of unauthorized transfers that
with other institutions need make only
occur before notice to the financial
those disclosures required by §§ 205.7
institution.
and 205.8 of this part that are within the
(2) Timely notice not given. If the
purview of its relationship with the
consumer fails to notify the financial
consumer for whom it holds an account. institution within two business days
after learning of the loss or theft of the
§ 205.5 Issuance of access devices.
access device, the consumer’s liability
(a) Solicited issuance. A financial
shall not exceed the lesser of $500 or the
institution may issue an access device to sum of:
a consumer only:
(i) $50 or the amount of unauthorized
(1) In response to an oral or written
transfers that occur within the two
request for the device; or
business days, whichever is less; and
(2) As a renewal of, or in substitution
(ii) The amount of unauthorized
for, an accepted access device whether
transfers that occur after the close of two
issued by the institution or a successor.
business days and before notice to the
(b) Unsolicited issuance. A financial
institution and that the institution
institution may distribute an access
establishes would not have occurred
device to a consumer on an unsolicited
had the consumer notified the
basis if the access device is:
institution within that time.
(1) Not validated, which means the
(3) Periodic statement; tim ely notice
institution has not yet performed all the not given. If the consumer fails to report
procedures that would enable a
8n unauthorized electronic fund transfer
consumer to initiate an electronic fund
that appears on a periodic statement
transfer using the access device;
within 60 days of the financial
(2) Accompanied by a clear
explanation that the access device is not institution's transmittal of the
statement, the consumer’s liability shall
validated and how the consumer may
dispose of it if validation is not desued; not exceed the amount of the
unauthorized transfers that occur after
(3) Accompanied by a complete
the close of the 60 days and before
disclosure, in accordance with § 205.7
of this part, of the consumer’s rights and notice to the institution and that the
institution establishes would not have
liabilities that will apply if the access
occurred had the consumer notified the
device is validated; and
institution within that time. If an access
(4) Validated only in response to the
device is involved, the consumer’s
consumer’s oral or written request for
liability may also extend to the amounts
validation, after the institution verifies
the consumer's identity by a reasonable set forth in paragraphs (b)(1) or (b)(2) of
this section, as applicable.
means (such as by photograph,
(4) Extension o f time limits. If the
fingerprint, personal visit, or signature
consumer’s delay in notifying the
comparison).
financial institution was due to
§ 205.6 Liability of consumer for
extenuating circumstances, the
unauthorized transfers.
institution shall extend the times
specified above to a reasonable period.
(a) Conditions fo r liability. A
(5) Notice to financial institution—(i)
consumer may be held liable, w ithin the
limitations described in paragraph (b) of Notice to a financial institution is given
when a consumer takes steps reasonably
this section, for an unauthorized
necessary to provide the institution with
electronic fund transfer involving the
consumer’s account only if the financial the pertinent information, whether or
institution has provided the disclosures not an employee or agent of the
required by § 205.7(b) of this part. If the institution actually receives the
information.
unauthorized transfer involved an
access device, it must be an accepted
(ii) The consumer may notify the
institution in person, by telephone, or in
access device and the financial
institution must have provided a means writing.

(iii) Written notice is considered
given at the time the consumer mails the
notice or delivers it for transmission by
any other usual means to the institution.
Notice may be considered
constructively given when the
institution becomes aware of
circumstances leading to the reasonable
belief that an unauthorized transfer
involving 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 the
agreement.
§ 205.7 Initial disclosures.

(a) Timing o f 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 o f disclosures. The
following disclosures shall be provided,
as applicable:
(1) Liability o f consumer. A summary
of the consumer’s liability, under
§ 205.6 of this part 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 o f transfers; limitations. The
type of electronic fund transfers that the
consumer may make and any limitations
on the frequency and dollar amount of
transfers. The 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 receive
documentation of electronic fund
transfers, as provided in §§ 205.9,
205.10(a), and 205.10(d) of this part.
(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) of this part.
(8) Liability o f institution. A summary
of the financial institution’s liability to

Federal Register / Vol. 59, No. 44 / Monday, March 7, 1994 / Proposed Rules
the consumer under section 910 of the
act for failure to m ate or to stop certain
transfers.
(9) Confidentiality. The circumstances
under which, is 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 the notice
concerning error resolution contained in
appendix A of this part.

receipt and displayed on or at the
terminal.
(2) Date. The date the consumer
initiates the transfer.
(3) Type. T he type of transfer and the
type of the consumer’s account or
accounts to o r from which funds are
transferred. The type of account may be
omitted if the access device used may
access only one account at that terminal.
(4) Identification. A number or code
that uniquely identifies the consumer's
account or the access device used to
§ 205.8 Change in terms notice; error
initiate the transfer.
resolution notice.
{5) Terminal location. The location or
(a) Change in terms notice—{1) Prior
an identification of the terminal where
notice required. A financial institution
the transfer is initiated (such as a code
shall mail or deliver a written notice to
or terminal number). The location shall
the consumer at least 30 days before the
include the city and state {the state may
effective date of any change in a term or be omitted for terminals that are within
condition required to be disclosed
50 miles of the account-holding
under §205.7(b) of this part if the
institution's main office) or foreign
change would result in:
country and one of the following:
(1) Increased fees;
(1) The street address;
(11) Increased liability for the
(ii) A generally accepted name for the
consumer;
specific location; or
(iii) Fewer types of available
(iii) The name of the owner or
electronic fund transfers; or
operator of the terminal if other than the
(iv) Stricter limitations on the
frequency or dollar amount of transfers. account-holding institution.
(6) Third party transfer. The name of
(2) Prior notice exception. A financial
any third party to or from whom funds
institution need not give prior notice if
are transferred
an immediate change in terms or
(b) Periodic statements. For accounts
conditions is necessary to maintain or
restore the security of an electronic fund to or from which electronic fund
transfers can be made, a financial
transfer system or an account. If such a
institution shall send a periodic
change is made permanent and
statement for each monthly cycle in
disclosure would not jeopardize the
which an electronic fund transfer has
security of the system or account, the
occurred; and shall send a periodic
financial institution shall notify the
statement at least quarterly if no transfer
consumer in writing within 45 days of
has occurred. The Statement shall set
the change.
forth the following information, as
(b) Error resolution notice. For
applicable:
accounts to or from which electronic
(1} Transaction information. For each
fund transfers can be made, a financial
electronic fund transfer occurring
institution shall mail or deliver to the
during the cycle:
consumer, at least once each calendar
(ij The amount of the transfer;
year, the error resolution notice set forth
(ii) The date the transfer was credited
in appendix A of this part.
or debited to the consumer’s account;
Alternatively, en institution may
(iii) The type of transfer and type of
include en abbreviated notice
account o r accounts to br from which
substantially similar to the error
funds were transferred;
resolution notice set forth in appendix
(iv) For a transfer initiated by the
A on or w ith each periodic statement
consumer at an electronic terminal
required by § 205.9(b) of this part.
(except fo ra deposit of cash or a check,
§ 205.9 Receipts 8t electronic terminals;
draft, or similar paper instrument), the
periodic statements.
terminal location in a form set forth in
(nj Receipts at electronic terminals. A paragraph (a)(5) of this section; and
financial institution shall make « receipt
(v) The name of any third party to or
available to a consumer at the time the
from whom funds were transferred.
consumer initiates an electronic fund
(2) Account immber. The number of
transfer et an electronic terminal. The
the account to which the statement
receipt shall set forth the following
pertains.
information, as applicable:
(3) Fees. The amount of any fees
{1} Amount. The amount of the
assessed against the account during the
transfer. A transaction fee may be
statement period for electronic fund
included in this amount, provided the
transfers, fo r the right to make transfers,
amount of the fee is disclosed on the
or for account maintenance.

10693

(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 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)(l){iii3 of this part.
{c) Exceptions to the periodic
statement requirements for certain
accounts—(1) Preauthorized transfers to
accounts. A financial institution need
not send a monthly periodic statement
for accounts that may only be accessed
by preauthorized transfers to the
account if:
(1) Passbook accounts. The financial
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
institution sends the periodic statement
quarterly.
(2) Intra-institutional transfers. If an
electronic fund transfer is 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 statement requirement.
(3) Relationship between paragraphs
(c)(1) and (c)(2) o f this section. An
account that is accessed by
preauthorized transfers to the account
and by intra-institutional transfers
described in paragraph (c)(2), but by no
other type of electronic fund transfers,
qualifies for the exceptions provided by
paragraph (c)(1).
(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 regulation if:
(1) The transfer is not initiated within
a state; ami
(2) The financial institution treats an
inquiry for clarification or
documentation as a notice of error in
accordance with § 205.11 of this part.

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Federal Register / Vol. 59, No. 44 / Monday, March 7, 1994 / Proposed Rules

§ 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 institution shall provide notice
to the consumer by:
(1) Positive notice. Providing oral or
written notice of the transfer within two
business days after it occurs;
(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) Telephone. Providing a readily
available telephone line that the
consumer may call to determine
vhether 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 if
the payor gives the consumer positive
notice that the transfer has been
initiated.
(b) Written authorization for
preauthorized transfers from
consumer’s account. Preauthorized
electronic fund transfers from a
consumer’s account may be authorized
.only by a writing signed or similarly
authenticated by the consumer. The
person that obtains the authorization
shall provide a copy to the consumer.
(c) Consumer’s right to stop
payment—(1) Notice. A consumer may
stop payment of a preauthorized
electronic fund transfer from the
consumer’s account by notifying the
financial institution orally or in writing
at least three business days before the
scheduled date of the transfer.
(2) Written confirmation. The
financial institution may require the
consumer to give written confirmation
of a stop-payment order within 14 days
of an oral notification. An institution
that requires written confirmation shall
inform the consumer of the requirement
and provide the address where
confirmation must be sent when the
consumer gives the oral notification. An
oral stop-payment order ceases to be
binding after 14 days if the consumer
fails to provide the required written
confirmation.
(d) Notice o f 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 written notice of

shall comply with the requirements of
this section with respect to any oral or
written notice of error from the
consumer that:
(1) Is received by the institution no
later than 60 days after the institution
sends the periodic statement or provides
the passbook documentation 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)(l)(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 was requested under paragraph
§ 205.11 Procedures for resolving errors.
(a)(l)(vii) of this section, the notice is
(a) Definition o f error—(1) Types
timely if received by the financial
included. The term “error” means:
institution within 60 days of
(1) An unauthorized electronic fund
transmitting the requested information.
transfer;
(ii) An incorrect electronic fund
(c) Time limits and extent of
transfer to or from the consumer’s
investigation—(1) Ten-day period. A
account;
financial institution shall promptly
(iii) The omission of an electronic
investigate and determine whether an
fund transfer from a periodic statement; error occurred within 10 business days
(iv) A computational or bookkeeping
of receiving a notice of error. The
error made by the financial institution
institution shall report the results to the
relating to an electronic fund transfer;
consumer within three business days
(v) The consumer’s receipt of an
after completing its investigation. The
incorrect amount of money from an
institution shall correct the error within
electronic terminal;
one business day after determining that
(vi) An electronic fund transfer not
an error occurred.
identified in accordance with § 205.9 or
(2) Forty-five day period. If the
§ 205.10(a) of this part; or
financial institution is unable to
(vii) The consumer’s request for
complete its investigation within 10
documentation required by § 205.9 or
business days, the institution may take
§ 205.10(a) of this part or for additional
up to 45 days after receiving a notice of
information or clarification concerning
error, provided the institution:
an electronic fund transfer, including a
(i) Provisionally credits the
request the consumer makes to
consumer’s account in the amount of
determine whether an error exists under
the alleged error (including interest
paragraphs (a)(1) (i) through (vi) of this
where applicable) within 10 business
section.
(2) Exclusions. The term "error” does days after receiving the error notice. If
the financial institution has a reasonable
not include:
basis for believing that an unauthorized
(i) A routine inquiry about the
electronic fund transfer has occurred
consumer’s account balance;
and it has satisfied the requirements of
(ii) A request for information for {ax
§ 205.6(a) of this part, the institution
or other recordkeeping purposes; or
may withhold a maximum of $50 from
(iii) A request for duplicate copies of
the amount credited. An institution
documentation.
(b) Notice o f error from consumer—(1) need not provisionally credit the
Timing; contents. A financial institution consumer’s account if:

the amount and date of the transfer to
the consumer 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 the extension of credit to a
consumer on the consumer’s repayment
by preauthorized electronic fund
transfers, except for credit that is
extended under an overdraft credit plan
or that is 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.

Federal Register / Vol. 59, No. 44 / Monday, March 7, 1994 / Proposed Rules
(A) It 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
(credit by brokers and dealers, 12 CFR
part 2 2 0 );
(ii) Informs the consumer, within two
business days after the provisional
crediting, of the amount and date of
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 of
completing its investigation (including,
if applicable, notice that a provisional
credit has been made final).
(3) Extension o f time periods. The
applicable time periods in this
subsection shall be 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 of this
part, a financial institution’s review of
its own records regarding an alleged
error satisfies the requirements of this
section if:
(i) The alleged error concerns a
transfer to or from a third party; and
(ii) There is no agreement between the
institution and the third party for the
type of electronic fund transfer
involved.
(d) Procedures i f financial institution
determines no error or different error
occurred. In addition to the procedures
specified in paragraph (c) of this
section, the financial institution shall
follow the procedures set forth in this
paragraph if it determines that no error
occurred or that an error occurred in a
different manner or amount from that
described by the consumer:
(1) Written explanation. The
institution’s report of the results of the
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. The institution shall,
upon request, 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

10695

regulation shall be preempted and then
only to the extent of the inconsistency.
A state law is not inconsistent with the
act and this regulation if it is more
protective of consumers.
(2) Standards for determination. State
law is inconsistent with the
requirements of the act and the
regulation 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 exceed the limits imposed by the
federal law;
(iii) Allows longer time periods than
the federal law for the investigation and
correction of errors alleged by a
consumer, or fails to require the
crediting of the consumer’s account
during the investigation of errors as set
§ 205.12 Relation to other laws.
forth in § 205.11(c)(2)(i) of this part; or
(a) Relation to Truth in Lending. (1)
(iv) Requires initial disclosures,
The Electronic Fund Transfer Act and
periodic statements, or receipts that are
this part govern:
different in content from those required
(1) The addition to an accepted credit
by the federal law except to the extent
card, as defined under Regulation Z (12 that the disclosures relate to rights
CFR 226.12(a)(2), footnote 21), of the
granted to consumers by the state law
capability to initiate electronic fund
and not by the federal law.
transfers;
(c) State exemptions—(1) General
(ii) The issuance of an access device
rule. Any state may apply to the Board
that permits credit extensions only
for an exemption from the requirements
under a preexisting agreement between
of the federal law for any class of
a consumer and a financial institution to electronic fund transfers within the
extend credit when the consumer’s
state. The Board shall grant an
account is overdrawn or to maintain a
exemption if the Board determines that:
specified minimum balance in the
(1) Under state law that class of
consumer’s account; and
electronic fund transfers is subject to
(iii) A consumer’s liability for an
requirements substantially similar to
unauthorized electronic fund transfer
those imposed by the federal law; and
and the investigation of an alleged error
(ii) There is adequate provision for
that involves an extension of credit, if
state enforcement.
the extension of credit occurs under an
(2) Exception. To assure that the
agreement between the consumer and a federal and state courts will continue to
financial institution to extend credit
have concurrent jurisdiction, and to aid
when the consumer’s account is
in implementing the act:
overdrawn or to maintain a specified
(i) No exemption shall extend to the
minimum balance in the consumer’s
civil liability provisions of section 915
account.
of the act; and
(2) The Truth in Lending Act and
(ii) When an exemption has been
Regulation Z, which prohibit the
granted, the requirements of the
unsolicited issuance of credit cards,
applicable state law shall constitute the
govern:
requirements of the federal law, for the
(i) The addition of a credit feature to
purposes of section 915 of the act,
an accepted access device; and
except for state law requirements not
(ii) The issuance of a credit card that
imposed by the federal law.
is also an access device, except as
§ 205.13 Administrative enforcement;
provided in paragraph (a)(l)(ii) of this
record retention.
section.
(a) Enforcement by federal agencies.
(b) Preemption o f inconsistent state
laws—(1) Inconsistent requirements.
Compliance with this part is enforced
The Board shall determine, upon its
by the agencies listed in appendix B of
own motion or upon the request of any
this part.
(b) Record retention—(1) A financial
state, financial institution, or other
institution shall retain evidence of
interested party, whether the act and
compliance with the requirements
this regulation preempt state law
imposed by the act and this regulation
relating to electronic fund transfers.
for a period of not less than two years.
Only those state laws that are
Records may be stored by use of
inconsistent with the act and this

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 notice; and honor items as specified
in the notice. The institution need only
honor items that it would have paid if
the provisionally credited funds had not
been debited.
(e) Reassertion o f 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 that the
institution shall investigate an error.
asserted by the consumer following
receipt of information requested under
paragraph (a)(l)(vii) of this section.

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Federal Register / Vol. 59, No. 44 / Monday, March 7, 1994 / Proposed Rules

microfiche, microfilm, magnetic tape, or
any other method capable of accurately
retaining and reproducing information.
(2) A financial institution having
actual notice that it is the subject of an
investigation or an enforcement
proceeding by an agency charged with
monitoring compliance with the act and
this regulation, 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 action or proceeding until final
disposition of the matter, unless an
earlier time is allowed by court or
agency order.

(iv) Transmits to the account-holding
institution the information specified in
§ 205.9(b)(1) of this part in the format
prescribed by the automated
clearinghouse system used to clear the
fund transfers;
(v) Extends the time period set forth
in § 205.6(b) (1) and (2) of this part for
notice of loss or theft of a debit card,
from two business days to four business
days after the consumer learns of the
loss or theft; and
(vi) Extends the time periods set forth
in §§ 205.6(b)(3) and 205.11(b)(l)(i) of
this part for reporting unauthorized
transfers or errors, from 60 days to 90
days following the transmittal of a
§205.14 Electronic fund transfer service
periodic statement by the accountprovider not holding consumer’s account
holding institution.
(2) Error resolution—(i) Extension of
(a) Electronic fu n d transfer service
error notification period. The electronic
providers subject to regulation. An
electronic fund transfer service provider fund transfer service provider shall
extend by a reasonable time the period
that does not hold the consumer’s
specified in § 205.1 l(b)(l)(i) of this part
account qualifies as a financial
institution subject to this regulation if it: in which notice of an error must be
received if a delay resulted from the
(1) Issues an access device to a
initial attempt by the consumer to notify
consumer;
the account-holding institution.
(2) Provides electronic fund transfer
(ii) Disclosure o f provisional credit.
service to the consumer by allowing the
The service provider shall disclose to
access device to be used to access the
the consumer the date on which it
consumer’s account held by another
initiates a transfer to effect a provisional
financial institution; and
credit in accordance with
(3) Has no agreement with the
§ 205.11(c)(2)(ii) of this part.
account-holding institution regarding
(iii) Error occurred. If the service
service involving that access device.
provider determines an error occurred,
(b) Compliance by electronic fu nd
it shall transfer funds to or from the
transfer service provider. In addition to
consumer’s account, in the appropriate
the requirementsgenerally applicable
amount and within the applicable time
under this part, the service provider
period, in accordance with
shall comply with the following special §205.11(c)(2)(i) of this part.
rules:
(iv) No error occurred. If funds were
(1) Disclosures and documentation. provisionally credited and the service
The electronic fund transfer service
provider determines no error occurred,
provider shall provide the disclosures
it may reverse the credit. The service
and documentation required by
provider shall then notify the account§§ 205.7, 205.8, and 205.9 of this part
holding institution of the period during
that are within the purview ofits
which the account-holding institution
relationship with the consumer, but
must honor debits to the account in
need not furnish a periodic statement to accordance with § 205.11(d)(2)(ii) of this
the consumer under § 205.9(b) of this
part. If an overdraft results, the service
part if the service provider:
provider shall promptly reimburse the
(i) Issues a debit card (to be used by
account-holding institution in the
the consumer to initiate electronic fund amount of the overdraft.
transfers) bearing the service provider’s
(c) Compliance by account-holding
name and an address or telephone
institution. The account-holding
number for consumer inquiries or for
institution need not comply with the
consumers to give notice of error;
requirements of the act and this
(ii) Provides the consumer a notice
regulation with respect to electronic
concerning transactions made with the
fund transfers made by the electronic
debit card that is substantially similar to fund transfer service provider except as
the notice contained in appendix A of
follows;
this part;
(l)T he account-holding institution
(iii) Provides, on or with the receipts
shall provide a periodic statement
describing each electronic fund transfer
required by § 205.9(a) of this part, the
involving transactions initiated by the
address and telephone number to be
used for an inquiry, or to give notice of
consumer with the access device issued
an error, to report the loss or theft of the by the service provider. The accountdebit card;
holding institution has no liability for

failure to comply with this requirement
if the service provider did not provide
the necessary information; and
(2) The account-holding institution
shall provide, upon request, 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) of this part.
3. Appendices A and B are revised,
and Appendix C is added to part 205 to
read as follows:
Appendix A to Part 205—Model
Disclosure Clauses and Forms
A -l—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 Service-Providing
Institutions (§ 205.14(b)(l)(ii))
A -l—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
i t 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) Icode)
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 the $50 if
someone used your (cardllcode) 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 S500.
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

Federal Register / Vol. 59, No. 44 / Monday, March 7, 1994 / Proposed Rules
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 o f 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 include every day other than Saturday,
Sunday or one of the federal holidays.
(d) Transfer types and limitations
(§ 205.7(b)(4))—(1) Account access. You may
use your [card] [code] to:
(1) 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 o f 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 o f
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 bill-

payment service] [point-of-sale transfer
service] if the [average] [minimum] balance
in your [checking account] [savings account]
[accounts] falls below [insert dollar amount].
If it does, we will charge you (insert dollar
amount] each [transfer] [insert time period].
(f) Confidentiality (§ 205.7(b)(9)). We will
disclose information to third parties about
your account or the transfers you make:
(1) Where it is necessary for completing
transfers, or
(2) In order to verify the existence and
condition of your account for a third party,
such as a credit bureau or merchant, or
(3) In order to comply with government
agency or court orders, or
(4) 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 (B))—(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 o f 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

10697

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:
• If, through no fault of ours, you do not
have enough money in your account to make
the transfer.
• If the transfer would go over the credit
limit on your overdraft line.
• If the automated teller machine where
you are making the transfer does not have
enough cash.
• If the [terminal] [system] was not
working properly and you knew about the
breakdown when you started the transfer.
• If circumstances beyond our control
(such as fire or flood) prevent the transfer,
despite reasonable precautions that we have
taken.
• There may be other exceptions stated in
our agreement with you.
A-3—Model Forms for Error Resolution
Notice
1. 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 acccjunt 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.
2. 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

10698

Federal Register / Vol. 59, No. 44 / Monday, March 7, 1994 / Proposed Rules

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 Service-Providing
Institutions §205.14(bMl)(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
bfelow].
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].

Appendix B to Part 205—Federal
Enforcement Agencies
The following list indicates which Federal
agency enforces Regulation E 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.&C. 1813(b)) 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 offoreign banks
District office o f the Office of the
Comptroller of the Currency where the
institution is located.

State member banks, branches and agencies
o f foreign banks (other than Federal
branches, Federal agencies, and insured state
branches o f foreign banks), commercial
lending companies,owned or controlled by
foreign banks, and organizations operating
under section 25 or 25(a) o f the Federal
Reserve Act
Federal Reserve Bank serving the District
in which the institution is located.
Nonmember insured banks and insured state
branches o f 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 o f
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.
Federal Credit Unions
Division of Consumer Affairs, National
Credit Union Administration, 1775 Duke
Street, Alexandria, Virginia 22314-3428

Scope o f 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, February 24,1994.
William W. Wiles,
Secretary o f the Board.
[FR Doc. 94—
4680 Filed 3-2-94; 12:38 pm]
BILLING CODE 8210-01-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: Proposed Official Staff
Interpretation.
SUMMARY: The Board is publishing for

comment a proposal to revise the
official staff commentary to Regulation
E (Electronic Fund Transfers). This
proposal is part of the Board’s current
Air Carriers
review of Regulation E. The
Assistant General Counsel for Aviation
Enforcement and Proceedings, Department of commentary interprets the requirements
of Regulation E in order to facilitate
Transportation, 400 Seventh Street, SW.,
compliance by financial institutions that
Washington, DC 20590.
offer electronic fund transfer services to
Brokers and Dealers
consumers. The proposed revisions
Division of Market Regulation, Securities
change the question and answer format
and Exchange Commission, Washington, DC
to a narrative one in order to make the
20549.
commentary easier to use and to
Retailers, Consumer Finance Companies,
conform it with the format of the
Certain Other Financial Institutions, and all
Board’s other staff commentaries. It also
others not covered above
includes interpretative provisions
Federal Trade Commission, Electronic
previously contained in the regulation
Fund Transfers, Washington, DC 20580.
that were more explanatory in nature.
The proposal includes additional
Appendix C to Part 205—Issuance o f
interpretations on matters not
Staff Interpretations
previously addressed.
Official Staff Interpretations
OATES: Comments must be received on
Pursuant to section 915(d) of the act, the
or before May 31,1994.
Board has designated the director and other
ADDRESSES: Comments should refer to
officials of the Division of Consumer and
Docket No. R-0831 and be mailed to
Community Affairs as officials “duly
William W. Wiles, Secretary, Board of
authorized” to issue, at their discretion,
official staff interpretations of this regulation. Governors of the Federal Reserve
Except in unusual circumstances, such
System, Washington, DC 20551. They
interpretations will not be issued separately
may also be delivered to the guard
but will be incorporated in an official
station in the Eccles Building Courtyard
commentary to the regulation, which -will be
on 20th Street NW. (between
amended periodically.
Constitution Avenue and C Street)
Requests for Issuance of Official Staff
between 8:45 a.m. and 5:15 p.m.
Interpretations
weekdays. Except as provided in the
A request for an official staff interpretation Board’s rules regarding the availability
shall be in writing and addressed to the
of information (12 CFR 261.8),
Director, Division of Consumer and
comments received will be available for
Community Affairs, Board of Governors of
inspection and copying by any member
the Federal Reserve System, Washington, DC
of the public in the Freedom of
20551. The request shall contain a complete
Information Office, Room MP— of the
500
statement of all relevant facts concerning the
Martin Building between 9 a.m. and 5
issue, including copies ofell pertinent
p.m. weekdays.
documents.

10699

Federal Register / Vol. 59, No. 44 / Monday, March 7, 1994 / Proposed Rules
FOR FURTHER INFORMATION CONTACT: Jane
Jensen Gell or Mary Jane Seebach, Staff
Attorneys, or John Wood, Senior
Attorney, Division of Consumer and
Community Affairs, Board of Governors
of the Federal Reserve System,
Washington, DC 20551. at (202) 4522412 or (202) 452-3667. For the hearing
impaired only, contact Dorothea
Thompson, Telecommunications Device
for the Deaf (TDD), at (202) 452-3544.
SUPPLEMENTARY INFORMATION:

(1) 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).
In 1981, the Board published an official
staff commentary to Regulation E. The
commentary substitutes for individual
official 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 present commentary was designed
to make compliance easier by providing
specific answers, in nontechnical
language, to commonly asked questions.
The Board proposes to replace the
current approach with a narrative
format, similar to other commentaries
issued by the Board. The proposed
change is intended to provide more
general applicability, as the current
format usually relies on specific factual
situations and often restricts the scope
of an interpretation.
The order of comments in the
proposal corresponds with the new
sections in the regulatory proposal.
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 proposed commentary
incorporates text that was moved from
the regulation because it is more
explanatory in nature than regulatory. In
addition, a number of comments would
be deleted as obsolete. The Board
solicits comment on whether deleting
any of these comments creates
confusion as to the Board's current
interpretation of a particular matter.
The section-by-section description
that follows points out those provisions

that differ in some significant way from
the current commentary. Similarly,
those portions of the current regulation
that would be moved to the commentary
are also discussed. Comments in the
existing commentary will be referred to
as “questions" and will be cited by the
section number and the number of the
question. For example, Q2-11 would be
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. At the beginning of each
section of the proposed commentary is
a listing that matches existing comments
with the proposed new commentary
provisions. It also provides a listing of
comments that would be deleted from
the commentary, comments that are
new, and comments that would be
moved to other sections.
(2) Form of Comment Letters
Comment letters should refer to
Docket No. R-0831. The Board requests
that, when possible, comments be
prepared using a standard typeface with
a type size of 10 or 12 characters per
inch. This will enable the Board to
convert the text into machine-readable
form through electronic scanning, and
will facilitate automated retrieval of
comments for review. Comments may
also be submitted on 3l/2 inch or 5V«
inch computer diskettes in any IBMcompatible DOS-based format.

agreements) and Q3-21 (trust accounts)
would be included in this section. The
change mirrors the statutory definition
of account.
(d) Business Day
The regulatory proposal includes a
new definition of business day.
Currently, the term is defined 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. The
proposal defines 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). Q2-6, Q2—
7 and Q2-9 provide guidance on
interpreting "substantially all business
functions” and would be deleted as
obsolete.
(k) Unauthorized Electronic Fund
Transfer

Proposed comment (k)-2 incorporates
Q2-27, which provides that when the
consumer furnishes an access device
and grants actual authority to make
transfers to another person (a family
member or co-worker, for example) who
then exceeds that authority, the
consumer is liable for the transfers
unless the consumer notifies the
financial institution that transfers by
that person are no longer authorized.
The Board solicits comment on whether
financial institutions should be required
to disclose a consumer’s liability in this
(3) Explanation of Proposed Revisions
instance as part of the initial disclosures
of § 205.7. While institutions are
Section 205.2—Definitions
required to provide a summary of the
consumer’s liability under § 205.6 in the
New
ad
initial disclosures, the current model
Q2-1.
(a)— ........
1
clauses do not refer to this type of
Q2-2, Q2-3, Q2-4, Q2-5, situation.
<bH ...........
(b)-2 --------(d>-1 --------( f M .......
(0-2 ............
(fH J .......... <kM .........
(k)-2 ...........
(k )-3 --------(k M -------

02-5.5.
0 3 -2 0 ,0 3 -2 1 .
02-8.
02-25.5, 02-23.
02-24.
02-25.
02-26.
02-27.
02-27.
02-28.

Comments Deleted
Q2-6: Business day—substantially all
business functions
Q2-7: Business day—duration
Q2-9: Business day—short hours
Q2-22: Electronic terminal—telephone
bill payment
Paragraph 2(b)(2)
In the regulatory proposal, the
exemption for trust accounts has been
incorporated into the definition of
account. Accordingly, Q3-20 (custodial

Section 205.3— Coverage
New

Old

<a)-1 --------(a )-2 _____
<b)-1 ---------

New (revised 09-15).
New (foreign applicability).
02-11, reverses 02-16. 0 2 18,02 -18 ,02 -2 1.5 .
02-10, 02-12, 02-21.
0 3 -1 .
03-3 .
New (UCC Article 4A/wire
transfer).
New (similar fund transfer sys­
tems).
New (securities exemption).
03-3.5, 03-3.6, new (margin
cafl).
0 3 -8 , 0 3 -9 , 03-10, 03-11,
03-12.
03-13.
03-14. 03-15, 03-16, 0 3 19.5.

(b )-2 --------(c)(2>— -----1
(cM3M .......
<c)(3)-2 .......
(c)(3)— -----3
<c)(4)-1 -----(c )(4 )-2 .......
(c)(5)— .......
1
<c)(5)-2.......
(c)(6)— - .....
1

10700

Federal Register / Vol. 59, No. 44 / Monday, March 7, 1994 / Proposed Rules

New

Old

(c)(6>-2.......

Q3-17, Q3-18, 03-19, new
(facsimile machine).
New (UCC Article 4A/small in­
stitutions).

<c)(7)-1 .... .

Comments Deleted
Q2-12.5: Fund transfer—withholding of
income tax on interest
Q2—
12.6: Fund transfer—EBT
Q2— Fund transfer—withdrawal at
13:
another institution
Q2-14: Fund transfer—check truncation
Q2-15: Fund transfer—payee
information, nonelectronic form
Q2-17: Fund transfer—ACH
Q2-20: Fund transfer—preauthorized
debits by paper drafts, ACH
Q3— Wire transfer—instructions on
2:
magnetic tape
Q3— Telephone transfer plans—
4:
applicability of intrainstitutional
exemption
Q3-5: Compulsory use—preauthorized
loan payments
Q3— Small institutions exemption—
22:
grace period
Comments Moved
Q3-6, Q3-7, and Q3-7.5 (see proposed
commentary to § 205.10(e))
Q3-20 and Q3-21 (see proposed
commentary to § 205.2)
Section 205.3 of the proposed
regulation is a new section on the
regulation’s coverage. It includes the
existing language on the scope of
Regulation E, as well as the definition
of EFT and the exemptions from the
regulation.
3(a) General
To correspond with the regulatory
proposal, the commentary proposal
consolidates existing and new
comments on the regulation’s coverage.
Q9-15, which specifies when periodic
statements are required, also details the
types of accounts subject to the
requirements of the regulation and has
been incorporated into comment (a)—
1.
Proposed comment (a)-2 is new. It
explains the application of Regulation E
in situations involving foreign-based
financial institutions, consumers who
are not U.S. citizens, or both. Language
for this proposed comment was
modeled upon the commentary to „
Regulation Z on foreign applicability (12
CFR part 226, supp. I, comment l(cj-l).
The Board requests comment on
whether the scope of the proposed
comment offers sufficient coverage of
foreign-related EFTs.
(b) Electronic Fund Transfer
In the regulatory proposal, the
definition of “electronic fund transfer”

(currently § 205.2(g)) has been
incorporated into the coverage section
as the definition is central to
determining coverage under the
regulation. The proposed commentary
reflects this change and consolidates in
this section the majority of questions
pertaining to EFTs. A number of
comments have been deleted due to a
change in Board position. For example,
Q2-12.6 deals with the electronic
payment of government benefits and
states that such transfers are not subject
to Regulation E. As the Board has
adopted amendments to Regulation E
extending coverage to electronic benefit
transfer programs established by federal,
state, or local government agencies, Q212.6 has been deleted (see Docket No.
R—
0829 in today’s Federal Register).
Proposed comment (b)-l provides
examples of EFTs subject to Regulation
E. The comment incorporates Q2-19,
and reverses Q2-16 to achieve
consistency. Q2-16 states that credits to
consumers’ accounts made by a
composite check accompanied by a
magnetic tape containing payee
information are not EFTs for purposes of
Regulation E. Q2-19, on the other hand,
states that debits made to consumer
accounts by use of a magnetic tape
containing consumers’ billing
information will be considered EFTs
covered by the regulation even if all the
debits are combined on one composite
check sent to the payee. The proposed
comment treats both credits and debits
to consumer accounts by use of
composite checks as EFTs.
Proposed comment (b)— provides
2
examples of EFTs that are not covered
by the regulation. The comment
generally states that any payment that
does not debit or credit a consumer
asset account is not an EFT. It also
incorporates Q2-10 and Q2-12. Q2-10
provides that a EFT excludes not only
payments made by check, draft, or
similar paper instrument at an
electronic terminal, but also payments
in currency since they do not debit or
credit a consumer’s account. Q2-12
provides that payroll allotments are
transfers not covered by Regulation E;
an example is a sum designated by the
consumer to be deducted from payroll
to repay a debt of the consumer. This
amount is deducted before a deposit is
made to the consumer’s account and so
the payroll allotment is not a debit to a
consumer asset account.

simplifies the analysis of whether or not
compliance with the regulation is
required.
Two new comments address the
relationship of Regulation E to Article
4A of the Uniform Commercial Code
(UCC). Article 4A provides
comprehensive rules governing the
rights and responsibilities arising from
wire transfers. It applies primarily to
large-dollar, commercial wire transfers
made via Fedwire, Clearing House
Interbank Payments Systems (CHIPS),
Society for Worldwide Interbank
Payments Systems (SWIFT) and Telex.

(c)(3) Wire Transfers
UCC § 4A-108 provides that Article
4A does not cover a fund transfer any
part of which is governed by the EFTA.
In drafting Article 4A, the National
Conference of Commissioners on
Uniform State Laws stated that if a fund
transfer is-made in part by Fedwire and
in part via automated clearinghouse
(ACH), because the EFTA applies to the
ACH part of the transfer, Article 4A
does not apply to any part of the
transfer. Institutions that offer Fedwire
services have been concerned that these
transfers would lose the legal certainty
offered by complying with the
requirements of Article 4A if some part
of the transfer was subject to the EFTA.
This concern must be balanced with the
potential of subjecting consumers to full
liability for unauthorized transfers
merely because some part of the
transfer, which would ordinarily be
covered by Regulation E, was made via
Fedwire.
In 1990, the Board adopted a
comprehensive revision of subpart B to
Regulation J (55 FR 40791, October 5,
1990). Regulation J (12 CFR part 210)
specifies the rules applicable to funds
transfers handled by Federal Reserve
Banks. To ensure that the rules for all
funds transfers through Fedwire are
consistent, the Board used its
preemptive authority under UCC section
4A-107 to determine that subpart B,
including the provisions of Article 4A,
applies to all funds transfers through
Fedwire, even if a portion of the fund
transfer is governed by the EFTA. The
portion of the fund transfer that is
governed by the EFTA is not governed
by subpart B.
Even with this relief, the Board has
received questions about the effect of
dual coverage. For example, if an
institution offers consumers the ability
(c) Exclusions From Coverage
to initiate Fedwire transfers pursuant to
a telephone transfer agreement, the
The regulatory proposal incorporates
transfer would be covered by both
the exemptions from current § 205.3
Regulation E and Article 4A. UCC
into the expanded section on coverage.
The Board believes having coverage and section 4A-202 encourages verification
of the authenticity of a Fedwire
exemption provisions in one section

10701

Federal Register / Vol. 59, No. 44 / Monday, March 7, 1994 / Proposed Rules
payment order pursuant to a “security
procedure” established by agreement
between the customer and a receiving
bank. Putting such an agreement in
writing could be deemed to constitute a
telephone transfer plan for purposes of
Regulation E. The Board believes that if
an institution offers Fedwire payments
as a service to consumers and does not
make the service available in
conjunction with a telephone plan
subject to Regulation E, then the
protections of Article 4A are applicable
to the transfer. Proposed comment
(c)(3)— explains that if the service is
2
offered as a product separate from the
more typical telephone bill-payment or
other prearranged plan, then any
security procedure followed to establish
an agreement will not be deemed to
create a telephone plan subject to
Regulation E
L
The wire transfer exemption extends
to any transfer of funds through Fedwire
or through a similar fund t r a n s f e r
system. Comment (c)(3)— provides
3
examples of such systems.
(c)(4) Securities and Commodities
Transfers
The Board has proposed to revise the
current exemption for certain securities
and commodities transfers contained in
§ 205.3(c). The exemption would apply
to a transfer for the purchase or sale of
securities or commodities, even if the
security or commodity is not regulated
by the Securities and Exchange
Commission or the Commodity Futures
Trading Commission so long as it is sold
by a registered broker-dealer or futures
commission merchant (for example,
municipal securities). Proposed
comment (c)(4)-l provides additional
clarification on this point.
Proposed comment (c)(4)— provides
2
examples from the current commentary
of covered and exempt securities
transfers (Q3— and Q3-3.6). The
3.5
comment also contains a new example
of an exempt transfer, that of a
telephone order to exercise a margin
call. The Board believes that the
exercise of a margin call is so closely
linked to the purchase or sale of
securities as to come within the purview
of the exemption. The Board solicits
comment on what additional examples
may be needed to illustrate the extent of
this exemption.

has received questions about plans in
which the consumer uses facsimile
paper designed to look like a paper
“draft” to initiate a transfer sent via
facsimile machine. The EFTA’s
definition of EFT includes any transfer
through a “telephonic instrument.” The
Board considers a facsimile machine to
be the functional equivalent of a
telephone. Since it is a telephone, it is
inconsequential whether information
about the transfer is transmitted orally
or by facsimile. The Board requests
comment on this interpretation and
solicits additional examples of both
covered and exempt transfers.

(c)(6) Telephone-Initiated Transfers
Proposed comment (c)(6)—
2
incorporates examples contained in the
current commentary of covered transfers
under a written plan (Q3-17, Q3-18 and
Q3-19). The proposal also contains a
new example, use of a facsimile
machine to initiate a transfer. The Board

(a) Form of Disclosures
The Board has consistently
interpreted the format requirements
currently contained in §§ 205.7(a) and
205.9 as generally applicable to all of
the disclosures required by the
regulation. Comments incorporating
Q7-3 and Q9-4 have been moved to this

section of the commentary to provide
additional guidance on disclosure
requirements.
Currently, Q7— provides that
4
Spanish language disclosures satisfy the
requirement that disclosures be readily
understandable so long as disclosures in
English are given to consumers who
request them. Proposed comment (a)-2
provides that disclosures may be made
in languages other than English, if the
disclosures are available in English
upon request. This is consistent with
the new disclosure requirements in
Regulation DD (see 12 CFR 230.3(b)).

Section 205.5—Issuance o f Access
Devices
(c)(7) Small Institutions
Proposed comment (c)(7)— clarifies
1
New
Old
that Article 4A is not applicable to
transfers exempt from Regulation E
1 ................. Q5-1.5.
under the small institution exemption.
(a)(1)-1 ....... New (footnote 1b to current
§ 205.5(a)(1)).
As noted above, the drafters of Article
4A considered the EFTA and Regulation (a)(2)-1 ......... Q5-1, 05 -2 .
(a)(2)— ....... Q5-3.
2
E to be mutually exclusive. The Board
Q5-6, Q5-7.
<bM ....
has been asked whether preauthorized
<b)-2.... ...... Q5-4.5.
transfers by small institutions
(t>)— ......... Q5-5.
3
(currently, institutions with assets
(t>)— ......... Q5-8.
4
under $25 million) which are largely
Comment Deleted
exempt from Regv t tions E are thus
subject to the requirements of Article 4A Q5— Renewal or substitution—pre4:
by virtue of the exemption (for example,
February 8,1979 device
a direct deposit to a consumer’s account
Comments Moved
at a small bank). As noted in the
proposed comment, the Board regards
Q5-9, Q5-10 (see proposed commentary
the transfers as generally subject to the
to §205.12)
EFTA, and therefore not covered by
Section 205.5 provides the rules for
Article 4A.
issuance of access devices. The
substance of existing commentary
Section 205.4— General Disclosure
provisions have been incorporated into
Requirements; Jointly Offered Services
the proposal, with one addition.
New
(a)-1 ...........
(a)-2 ...........

Old
Q7-3, Q9-4,
New (revises Q7-4).

Comments Deleted
,
Q4-1: Shared system—scope of
disclosures
Q4-2: Shared system—disclosures on
behalf 6f another institution
Q4-3: Multiple accounts and account
holders (clarified in § 205.4(c)(1) of
proposed regulation)
The Board’s regulatory proposal
includes both general disclosure
requirements and special requirements
for providing the various disclosures in
a revised § 205.4.

(a) Solicited Issuance
(a)(1)
Footnote lb to current § 205.5(a)(1)
provides that financial institutions may
issue an access device to each joint
account holder for whom the requesting
account holder specifically requests an
access device. The footnote would be
deleted from the regulation and moved
to comment (a)(1)—
1.
Section 205.6—Liability o f Consumer for
Unauthorized Transfers
New
(a>— ...........
1
(a)-2 ...........
(b>-1 ...........
(b)-2 ...........
(b)(1)-1 .......
(b)(1)— .......
2
(b)(2)— .......
1
(b)(3)— ----- 1
(b)(3)— .......
2
(b )(4 H -----(b)(5)— .......
1

Old
Q6-4, new (current
§ 205.6(a)(2)).
Q6-3.
Q6-5 (revised).
Q6-6.5.
Q6-5 (revised).
Q6-6 (revised).
Q6-5 (revteed).
Q6-5 (revised).
Q6-5 (revised).
New (current §205.6(b)(4)).
Q6-7.

10702

Federal Register / Vol. 59, No. 44 / Monday, March 7, 1994 / Proposed Rules

New

Old

(b)(5>-2....... New (notice from third party).
(b)(5)-3....... Q6-8.
Comment Deleted
Q6— Unauthorized transfers—access
1:
device not involved
Q6-2: Failure to disclose business days
Comments Moved
Q 6-9, Q6-10, and Q6-11 (see proposed
commentary to § 205.12)
(a) Conditions for Liability
The current regulation conditions
consumer liability solely on the
issuance of an accepted access device
(§ 205.6(a)). Q6— on the other hand,
1,
states that if the consumer fails to report
an unauthorized EFT within 60 days of
transmittal of the periodic statement
reflecting the transfer, the consumer
could be subject to liability for
subsequent transfers. The Board has
incorporated the current commentary
into the regulatory tex t Accordingly,
Q6-1 has been deleted.
Current § 205.6(a)(2) of the regulation
requires that the institution provide a
means of identifying the consumer to
whom the access device is issued. The
regulation currently provides example
of such permissible means; this
explanatory language has been moved to
proposed comment (a)-l.
Current § 205.6(a)(3) of the regulation
requires institutions to disclose certain
information to the consumer before
imposing liability for unauthorized
EFTs involving the consumer’s account.
The information required to be
disclosed is already part of the initial
disclosures under § 205.7. The
regulatory proposal to this section
requires that an institution have
complied with § 205.7(b) before
imposing liability. Accordingly, Q6-2,
which pertains to these disclosures, has
been deleted.
fb) Limitations on Amount of Liability
Q6— provides examples of when the
5
liability rules apply. Material from Q 65, in revised form, has been
incorporated into the commentary to
paragraph (b).
(b)(4) Extension of Time Limits
Current § 205.6(b)(4) provides
examples of what constitutes
extenuating circumstances for purposes
of delaying notification to the
institution that an access device has
been lost or stolen. The examples have
been deleted from the proposed
regulation and moved to comment
(b)(4)—
1.

(b)(5) Notice to Financial Institution
The Board has received questions
about whether notice from a third party
is sufficient under § 205.6. Proposed
comment (b)(5)— indicates that such
2
notice is considered adequate if it is
communicated by a third party on the
consumer’s behalf.
Section 205.7—Initial Disclosures
New

Old

Q7-1.
Q7-2.
Q7-5.5.
Q7-6, new (timing of disclo­
sures).
(a)— .......... Q7-6.5.
5
(a)-6 .......... Q7-5.
(b)(1)-1 ...... Q7-8.
(b)(1 )- 2 ....... Q7-7.
(b)(1)-3...... New (current §205.7(a)(f)).
(b)(2)-1 ...... 07-19, 07-20.
(b)(4)— ...... 07-11.
1
(b)(4)— ...... Q7-11.5.
2
(b)(4>-3...... Q7-10.
(b)(5)— ...... Q7-12, 7-13.
1
(b)(5>-2...... Q7-14, 7-15.
(b)(5>-3...... Q7-15.5.
(b)(9H ...... 07-16, 7-17.
(b)(10)-1 ..... 07-18.
(b)(10)-2 ...... Q7-18.5.

(aM
(a)-2
(a)-3
(a>-4

..........
..........
..........
..........

Comments Deleted
Q7-9: Summary disclosure of rights
Comments Moved
Q7-3, Q7— (see proposed commentary
4
to §205.4)

Section 205.8—Change in Terms Notice;
Error Resolution Notice
New

Old

(aH ..........
(a)-2 ..........
(a)-3 ..........
(aM ..........
(a)(2H ........

Q8-6.
Q8-3, Q8-5.
Q8—
4.
Q8-2.
New (45 calendar days to
send notice).
Q8-8.

(bH ..........

Comments Deleted
Q8-1.: Terms requiring change in terms
notice
Q8-7: Error resolution notice—no
periodic statements sent
(a) Change in Terms Notice
(a)(2) Prior Notice Exception
Proposed comment (a)(2)— addresses
1
circumstances when financial
institutions are required to send a
subsequent notice upon making a
permanent change in terms related to
security. The Board proposes to extend
the time period in which financial
institutions must send such notice to 45
days (from the current 30 days) to allow
institutions to more easily use the
periodic statement as a vehicle of the
consumer notice.
Section 205.9—Receipts at Electric
Terminals; Periodic Statements
New

Old

(a)— ..........
1
(a)-2 ..........

09-1.
New (footnote 2 to current
§205.9(a)), 09-2.
09-3.5.
09-5.
Q9-6.

(a) Timing of Disclosures
Proposed comment (a)— expands on
4
Q7-6, which discusses the addition of
new EFT services. The current
commentary requires financial
institutions to provide disclosures for
the additional service if it is subject to
terms and conditions different from
those previously described in the initial
disclosures; the commentary is silent,
however, as to when such disclosures
should be provided. The proposed
comment requires that such disclosures
be given either when the consumer
contracts for the new service or before
the first EFT is made using the new
service.
(b) Content of Disclosures
Current § 205.7(a)(1) gives financial
institutions the option of including
advice about promptly reporting the loss
or theft of the access device or other
unauthorized transfers in the summary
of the consumer’s liability. This
language has been deleted from the
proposed regulation and moved to
comment (b)(1)—
3.

<a>-3 ..........
(a)-4 ..........
(a)-5 ..........
(aH5 ..........
(a)(1H ....
(a)(2)-1 ......
(a)(3>-1 .......
(a)(3)-2......
(a)(3)-3......
(a)(3H4.......
(a)(3)-5.......
(a)(4)-1 .......

(a)<5H .......
(a)(5)-2.......
(a)(5)(i)— ....
1
(a)(5)(ii)— ....
1
(a)(5)(iii)— ...
1
(a)(6H ....:...

q 9 -4 .

New (displaying amount of fee
on ATM screen).
09-7.
New (current § 205.9(a)(3)).
New (footnote 3 to current
§205.9(a)(3)), 0-9, 9-10.
Q9-8.
New (current § 205.9(a)(3)),
09-37.
09-36, 09-27.
New (identification among ac­
counts held by, or access
devices issued by an institu­
tion).
09-38.
09-40.
New (current
§205.9(b)(1)(iv)(A)).
New (current
§205.9(b)(1)(iv)(B)).
New (current
§205.9(b)(1)(iv)(C)).
09-13, new (current
§ 205.9(a)(6)).

(a)(6>-2....... QSM4.
(bH -------- 09-19, 9-20.
(b>-2.......... New (defining periodic cycle).

Federal Register / Vol. 59, No. 44 / Monday, March 7, 1994 / Proposed Rules
New

Old

Q9-17.
Q9-18.
Q9-21.
Q9-23, new (footnote 4 to
§ 205.9(b)(1)).
(b)(1)— ....... Q9-25.
1
(b )d )(iH .... Q9-35.
(b)(1)(iii)— ... 09-36.
1
(b)(1)(ivH - Q9-40.5.
(b )0 )(v H - Q9-28.
(b)(1)(v)-2 ... Q9-30.
(b)(l)(vH J ... Q9-41.
(b )(l)(v H - Q9-43.
<b)(1)(v)-5 ... Q9—
44.
(b)(1)(v)-6 ... New (footnote 9 to current
§205.9(b)(1)(v)).
(b)(3)— ....... Q9-31.
1
(b )(3 )-2 ....... Q9-31.5.
(b )(3 }-3 ....... New (current § 205.9(b)(3)).
(b)(4)— ....... Q9-32.
1
(b)(5)&(6H • Q9-33.
(0-1 ........... Q9-50.
(d H ........... Q9-51.
(b)-3
(b H
(b)-5
(b>—
6

...........
...........
...........
...........

Comments Deleted
Q9-3: Receipts—information displayed
on screen
Q9-10.5: Receipts—type of account,
interchange system
Q9-11: Receipts—unique identifier
Q9-12: Receipts—terminal location
Q9-16: Periodic statements—frequency
Q9-24: Periodic statements—
accompanying documents
Q9-29: Periodic statements—multiple
transferees
Q9-34: Periodic statements—telephone
numbers
Q9-39: Receipts/periodic statements—
location code
Q9— Receipts/periodic statements—
42:
intermediate party
Q9— Passbook updates—when
45:
required
Q9-46: Passbook accounts—telephone
notice alternative
Q9— Passbook updates—discarding of
47:
data
Q9— Passbook updates—periodic
48:
transmittals
Q9— Quarterly statements—
49:
compliance with regular requirements
Comments Moved
Q9-4 (see proposed commentary to
§205.4)
Q9-15 (see proposed commentary to
§205.2)
Q9-26 (see proposed commentary to
§205.11)
The Board has proposed a number of
editorial revisions to § 205.9 such as
adding new paragraphs and headings to
better organize the text concerning
timing and content of disclosures. A
number of comments have been deleted
from the proposed commentary to this
section. Many of the current questions
are very fact specific, and believed to be

unnecessary in the revised commentary.
No substantive changes are intended.
(a) Receipts at Electronic Terminals
Footnote 2 to current § 205.9(a) allows
an account-holding institution to make
terminal receipts available through third
parties. The footnote would be deleted
from the regulation and moved to
comment (a)—
2.
(a)(1) Amount
Current § 205.9(a)(1) provides that
financial institutions other than the
account-holding institution may include
a fee for a transfer in the amount of the
transfer if the fee is disclosed on the
receipt and on a sign posted on or at the
terminal. The regulatory proposal would
modify these requirements and allow
the account-holding institution to take
advantage of the exception. In addition,
proposed comment (a)(1)— provides
1
that the requirement to display the
amount of a transaction fee “on or at the
terminal” could be met by displaying
the fee on the terminal screen before the
consumer has initiated the transfer if
displayed for a reasonable duration. The
Board requests comment on whether the
proposed changes provide adequate
notice to the consumer.

10703

(a)(5) Terminal Location
The current regulation includes
detailed guidance for specifying the
terminal location on both the receipt
and periodic statement (see current
§ 205.9(b)(l)(iv)). While the substantive
requirement to disclose the location
remains unchanged, the illustrative
language would be moved to comments
(a)(5)(i)— (a)(5)(ii)— and (a)(5)(iii>—
1,
1,
1.
(a)(6) Third Party Transfer
Current § 205.9(a)(6) requires that the
name of any third party to or from
whom funds are transferred be disclosed
on the receipt. It also provides guidance
on the use of codes and an exception to
the disclosure requirement when the
name of the payee cannot be duplicated
by the terminal. This secondary
information would be deleted from the
regulation and moved to comment
(a)(6)—
1.
(b)

Periodic Statements

Current § 205.9(b) provides that
periodic statements must be sent for
each monthly or shorter cycle in which
an EFT has occurred, but at least
quarterly if no transfer has occurred. As
the Board believes that few institutions
send a statement (for Regulation E
(a)(3) Type
purposes) for a cycle shorter than one
month, the regulatory proposal has
Current § 205.9(a)(3) requires
disclosure of the type of transfer and the deleted reference to a "shorter cycle.”
The reference would be moved to
type of consumer’s account to or from
comment (b)—
1.
which funds are transferred. It also
provides examples of descriptions for
Proposed comment (b)— provides
2
such accounts. The examples would be
additional guidance on what is
deleted from the regulation and moved
considered a cycle for purposes of
to comment (a)(3)— In addition,
1.
Regulation E. The comment requires
§ 205.9(a)(3) provides generic
that financial institutions provide
descriptions for accounts that are
relevant information for the cycle or
similar in function. These examples
period since the last statement was
would also be deleted from the
issued. The Board has adopted a similar
regulation and incorporated with the
approach in the proposed commentary
substance of Q9-37 in proposed
to Regulation DD (see 59 FR 5536,
comment (a)(3)—
4.
February 7,1994). For example, if an
institution may issue quarterly
Footnote 3 to current § 205.9(a)(3)
statements in March, June, September,
provides an exception to the
and December and the consumer
requirement to disclose the type of
initiates an EFT in February, an interim
transfer and account if the consumer
statement would be provided. The
can access only one account at a
comment indicates that the statement
particular time or terminal. The
should provide information for the
exception would be deleted from the
months of January and February. The
regulation and the substance moved to
regularly scheduled March statement
comment (a)(3)—
2.
would provide information only about
(a)(4) Identification
the month of March. The proposed
Regulation DD commentary provides
Proposed comment (a)(4)— clarifies
1
that disclosures given on the interim
that an identifying number or code that
statement cannot be repeated on the
uniquely identifies the consumer’s
regularly scheduled statement. In the
account or access device—among all
accounts held by an institution or access example above, the March statement
could not repeat information disclosed
devices issued by an institution—is
on the February statement. The Board
sufficient to meet the requirements of
solicits comment on whether the same
the regulation.

10704

Federal Register / VoL 59, No. 44 / Monday, March 7, 1994 / Proposed Rules

approach should be adopted in
Regulation E.
Footnote 4 to current § 205.9(b)(1)
permits financial institutions to provide
certain periodic statement disclosures
on documents that accompany the
statement; it also permits institutions to
use codes for the disclosures if they are
explained either on the statement or
accompanying documents. The footnote
would be deleted from the regulation
and the substance moved to comment
(b)-6.
Paragraph 9(b)(l)(v)
Footnote 9 to current § 205.9(b)(l)(v)
provides that a financial institution
need not identify on the periodic
statement third parties whose names
appear on checks, drafts, or similar
paper instruments deposited to the
consumer's account at an electronic
terminal. The footnote would be deleted
from the regulation and the substance
moved to comment fb)(l)(v)—
6.
(b)(3) Fees
Section 205.9(b)(3) provides that
financial institutions must disclose the
amount of any fees other than a finance
charge imposed under Regulation Z, 12
CFR 226.7(f) that were assessed against
the account during the statement period
for EFTs. The reference to finance
charges would be deleted from the
regulation and moved to comment
(b)(3)—
3
Section 205.10—Preauthorized
Transfers
New

Otd

(a )(1 M ----(a)(1 > 2 ........
—
(a)(1H 3 ----(a)(1 M .......

Q10-6, Q10-6.
Q10-1.
010-7.
010-8, Q10-9, New (reverses
part of 010-7).
010-10.
010-12.
010-11.
010-17, New (example of
preexisting authorization).
010-18.
010-18.6.
Q10-18.5.
New (similarly authorized).
010-19.
Q10-19.5.
010-21.
new (range).
0 3 -7 , 0 3 -7 5 .
New (repayment of over­
drafts).
03-6 .

(a)(1>-6 ----(a)(1 > 6 ----—
(a )(1 )-7 ----(b)-1 ------(b >-2 ------(b )-3 ------( b M ------(b > -5 ------(c)-1 -------

( 0 -2 ------(d )0 H ----(d)(2H----(e)(1H ----(e )(1 )-2 -----(e )(2 H ------

Comments Deleted
Q10-2: Notice of credit—when receipt
guaranteed
Q10-3: Notice provided by payor
QlQ-4: Notice provided by payor—form

on a preexisting authorization to debit
Q10-13: Preauthorized credits—
payments from the consumer’s account,
availability of funds
Q10-14: Preauthorized credits—posting for example when an institution
purchases the mortgage servicing rights
schedule
Q10-15: Preauthorized credits—funds
from a party that previously obtained
received prior to agreed crediting date the consumer's authorization. The
Q10— Preauthorized debits—
16:
Board solicits comment on other
preexisting authorizations
instances in which a new authorization
QlO— Ten-day notice of varying
20:
may not be necessary.
debits—preexisting authorizations
The requirement in current
Q3-5: Compulsory use—preauthorized
§ 205.10(b) that preauthorized EFTs
loan payments
from a consumer’s account be
Section 205.10 sets forth the
authorized by the consumer only in
substantive and disclosure requirements writing has been revised. The
for authorizing preauthorized transfers
requirement for the authorization to be
a signed writing has been expanded to
to and from a consumer's account. The
include authorizations which are
Board has proposed to expand this
“similarly authenticated” by the
section to include guidance on the
consumer. This enhancement addresses
prohibitions against compulsory use,
developments in electronic services,
and corresponding commentary has
such as home banking. Proposed
been added. The section contains
comment (b)— provides an example of
5
several new interpretations, as
a consumer’s authorization that is
discussed below.
“similarly authenticated.” The comment
(a) Preauthorized Transfers to
provides that for a home banking system
Consumer’s Account
to satisfy the requirement, there must be
Regulation E currently requires
some means to identify the consumer
financial institutions that receive
(such as a security code), and the
preauthorized transfers to credit the
consumer must have the ability to
funds to the consumers account as of
obtain a printed copy of the
the day the funds are received. The
authorization (either from the
consumer’s printer or from the payee).
regulatory proposal would delete this
requirement as obsolete. Accordingly,
The Board solicits comment on whether
additional safeguards are necessary to
Q10-13,10-14, and Q10-15 also have
protect consumers in this situation. For
been deleted.
example, should the commentary
(a)(1) Notice by Financial Institution
require that the authorization remain in
Section 906(b) of the EFTA and
the institution’s computer memory and
current § 205.10(a)(1) of the regulation
be available to the consumer through
provide that when a payor credits a
the home banking device until it is
consumer's account by preauthorized
modified or terminated? Should the
EFT at least once every 60 days, the
commentary explicitly require that the
account-holding institution must
authorization may only be provided by
inform the consumer either that the
the consumer (by using a personal
transfer has or has not occurred or
identification code) and not by a payee
provide a phone number for the
on the consumer’s behalf? How would
consumer to use to verify the transfer.
this change affect the stop payment
rules under § 205.10(c)? The Board
Q10-7 provides that the absence of a
solicits comment on these and other
deposit entry on a periodic statement
can serve as notice that a preauthorized issues related to the requirements of a
written authorization under this section.
transfer has not occurred. Proposed
The Board solicits comment on two
comment (a)(1)— reverses the current
4
issues that have not been discussed
position and states that the absence of
previously in the commentary. The
a deposit entry is not negative notice.
Board has received inquiries about
The Board believes the requirement is
telephone-initiated transfers when the
an affirmative duty to provide notice
consumer provides an account number
either positively or negatively.
to the caller and authorizes a draft or an
(b) Written Authorization for
ACH debit to be submitted against the
Preauthorized Transfers From
consumer’s account. The Board believes
Consumer’s Account
such transfers are EFTs since they are
Proposed comment (b )-l incorporates initiated by telephone and authorize the
Q10-17, which provides that a financial debiting of the consumer's account. The
institution or designated payee does not transfers are not “preauthorized
transfers," however, and the rules
need to obtain new authorizations
before shifting from a paper-based to an regarding written authorization by the
consumer thus are not applicable. The
electronic debiting system. The
Board solicits comment on whether this
proposed comment also provides that a
type of transfer poses sufficient
successor payee or institution may rely

Federal Register / Vol. 59, No. 44 / Monday, March 7, 1994 / Proposed Rules
consumer risk as to warrant special
through a checking account. The Board
provision in the regulation or
believes that the exemption applies to
commentary.
such plans and that it is not practicable
The Board has also received questions to distinguish between extensions of
on what are appropriate means for
credit triggered under such plans
obtaining a consumer’s authorization for because of the overdraft mechanisir
preauthorized transfers. For example,
versus those advanced to the consumer
the Board has been asked whether
by some other means.
sending the consumer a check which
Section 205.11—Procedures for
incorporates in the endorsement an
Resolving Errors
authorization for the financial
institution to automatically debit the
New
Old
consumer’s account on a monthly basis
is a legitimate method for obtaining the
(a M ........... 09-26.
consumer’s authorization. The Board
(a)-2 ........... Q11-2.
<a>-3 ........... Q11-3.
solicits comment on whether the
(a M ........... Q11-4.
commentary or regulation should
(b)(1)-1 ....... Q11-8, new (example added).
address such format issues.
(b)(1)— .......
2

(d) Notice of Transfers Varying in
Amount
(d)(2) Range
Proposed comment (d)(2)— provides
1
guidance on what is an acceptable range
for purposes of this section. The
comment provides that an acceptable
range is one that could plausibly be
anticipated by the consumer. For
example, if the consumer’s monthly
payment is approximately $50,
providing a range between zero and
$10,000 does not seem reasonable. The
Board solicits comment on how
financial institutions currently
determine such a range, as well as
reaction to the proposed analysis.
(e) Compulsory Use
(e)(1) Credit
The regulatory proposal incorporates
the statutory restrictions against
compulsory use of EFTs as a condition
of credit, employment, or receipt of
government benefits into § 205.10(e).
The questions pertaining to compulsory
use in the current commentary (under
§ 205.3) have, for the most part, been
incorporated into the commentary
proposal. The regulatory proposal also
incorporates the substance of footnote
la to § 205.3 into proposed
§ 205.10(e)(1), which provides that a
financial institution may require the
automatic repayment of credit that is
extended under an overdraft credit plan
or that is extended to maintain a
specified minimum balance in the
consumer’s account. The commentary
proposal includes a new comment
(e)(1)— which allows an institution to
2
use the exception even if the overdraft
extension is charged to an open-end
account that may be accessed by the
consumer in ways other than by
overdrafts. For example, in addition to
overdraft protection, a consumer may be
able to obtain cash advances directly
from the credit line without going

(b)(1)—
3
< b )0 M
(b)(1)—
5
(b)(1)—
6

.......
.......
.......
.......

(b)(2)— .......
1
(c M ...........
(c)-2 ...........

(c)-3 ..........
(CM ..........

(c)-5 ...........

(CHS ...,.......
(c)-7 ...........
(c)(2)(i)— ....
1
(c)(3>-1 .......
(c)(4)-1 .......
(c)<4)-2 .......
(c)(4)— .......
3

(c)(4M .......
(d M ..... ......

(d)(1)-1 .......
(d)(2M .......
(d)(2H .......
(e M ...........

New (required submission of
an affidavit).
Q11-5.
Q11-6.
Q11-7.
New (footnote 10 to current
§205.11 (b)(1 )(i)).
Q11-9, new (provisional cred­
iting).
New (provide notices either
orally or in writing).
011-10.
New (strengthens Q11-31).
New (current §205.11(d)(3)).
011-20, new (footnote 12 to
current §205.11(e)(2)).
New (current §205.11(e)(1)),
Q11-19.
New current §205.11(d)(1).
New (currfent §205.11(c)(3)).
011-11.5.
011-13.
011-14.
011-16.
New (footnote 11 to current
§205.11 (d)(1)).
011-17.
Q11-25.
011-23.
011-24.
011-30.

Comments Deleted
Q ll-1 : Transfers—initiated by
institution
Q ll-1 1 : Deadlines for investigation of
error
Q ll- 1 2: Request for documentation—
facsimile or photocopy
Q ll- 1 5: Scope of investigation—
preauthorized credits
Q l 1-18: Crediting of interest
Q ll-2 1 : Written explanation—timing
Q ll-2 2 : Debiting of recredited funds—
items to be honored
Q ll-2 6 : Documents relied on—privacy
issue
Q ll-2 7 : Documents relied on—no
information On relevant tapes
Q ll-2 8 : Withdrawal of error notice
Q ll-2 9 : Withdrawal of error notice
Comments Moved
Q ll-3 2 , Q ll-3 3 (see proposed
commentary to § 205.12)

10705

Section 205.11 sets forth the
regulation’s procedures for error
resolution. The regulatory proposal
reformatted the section to facilitate
compliance and the commentary
provisions have accordingly been
assigned. The proposed commentary
contains several new comments, most of
which have been removed from the
regulation.
(b) Notice of Error From Consumer
(b)(1) Timing; Contents
Section 908 of the EFTA and § 205.11
of the regulation require institutions to
investigate and make a final
determination as to a consumer’s
allegation of an error within either 10
business days or 45 calendar days.
Financial institutions have asked
whether they can delay initiating or
completing an investigation pending
receipt of an affidavit related to the
alleged error. Proposed comment (b)(1)—
2 prohibits institutions from delaying
their investigation until a consumer has
produced the affidavit. The Board
believes that permitting delay would
allow institutions to circumvent the
investigation procedures currently
mandated by the act and regulation.
Footnote 10 to current
§ 205.11(b)(l)(i), which permits a
financial institution to prescribe
procedures for giving notice of an error,
would be deleted from the regulation
and the substance moved to comment
(b)(1)—
6.
(b)(2) Written Confirmation
Q ll-9 provides that a financial
institution does not have to have referral
procedures for forwarding a written
confirmation of error that is sent to the
wrong address. Proposed comment
(b)(2)— further provides that
1
institutions operating under the 45calendar-day rule need not
provisionally credit the consumer’s
account when the written confirmation
is delayed beyond 10 business days
because it was sent to the wrong
address.
(c)
Time Limits and Extent of
Investigation
As noted in § 205.4, most disclosures
required by Regulation E must be in
writing and in a form the consumer may
keep. Proposed comment (c)-l provides
that financial institutions may give the
notices required by § 205.11 either
orally or in writing, unless otherwise
indicated in the section. This exception
would not apply to a consumer’s request
for documentation pursuant to proposed
§ 205.11(a)(l)(vii).
Q ll-3 1 articulates the Board's
concern that charging consumers for the

10706

Federal Register / Vol. 59, No. 44 / Monday, March 7, 1994 / Proposed Rules

financial institution’s compliance with
the regulation's error resolution
procedures might have a chilling effect
on the good faith assertion of errors. The
Board believes that as the EFTA
specifically grants the consumer errorresolution rights, institutions must
avoid any deterrent to exercising such
rights. To clarify its position, the Board
proposes to add comment (c)— to
3
explicitly prohibit institutions from
charging consumers for error resolution.
The Board solicits comment on the
impact of such a prohibition on
institutions and consumers.
Current § 205.11(d)(3) provides that a
financial institution may correct an
error in the amount or manner alleged
by the consumer without complying
with the investigation requirements of
this section if it complies with all other
requirements of § 205.11. The provision
would be deleted from the regulation
and moved to comment (c)—
4.
Footnote 12 to current § 205.11(e)(2)
allows financial institutions to provide
the notice of correction on the periodic
statement that is mailed or delivered
within the time limits specified in the
section. The footnote would be deleted
from the regulation and moved to
comment (c)-5.
Current § 205.11(e)(1) provides that if
a financial institution determines an
error occurred, it must correct the error
including, where applicable, the
crediting of interest and the refunding of
any fees or charges imposed. This
language would be deleted from the
regulation and combined with the
substance of Q ll-1 9 in comment (c)-6.
The comment would also clarify that the
requirement only applies to fees
imposed by the institution versus those
imposed by third parties.

Section 205.12—Relation to Other Laws

Paragraph (c)(2)(i)

Comments Moved

New

Old

(a H ...........

0 6 -9 , 06-10, 06-11, 0 1 1 32.011-33.
0 5 -9 , 05-10.
012-1, new (compliance with­
out Board determination).
New (current preemption of
Michigan law).

(a)-2 ...........

(bH ..........
(b)-2 ...........

The regulatory proposal has
consolidated the references to the Truth
in Lending Act and Regulation Z in
§ 205.12. The section would also
contain the rules the Board applies in
determining the preemption of
inconsistent state laws or in granting a
state exemption. The commentary
provisions have been consolidated in
this section as well.
(b) Preemption of Inconsistent State
Laws
Proposed comment fb)— incorporates
1
Q12-1, which provides that state law
may be preempted even if the Board has
not issued a determination. The
comment also notes that financial
institutions are not protected from
liability for failing to comply with state
law in the absence of a preemption
determination by the Board.
Proposed comment (b)-2 incorporates
into the commentary an official staff
interpretation preempting certain
provisions of Michigan’s EFT statute.
Future preemption determinations
would also be included in the
commentary.
Section 205.13—Administrative
Enforcement; Record Retention
Old

New
(b H ...........

013-2.

Section 205.14—Electronic Fund
Transfer Service Provider Not Holding
Consumer's Account
New
(a )-1 ---------

(a)-2 ...... .
(bH ..........
(b)(1)-1 ......
(b)(2)— ......
1
(c)(lH ......

Old
014-1, Q14-2.
014-3.
New (formerly §205.14(a)(1).
Q14-4.
014-6.
014—
7.

Comment Deleted
Q14— Periodic statement—issuance of
5:
card
Section 205.14 details the
requirements for financial institutions
that issue access devices and provide
EFT services to consumers even though
the consumers’ accounts are held by a
second institution.
(b) Compliance^by Electronic Fund
Transfer Service Provider
Current § 205.14(a)(1) provides that
the service-providing institution shall
reimburse the consumer for
unauthorized EFTs in excess of the
limits set by § 205.6. This provision
would be deleted from the regulation
and moved to comment (b)—
1.
Section 205.15—Electronic Fund
Transfer o f Government Benefits
Proposed comments interpreting the
requirements of this section will be
published at a later date.
Model Disclosure Clauses
Appendix A-—
and Forms
Old
0 1 & -1 -------

New
Appendix A -1.

Text of Proposed Revisions
For the reasons set forth in the
preamble, the Board proposes to amend
12 CFR part 205 as follows:

Q13-1 (see proposed commentary to
Current § 205.11(c)(3) provides
PART 205—ELECTRONIC FUND
appendix A)
examples of when a financial institution
TRANSFERS (REGULATION E)
must comply with all requirements of
Current § 205.13 contains information
1. The authority citation for part 201
§ 205.11 except the provisional crediting about administrative enforcement,
would be revised to read as follows:
requirements. While the examples have issuance of staff interpretations and
Authority: 15 U.S.C. 1693.
been retained in the regulatory proposal, record retention. The regulatory
the language requiring compliance with proposal moved much of the detail
2. In part 205, Supplement I would be
other requirements of the section would pertaining to these topics to the
revised to read as follows:
be deleted and moved to comment
appendices. With one exception, no
Supplement I to Part 205—Official Staff
(c)(2)(i)-l.
substantive change was intended. As
Interpretations
noted above, the information describing
(c)(4) Investigation
Section 2052—Definitions
issuance of staff interpretations would
be deleted from the regulation,
Footnote 11 to current § 205.11(d)(1)
(a) Access device
including any reference to unofficial
provides examples of what does and
1. Examples. The term access device
staff interpretations (which the Board no includes debit cards, personal identification
does not constitute an agreement for
longer issues in writing). Information
purposes of this section. The
numbers (PINs), telephone transfer and
about procedures for the official
telephone bill payment codes, and other
explanatory language would be deleted
commentary is set forth in a new
means that may be used by a consumer to
from the regulation and moved to
initiate an electronic fund transfer to or from
appendix C.
comment (c)(4)-4.

Federal Register / Vol. 59, No. 44 / Monday, March 7, 1994 / Proposed Rules
a consumer account. The term does not
include magnetic tapes or other devices used
internally by a financial institution to initiate
electronic transfers.
(b)(1) Account
1. Consumer asset accounts. The term
consumer asset account includes:
• Club accounts, such as Christmas or
vacation clubs. In many cases, however,
these accounts ere exempt from the
regulation under § 205.3(c)(5) because all
electronic transfers to or from the account
have been preauthorized by the consumer
and involve another account of the consumer
at the same institution.
• A retail repurchase agreement (repo)
which is a loan made to a financial
institution by a consumer that is
collateralized by government or governmentinsured securities.
The term “consumer asset account" does
not include:
• Profit-sharing and pension accounts
established under a trust agreement, which
are exempt under § 205.2(b)(2).
• Escrow accounts, such as those
established to ensure payment of items such
as real estate taxes, insurance premiums, or
completion of repairs or improvements.
• Accounts for accumulating funds to
purchase U.S. savings bonds.
Paragraph (b)(2)
1. Bona fide trust agreements. The term
bona fide trust agreement is not defined by
the act or regulation. Therefore, financial
institutions must look to state or other
applicable la,w for interpretation.
2. Custodial agreements. An account held
under a custodial agreement that qualifies as
a trust under the Internal Revenue Code,
such as an individual retirement account, is
considered to be held under a trust
agreement for purposes of this part.
Id) Business Day
1. Duration. A business day includes the
entire 24-hour period ending at midnight and
notice is effective even if given outside
normal business hours. The regulation does
not require, however, that telephone lines be
available on a 24-hour basis.
(f) Electronic Terminal
1. Point-of-sale (POS) payments initiated
by telephone. Because the term electronic
terminal excludes a telephone operated by a
consumer, a financial institution need not
provide a terminal receipt when:
• A consumer uses a debit card at a public
telephone to pay for the call.
• A consumer initiates a transfer by the
equivalent to a telephone, such as by home
banking equipment or a facsimile machine.
2. POS terminals. A POS terminal that
captures data electronically, for debiting or
crediting to a consumer’s asset account, is an
electronic terminal for purposes of
Regulation E if a debit card is used to initiate
the transaction.
3. Teller-operated terminals. A terminal or
other computer equipment operated by an
employee of a financial institution is not an
electronic terminal for purposes of the
regulation. However, transfers initiated at
such terminals by means of the consumer’s

access device (using the consumer’s personal
identification number, for example) are
electronic fund transfers and are subject to
other requirements of the regulation. If the
access device is used only for identification
purposes or for determining the account
balance, the transfers are not electronic fund
transfers for purposes of the regulation.
(k) Unauthorized Electronic Fund Transfer
1. Transfer by institution’s employee. A
consumer has no liability for erroneous or
fraudulent transfers initiated by an employee
of a financial institution.
2. Authority. If a consumer furnishes the
access device and grants authority to make
transfers to a person (such as a family
member or co-worker) who exceeds the
authority given, the consumer is fully liable
for the transfers unless the consumer has
notified the financial institution that
transfers by that person are no longer
authorized.
3. Access device obtained through robbery,
fraud. An unauthorized electronic fund
transfer includes a transfer initiated by a
person who obtained the access device from
the consumer through fraud or robbery.
4. Forced initiation. An electronic fund
transfer at an automated teller machine
(ATM) is an unauthorized transfer if the
consumer is induced by force to initiate the
transfer.
Section 205.3—Coverage
(a) General
1. Accounts covered. The requirements of
the regulation apply only to accounts for
which an agreement for electronic fund
transfer services to or from the account has
been entered into between:
• The consumer and the financial
institution (including accounts for which an
access device has been issued to the
consumer, for example):
• The consumer and a third party (for
preauthorized debits or credits, for example),
when the account-holding institution has
received notice of the agreement and the
fund transfers have begun.
The fact that membership in an automated
clearing house requires a participating
financial institution to accept electronic fund
transfers to accounts at the institution does
not make every account of that institution
subject to the regulation.
2. Foreign applicability. Regulation E
applies to all persons (including branches
and other offices of foreign banks located in
the United States) that offer electronic fund
transfer services to residents of any state
(including resident aliens). It covers any
account located in the United States through
which electronic fund transfer services are
offered to a U.S. resident. This is the case
whether or not a particular transfer takes
place in the United States and whether or not
the financial institution is chartered or based
in the United States or a foreign country. The
regulation does not apply to a foreign branch
of a U.S. bank unless the electronic fund
transfer services are offered in connection
with an account held by the consumer in a
state as defined in § 205.(j).

10707

(b) Electronic Fund Transfer
1. Fund transfers covered. The term
electronic fund transfer includes:
• A deposit made at an ATM or other
electronic terminal (including a deposit in
cash or by check) provided a specific
agreement exists between the financial
institution and the consumer for electronic
fund transfers to or from the account to
which the deposit is made.
• Any transfer sent via an automated
clearing house. For example, social security
benefits under the U.S. Treasury’s directdeposit program are covered, even if the
listing of payees and payment amounts
reaches the account-holding institution by
means of a computer printout from a
correspondent bank.
• A preauthorized transfer credited or
debited to an account in accordance with
instructions contained on magnetic tape,
even if the financial institution holding the
account sends or receives a composite check.
• A transfer resulting from a debit-card
transaction, even if no electronic terminal is
involved at the time of the transaction, if the
consumer's asset account is subsequently
debited for the amount of the transfer.
2. Fund transfers not covered. The term
electronic fund transfer does not include:
• A payment that does not debit or credit
a consumer asset account, such as payroll
allotments to a creditor to repay a credit
extension that are deducted from salary
payments and not from consumer accounts,
or any payment made in currency by a
consumer to another person at an electronic
terminal.
• A preauthorized check drawn by the
financial institution on the consumer’s
account (such as an interest or other
recurring payment to the consumer or
another party), even if the check is computergenerated.
(c) Exclusions From Coverage
(c)(2) Check Guarantee or Authorization
Services
1. Memo posting. Under a check guarantee
or check authorization service, debiting of
the consumer’s account occurs when the
check or draft is presented for payment.
These services are exempt from coverage,
even when a temporary hold on the account
is memo-posted electronically at the time of
authorization.
(c)(3) Wire Transfers
1. Fedwire and ACH. If a financial
institution makes a fund transfer via an
automated clearing house (ACH) after
receiving funds via Fedwire or a similar
network, the transfer by the ACH is covered
by the regulation even though the Fedwire or
network transfer is exempt.
2. Article 4A. Financial institutions that
offer telephone-initiated Fedwire payments
are subject to the requirements of the UCC
section 4A-202, which encourages that
Fedwire payment orders be verified pursuant
to a security procedure established by
agreement between the consumer and the
receiving bank. These transfers are not
subject to Regulation E and the agreement is
not considered a telephone plan if the service
is offered separately and apart from any

10708

Federal Register / Vol. 59, No. 44 / Monday, March 7, 1994 / Proposed Rules

telephone bill-payment or other prearranged
plan normally subject to Regulation E.
3. Similar fund transfer systems. Examples
of fund transfer systems similar to Fedwire
include the Clearing House Interbank
Payments System (CHIPS), Society for
Worldwide Interbank Financial
Telecommunication (SWIFT), and Telex.
(c)(4) Securities and Commodities Transfers
1. Coverage. The securities exemption
applies to securities and commodities that
may be sold by a registered broker-dealer or
futures commission merchant, even when the
security or commodity itself is not regulated
by the Securities and Exchange Commission
or the Commodity Futures Trading
Commission.
2. Examples o f exempt and nonexempt
transfers. The exemption applies to a transfer
involving:
• A transfer initiated by a telephone order
to a stockbroker to buy or sell securities or
to exercise a margin call.
The exemption does not apply to a transfer
involving:
• A debit card that accesses a money
market mutual fund and that the consumer
uses for purchasing goods or services or
obtaining cash.
• A payment of interest or dividends into
the consumer’s account, for example, from a
brokerage firm or from a Federal Reserve
Bank (for government securities).
(c)(5) Automatic Transfers by AccountHolding Institution
1. Automatic transfers exempted. The
exemption applies to:
• Electronic debits or credits to consumer
accounts for check charges, stop-payment
charges, NSF charges, overdraft charges,
provisional credits, error adjustments, and
similar items that are initiated automatically
on the occurrence of certain events.
• Debits to consumer accounts for group
insurance available only through the
financial institution and payable only by
means of an aggregate payment from the
institution to the insurer.
• Electronic fund transfers between a thrift
institution and its paired commercial bank in
the state of Rhode Island, which are deemed
.under state law to be intra-institutional.
• Automatic transfers between a
consumer's accounts within the same
financial institution, even if the account
holders on the two accounts are not identical.
2. Automatic transfers not exempted.
Transfers between accounts of the consumer
at affiliated institutions (such as between a
bank and its subsidiary or within a holding
company) are not intra-institutional transfers,
and thus do not qualify for the exemption.
(c)(6) Telephone-Initiated Transfers
1. Written plan or agreement. A transfer
that the consumer initiates by telephone is
covered only if the transfer is made under a
written plan or agreement between the
consumer and the financial institution
making the transfer. The following do not, by
themselves, constitute a written plan or
agreement:
• A hold-harmless agreement on a
signature card that protects the institution if
the consumer requests a transfer.

• A legend on a signature card, periodic
statement, or passbook that limits the number
of telephone-initiated transfers the consumer
can make from a savings account because of
Regulation D (12 CFR part 204) reserve
requirements.
• An agreement permitting the consumer
to approve by telephone the rollover of funds
at the maturity of an instrument.
2. Examples o f covered transfers. When a
written plan or agreement has been entered
into, a transfer initiated by a telephone call
from a consumer is covered even though:
• An employee of the financial institution
completes the transfer manually, for
example, by means of a debit memo or
deposit slip.
• The consumer is required to make a
separate request for each transfer.
• The consumer uses the plan
infrequently.
• The consumer initiates the transfer via a
facsimile machine.

issued. If the replacement device permits
either additional or fewer types of electronic
fund transfer services, new disclosures or a
change-in-terms notice are required.
2. Renewal or substitution by a successor
institution. A successor institution is an
entity that replaced the original financial
institution (for example, through a corporate
merger or acquisition) or that has acquired
accounts or assumed the operation of an
electronic fund transfer system.

(b) Unsolicited Issuance
1. Compliance. A financial institution may
issue an unsolicited access device (such as a
combination of a debit card and PIN) if the
institution’s ATM system has been
programmed not to accept the access device
until after the consumer requests and the
institution validates the device. Merely
instructing a consumer not to use an
unsolicited debit card and PIN until after the
institution has satisfactorily verified the
consumer's identity does not comply with
(c)(7) Small Institutions
the regulation.
2. PINS. A financial institution may
1. Coverage. This exemption is limited to
preauthorized transfers; institutions that offer impose no liability on the consumer for
unauthorized transfers involving an
electronic fund transfer services other than
unsolicited access device until the device
preauthorized transfers must comply with
the applicable sectiuas of the regulation as to becomes an “accepted access device” under
the regulation. A card-PIN combination can
such services. The preauthorized transfers
be treated as an accepted access device once
remain subject, however, to sections 913,
the card and PIN have been used by the
915. and 916 of the act and § 205.10(e) and
consumer.
are therefore exempt from UCC Article 4A.
3. Functions of PIN. If an institution issues
Section 205.4— General Disclosure
a personal identification number at the
Requirements; Jointly Offered Services
consumer's request, the issuance may
constitute both a way of validating the debit
(a) Form o f Disclosures
card and the means to identify the consumer
1. General. Although no particular rules
(required as a condition of imposing liability
govern such matters as type size, number of
for unauthorized transfers).
pages, or the relative conspicuousness of
4. Verification o f identity. A financial
various terms, the disclosures must be in a
institution may use other means, not just
clear and readily understandable written
those listed in the regulation, to verify the
form that the consumer may retain. Numbers consumer’s identity. However, if an
or codes are considered readily
institution fails to correctly verify the
understandable if explained elsewhere on the
consumer’s identity, even if reasonable
disclosure.
means were used, and an imposter succeeds
2. Foreign language disclosures.
in having the device validated, the consumer
Disclosures may be made in languages other
is not liable for any unauthorized transfers
than English, provided they are available in
from the account.
English upon request
Section 205.5—Issuance o f Access Devices
1. Coverage. The provisions of this section
limit the circumstances under which a
financial institution may issue an access
device to a consumer. Making an additional
account accessible through an existing access
device is equivalent to issuing an access
device and is subject to the limitations in this
section.
(a) Solicited Issuance
Paragraph (a)(1)
1. Joint account. For joint accounts, a
financial institution may issue an access
device to each account holder if the
requesting holder specifically authorizes the
issuance.
Paragraph (a)(2)
1. One-for-one rule. In issuing a renewal or
substitute access device, a financial
institution may not provide additional
devices. For example, only one new card and
PIN may replace a card and PIN previously

Section 205.6—Liability of Consumer for
Unauthorized Transfers
(a) Conditions for Liability
1. Means o f identification. A financial
institution may use various means for
identifying the consumer to whom the access
device is issued including but not limited to:
• Electronic or mechanical confirmation
(such as a PIN).
• Comparison of the consumer’s signature,
fingerprint, or photograph.
2. Multiple users. When more than one
access device is issued for an account, the
financial institution may, but need not,
provide a separate means to identify each
user of the account.
(b) Limitations on Am ount o f Liability
1. Application o f liability provisions. There
are three possible tiers of consumer liability
for unauthorized electronic fund transfers
depending on the situation. A consumer may
be liable for (1) up to $50; (2) up to $500; or
(3) an unlimited amount. More than one tier

Federal Register / Vol. 59, No. 44 / Monday, March 7, 1994 / Proposed Rules
may apply to a given situation because each
corresponds to a different (sometimes
overlapping) time period.
2. Consumer negligence. Negligence by the
consumer cannot be used as the basis for
imposing greater liability than is permissible
under Regulation E. Thus, consumer
behavior that may constitute negligence
under state law, such as writing the PIN on
the ATM card or on a piece of paper kept
with the card, does not affect the consumer’s
liability for unauthorized transfers. The
extent of the consumer's liability is
determined solely by the consumer's
promptness in reporting the loss or theft of
an access device. Similarly, no agreement
between the consumer and an institution
may impose greater liability on the consumer
for an unauthorized transfer than the limits
provided in Regulation E.

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

10709

device or an unauthorized transfer, the notice
effectively limits the consumer’s liability if
the consumer otherwise identifies
sufficiently the account in question. For
example, the consumer may identify the
account by the name on the account and the
type of account in question.
Section 205.7—Initial Disclosures

(a) Timing o f Disclosures
1. Early disclosures. Disclosures given
earlier than the regulation requires (for
example, when the consumer opens a
checldng account) need not be repeated when
the consumer later signs up for an electronic
fund transfer service if the electronic fund
transfer agreement is between the consumer
and a third party who will initiate
preauthorized transfers to or from the
consumer’s account, unless the terms and
conditions required to be disclosed differ
(b)( 1) Timely Notice Given
from those previously given. If, on the other
1. $50 limit applies. The basic liability
hand, the electronic fund transfer agreement
limit is S50. For example, the consumer’s
is directly between the consumer and the
card is lost or stolen on Monday and the
account-holding institution, the disclosures
consumer learns of the loss or theft on
must be given in close proximity to the event
Wednesday. If the consumer notifies the
requiring disclosure, for example, signing up
financial institution within two business
for a service.
days of learning of the loss or theft (by
2. Lack o f prenotification o f direct deposit.
midnight Friday), the consumer’s liability is
In some instances, before direct deposit of
limited to $50 or the amount of the
government payments such as Social
unauthorized transfers that occurred before
Security takes place, the consumer and the
notification, whichever is less.
financial institution both must complete a
2. Knowledge o f loss or theft of access
Form 1199A (or comparable form providing
device. The fact that a consumer has received
notice to the institution) and the institution
a periodic statement that reflects
can make disclosures at that time. If an
unauthorized transfers may be a factor in
institution has not received advance notice
determining whether the consumer had
that direct deposits are to be made to a
knowledge of the loss or theft, but cannot be
consumer’s account, the institution must
deemed to represent conclusive evidence that
provide the required disclosures as soon as
the consumer had such knowledge.
reasonably possible after the first direct
(b)(2) Timely Notice Not Given
deposit is made, unless the institution has
previously given disclosures.
1. $500 limit applies. The second tier of
3. Addition of new accounts. If a consumer
liability is $500. For example, the consumer's
opens a new account permitting electronic
card is stolen on Monday and the consumer
(b)(4) Extension o f Time Limits
fund transfers in a financial institution where
learns of the theft that same day. The
1. Extenuating circumstances. Examples of the consumer already maintains an account
consumer reports the theft on Friday. The
that provides for electronic fund transfer
circumstances that require extension of the
$500 limit applies because the consumer
services, the institution need only disclose
notification periods under this section
failed to notify the financial institution
terms and conditions that differ from .those
include the consumer’s extended travel or
within two business days of learning of the
previously given.
hospitalization.
theft (which would have been by midnight
4. Addition o f new electronic fu nd transfer
Wednesday). How much the consumer is
(b)(5) Notice to Financial Institution
services. If an electronic fund transfer service
actually liable for, however, depends on
1. Receipt o f notice. A financial institution
is added to a consumer’s account and is
when the unauthorized transfers take place.
is considered to have received notice for
subject to terms and conditions different
In the example above, assume an
from those described in the initial
purposes of limiting the consumer’s liability
unauthorized transfer for $100 was made on
disclosures, disclosures pertaining to the
if notice is given in a reasonable manner,
Tuesday, and another unauthorized transfer
additional service must be given. The
even if the consumer uses an address or
for $600 occurred on Thursday. As the
disclosures must be provided either when the
telephone number other than the one
consumer is liable for the amount of the loss
consumer contracts for the new service or
specified by the institution.
that occurred within the first two business
before the first electronic fund transfer is
2. Notice by third pdrty. Notice to a
days (but no more than $50), plus the amount
financial institution by a person acting on the made using the new service.
of the unauthorized transfers that occurred
5. Addition o f service in interchange
consumer’s behalf is considered valid under
after the first two business days and before
systems. If a financial institution joins an
this section. For example, if a consumer is
the consumer gives notice, the consumer’s
interchange or shared network system
total liability is $500 ($50 of the $100 transfer hospitalized and unable to report the loss or
theft of an access device, notice is considered (providing access to terminals operated by
plus $450 of the $600 transfer in this
other institutions in the system), new
given when someone acting on the
example). But if $600 was taken on Tuesday
disclosures are required for any additional
consumer’s behalf notifies the bank of the
and $100 was taken on Thursday, the
services not previously available to
loss or theft
consumer’s maximum liability would be
consumers if the terms and conditions for the
3. Content o f notice. Notice to a financial
$150.
additional services differ from those
institution is considered given when a
(b)(3) Periodic Statement; Timely Notice Not
previously disclosed.
consumer takes reasonable steps to provide
Given
6. Disclosures covering all electronic fund
the institution with the pertinent account
transfer services offered. An institution may
1. Unlimited liability applies. The standard information. Even when the consumer is
unable to provide an account number or card provide disclosures covering all electronic
of unlimited liability applies if unauthorized
fund transfer services that it offers, even if
transfers appear on a periodic statement, and number in reporting a lost or stolen access

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some consumers have not arranged to use all
services.
(b) Content o f Disclosures
(b)( 1) Liability o f Consumer
1. No liability imposed by financial
institution. If a financial institution chooses
to impose zero liability for unauthorized
electronic fund transfers, it need not provide
liability disclosures. If the institution later
decides to impose liability, however, it must
first provide the disclosures.
2. Preauthorized transfers. If the only
electronic fund transfers from an account are
preauthorized transfers, an institution must
disclose that liability could arise if the
consumer fails to report unauthorized
transfers reflected on a periodic statement in
order to impose liability on the consumer.
The institution must also disclose the
telephone number and address for reporting
unauthorized transfers.
3. Additional information. At the
institution's option, the summary of the
consumer’s liability may include advice on
promptly reporting unauthorized transfers or
the loss or theft of the access device.
(b)(2) Telephone Number and Address
1. Disclosure o f telephone numbers. An
institution may use the same or different
telephone numbers in the disclosures for the
purpose of:
• Reporting the loss or theft of an access
device or possible unauthorized transfers;
• Inquiring about the receipt of a
preauthorized credit;
• Stopping payment of a preauthorized
debit; and
• Giving notice of an error.
The telephone number need not be
incorporated into the text of the disclosure;
for example, the institution may instead
insert a reference to a telephone number that
is readily available to the consumer, such as
“Call your branch office. The number is
shown on your periodic statement.”
However, an Institution must provide a
specific telephone number and address on or
with the disclosure statement for reporting a
lost or stolen access device or a possible
unauthorized transfer.
(b)(4) Types o f Transfers; Limitations
1. Security limitations. Information about
limitations on the frequency and dollar
amount of transfers generally must be
disclosed In detail, even if related to security
aspects of the system. If the confidentiality of
certain details is essential to the security of
an account or system, however, these details
may be withheld (but the fact that limitations
exist must still be disclosed). For example, an
institution limits cash ATM withdrawals to
$100 per day. The institution may disclose
that certain daily withdrawal limitations
apply and need not disclose that the
limitations may not always be enforced (such
as during periods when its ATMs' are “off­
line").
2. Restrictions on certain deposit accounts.
A limitation on account activity that restricts
the consumer’s ability to make electronic
fund transfers must be disclosed even if the
restriction also applies to transfers made by
nonelectronic means. For example.

Regulation D restricts the number of
payments to third parties that may be made
from a money market deposit account; an
institution that does not execute EFTs in
excess of those limits must disclose the
restriction as a limitation on the frequency of
electronic fund transfers.
3. Preauthorized transfers. Financial
institutions are not required to list
preauthorized transfers among the types of
transfers that a consumer can make.
(b)(5) Fees
1. Disclosure o f fees. A per-item fee for
electronic fund transfers must be disclosed
even if the same fee is imposed on
nonelectronic transfers. If a per-item fee is
imposed only under certain conditions, such
as when the transactions in the cycle exceed
a certain number, those conditions must be
disclosed. Itemization of the various fees may
be provided on the disclosure statement or
on an accompanying document. In the latter
case, the statement must refer to the
accompanying document.
2. Fees also applicable to non-electronic
fu nd transfer. An institution is required to
disclose all fees that are attributable to
electronic fund transfers or the right to make
them. Fees that are relevant to both electronic
and nonelectronic transfers (for example,
minimum balance fees, stop-payment fees or
account overdrafts) may, but need not, be
disclosed. An institution is not required to
disclose fees for inquiries at an ATM since
no transfer of funds is involved.
3. Interchange system fees. Fees paid by
the account-holding institution to the
operator of a shared or interchange ATM
system need not be disclosed, unless
imposed on the consumer by the accountholding institution. Fees for use of an ATM
that are debited directly to the consumer’s
account by an institution other than the
account-holding Institution (for example, fees
included in the transfer amount) need not be
separately disclosed.
(b)(9) Confidentiality
1. Information provided to third parties.
The institution must describe the
circumstances under which any information
relating to an account to or from which
electronic fund transfers are permitted, not
just information concerning those electronic
transfers, will be made available to third
parties. The term “third parties” includes
affiliates such as other subsidiaries of the
same holding company.
(b)(10) Error Resolution
1. Substantially similar. The error
resolution notice must be substantially
similar to the model form in appendix A. An
Institution may delete inapplicable
provisions (for example, the requirement for
written confirmation of an oral notification),
substitute substantive state law requirements
affording greater consumer protection than
Regulation E, or use different wording so
long as the substance of the notice remains
the same.
2. Exception from provisional crediting. If
a financial institution takes advantage of the
longer time periods for resolving errors under
§ 205.11(c)(3) (for transfers initiated outside
the United States, or resulting from POS

debit-card transactions), it must disclose
these longer time periods. Similarly, an
institution that relies on the exception from
provisional crediting in § 205.11(c)(2) for
accounts subject to Regulation T must
disclose accordingly.
Section 205.8—Change in Terms Notice:
Error Resolution Notice
(a) Change in Terms Notice
1. Form o f notice. No specific form or
wording is required for a change in terms
notice. The notice may appear on a periodic
statement, or may be given by sending a copy
of a revised disclosure statement, provided
attention is directed to the change (for
example, in a cover letter referencing the
changed term).
2. Changes not requiring notice. The
following changes do not require disclosure:
• Closing some of an institution’s ATMs
• Cancellation of an access device
3. Limitations on transfers. When the
initial disclosures omit details essential to
the security of the account or system, a
subsequent increase in those limitations need
not be disclosed if secrecy is still essential.
If, however, an institution had no limits
when the initial disclosures were given and
it now wishes to impose limits for the first
time, it must disclose at least the fact that
limits have been adopted. (See also
§ 205.7(b)(4) and the related commentary.)
4. Change in telephone number or address.
A change in terms notice is not required
when a financial institution changes the
telephone number or address used for
reporting possible unauthorized transfers, but
the change must be disclosed under § 205.6
as a condition of imposing liability on the
consumer for unauthorized transfers. (See
also § 205.6(a) and the related commentary.)
(a)(2) Prior Notice Exception
1. Notice o f permanent change included in
periodic statement. If a change under this
paragraph is made permanent, the financial
Institution may include the written notice to
the consumer on or with a periodic statement
sent within 45 calendar days of the
permanent change.
(b) Error Resolution Notice
1. Change between annual and periodic
notice. If an institution switches from an
annual to a periodic notice, or vice versa, the
first notice under the new method must be
sent no later than 12 months after the last
notice under the old method.
Section 205.9—Receipts at Electronic
Terminals; Periodic Statements
(a) Receipts at Electronic Terminals

1. Receipts furnished only on request. The
regulation requires that a receipt be “made
available." A financial institution may
program its electronic terminals to provide a
receipt only to consumers who elect to
receive one.
2. Third party providing receipt. An
account-holding institution may make
terminal receipts available through third
parties such as merchants or other financial
institutions.
3. Inclusion of promotional material. A
financial institution may include

Federal Register / Vol. 59, No. 44 / Monday, March 7, 1994 / Proposed Rules
promotional material on receipts if the
required information is set forth clearly (for
example, by separating it from the
promotional material). In addition, a
consumer must not be required to surrender
the receipt or that portion containing the
required disclosures in order to take
pdvantage of a promotion.
4. Transfer not completed. The receipt
requirement does not.apply to a transfer that
is initiated but not completed, for example,
if the ATM is out of currency or the
consumer decides not to complete the
transfer.
5. Receipts not furnished due to
inadvertent error. If a receipt is not provided
to the consumer because of a bona fide
unintentional error, such as the terminal
running out of paper or the mechanism
jamming, no violation results if the financial
institution maintains procedures reasonably
adapted to avoid such an error.
6. Individual transfers. If the consumer
makes multiple transfers at the same time,
the financial institution may document them
on a single or on separate receipts.

are similar in function such as share draft or
NOW accounts and checking accounts. In a
shared system, for example, when a credit
union member initiates transfers to or from
a share draft account at a terminal owned or
operated by a bank, the receipt may identify
a withdrawal from the account as a
“withdrawal from checking.”
5. Point-of-sale transactions. There is no
prescribed terminology for identifying a
transfer at a merchant’s POS terminal. A
transfer may be identified, for example, as a
purchase, a sale of goods or services, or a
payment to a third party. When a consumer
obtains cash from a POS terminal in addition
to purchasing goods, or obtains cash only, the
documentation need not differentiate the
transaction from one involving the purchase
of goods.

(a)(1) Am ount
1. Disclosure of transaction fee. The
required display of a fee amount on or at the
terminal may be accomplished by displaying
the fee on the terminal screen before the
consumer has initiated the transfer if
displayed for a reasonable duration.

(a)(5) Terminal Location
1. Location code. A code or terminal
number identifying the terminal where the
transfer is initiated may be given as part of
a transaction code.
2. Omission o f city name. The city may be
omitted if the generally accepted name (such
as a branch name) contains the city name.

(a)(4) Identification
1. Unique identification. A number or code
used by a financial institution to identify the
consumer’s account or the access device used
to initiate the transfer need be unique only
within that financial institution.

(a)(2) Date
1. Calendar date. The receipt must disclose Paragraph (a)(5)(i)
the calendar date on which the consumer
1. Street address. The address should
include number and street (or intersection);
uses the electronic terminal. An accounting
or business date may be disclosed in addition the number (or intersecting street) may be
if the dates are clearly distinguished.
omitted if the street alone uniquely identifies
the terminal location.
(a)(3) Type
Paragraph (a)(5)(ii)
1. Identifying transfer and account.
Examples identifying the type of transfer and
1. Generally accepted name. Examples of
the type of the consumer’s account to or from a generally accepted name for a specific
which funds are transferred include
location include a branch of the financial
“withdrawal from checking,” “transfer from
institution, a shopping center, or an airport.
savings to checking,” or "payment from
Paragraph (a)(5)(iii)
savings.”
1. Name o f owner or operator o f terminal.
2. Exception. Identification of an account
Examples of an owner or operator of a
is not required when the consumer can
terminal are a financial institution or a retail
access only one asset account at a particular
time or terminal, even if the access device
merchant.
can normally be used to access more than
one account. For example, the consumer may (a)(6) Third Party Transfer
1. Omission o f third-party name. The
be able to access only one account at
receipt need not disclose the third-party
terminals operated by institutions other than
name if the name is provided by the
the account-holding institution, or to access
consumer in a form that is not machine
only one account when the terminal is off­
readable (for example, if the consumer
line. If a consumer can use an access device
indicates the payee by depositing a payment
at a terminal to debit an asset account and
stub into the ATM). If, on the other hand, the
also to access a credit line, the exception is
consumer keys in the identity of the payee,
still available.
3. Access to m ultiple accounts. If the
the receipt must identify the payee by name
or by using a code that is explained
consumer can use an access device to make
transfers to or from different accounts of the
elsewhere on the receipt.
same type, the terminal receipt must specify
2. Receipt as proof o f payment.
which account was accessed, such as
Documentation required under this
“withdrawal from checking I” or
regulation constitutes prima facie proof of a
“withdrawal from checking U.” If only one
payment to another person, except in the
account besides the primary checking
case of a terminal receipt documenting a
account can be debited, the receipt can
deposit.
identify the account as “withdrawal from
(b) Periodic Statements
other account.”
4. Generic descriptions. Generic
• 1. Periodic cycles. Periodic statements may
descriptions may be used for accounts that
be sent on a cycle that is shorter than

10711

monthly. The statements must correspond to
periodic cycles that are reasonably equal, that
is, do not vary by more than four days from
the regular period. The requirement of
reasonably equal cycles does not apply when
an institution changes cycles for operational
or other reasons, such as to establish a new
statement day or date.
2. Defining a cycle. Financial institutions
must provide relevant information for the
cycle or period since the last statement was
issued. For example, an institution regularly
issues quarterly periodic statements at the
end of March, June, September and
December. If the consumer initiates an
electronic fund transfer in February, an
interim statement would be provided. The
interim statement should provide relevant
information for the period since the last
statement was issued, (the months of January
and February in this example). The regularly
scheduled statement would provide
information from the date of the interim
statement.
3. Inactive accounts. A financial institution
need not send statements to consumers
whose accounts are inactive as defined by the
institution.
4. Customer pickup. A financial institution
may permit, but may not require, consumers
to call for their periodic statements.
5. Periodic statements limited to electronic
fund transfer activity. A financial institution
that uses a passbook as the primary means for
displaying account activity, but also allows
the account to be debited electronically, may
comply with the periodic statement
requirement by providing a statement that
reflects only the electronic fund transfers and
other required disclosures (such as charges,
account balances, and address and telephone
number for inquiries). (See § 205.9(c)(l)(i) for
the exception applicable to preauthorized
transfers for passbook accounts.)
6. Codes and accompanying documents.
To meet the documentation requirements for
periodic statements, a financial institution
may:
• Include copies of terminal receipts to
reflect transfers initiated by the consumer at
electronic terminals;
• Enclose posting memos, deposit slips,
and other documents that, together with the
statement, disclose all the required
information;
• Use codes for names of third parties or
terminal locations and explain the
information to which the codes relate on an
accompanying document.
(b)(1) Transaction Information
1. Information obtained from others. While
financial institutions must maintain
reasonable procedures to insure the integrity
of data obtained from another institution, a
merchant, or other third parties, independent
verification of the data for each transfer is not
required for purposes of the periodic
statement disclosures.
Paragraph (b)(lHQ
1. Incorrect deposit amount. If the financial
institution determines that the amount
actually deposited at an ATM is different
from the amount entered by the consumer,
the institution need not immediately notify

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Federal Register / Vol. 59, No. 44 / Monday, March 7, 1994 / Proposed Rules

the consumer about the discrepancy. The
periodic statement reflecting the deposit may
either show the correct amount of the
deposit, or the amount entered by the
consumer along with the institution's
adjustment.
Paragraph (bMlHiii)
1. Type o f transfer. There is no prescribed
terminology for describing the type of
transfer. It is sufficient to show the amount
of the transfer in the debit or the credit
column if other information on the statement,
such as a terminal location or third-party
name, enables the consumer to identify the
type of transfer.
Paragraph (bMlMM
1. Nonproprietary terminal in network. An
institution need not reflect on the periodic
statement the street addresses, identification
codes, or terminal numbers for transfers
initiated in a shared or interchange system at
a terminal operated by an institution other
than the account-holding institution. The
statement must, however, specify the entity
which owns or operates the terminal, plus
the city and state.
Paragraph (bMltfv)
1. Recurring paym ents by government
agency. The third-party name for recurring
payments from federal, state or local
governments need not list the particular
agency. For example, “U.S. gov’t” or “N.Y.
sal" will suffice.
2. Consumer as third-party payee. If a
consumer makes an electronic fund transfer
to another consumer, the financial institution
must identify the recipient by name (not just
by an account number, for example).
3. Terminal location/third party. A single
entry may be used to identify both the
terminal location and the name of the third
party to or from whom funds are transferred.
For example, if a consumer purchases goods
from a merchant, the name of the party to
whom funds are transferred (the merchant)
and the location of the terminal where the
transfer is initiated will be satisfied by a
disclosure such as "XYZ Store, Anytown,
Ohio.”
4. Account-holding institution as third
party. Transfers to the account-holding
institution, by ATM for example, must show
the institution as the recipient, unless other
information on the statement, for example,
"loan payment from checking,” clearly
indicates that the payment was to the
account-holding institution.
5. Consistency in third-party identity. The
periodic statement must disclose a thirdparty name as it appeared on the receipt,
whether it was, for example, the “dba"
(doing business as) name of the third party
or the parent corporation’s name.
6. Third-party identity on deposits at
electronic terminal. A financial institution
need not identify third parties whose names
appear on checks, drafts, or similar paper
instruments deposited to the consumer’s
account at an electronic terminal.
(b)(3) Fees

1.

Disclosure o f fees. The fees disclosed

may include fees for electronic fund transfers
and for other non-electronic services and

both fixed fees and per-item fees; they may
be given as a total or may be itemized in part
or in full.
2. Fees in interchange system. An accountholding institution must disclose any fees it
imposes on the consumer for electronic fund
transfer services, including fees for ATM
transactions in an interchange or shared
ATM system. Fees for use of an ATM
imposed on the consumer by an institution
other than the account-holding institution
and included in the amount of the transfer
by the terminal-operating institution need
not be separately disclosed on the periodic
statement
3. Finance charges. The requirement to
disclose any fees assessed against the account
does not include a finance charge imposed
on the account during the statement period.
(b)(4) Account Balances
1. Opening and closing balances. The
opening and closing balances in the
consumer’s account must reflect both
electronic fund transfers and other account
activity.
(b)(5) Address and Telephone Number for
Inquiries
(b)(6) Telephone Number for Preauthorized
Transfers
1. Telephone number. A single telephone
number, preceded by the “direct inquiries
to” language, will satisfy the requirements of
§ 205.9(b)(5) and (6).
(c) Exceptions to the Periodic Statement
Requirements for Certain Accounts
1. Transfers between accounts. The
regulation provides an exception from the
periodic statement requirement for certain
intra-institutional transfers between a
consumer’s accounts. The financial
institution must still comply with the
applicable periodic statement requirements
for any other electronic transfers to or from
the account For example, a Regulation E
statement must be provided quarterly for an
account that also receives payroll deposits
electronically, or for any month in which an
account is also accessed by a withdrawal at
an ATM.
(d) Documentation for Foreign-Initiated
Transfers
1. Foreign-inrtiated transfers. An
institution must make a good faith effort to
provide all required Information for foreign
initiated transfers. For example, even though
the institution may not be able to provide a
specific terminal location, it should identify
the country and city in which the transfer
was initiated.
Section 205.10—Preauthorized Transfers
(a) Preauthorized Transfers to Consumer's
Account
(a)(1) Notice by Financial Institution
1. Content. No specific language is required
in the notice regarding receipt of a
preauthorized transfer. Identifying the
deposit is sufficient; however, simply
providing the current account balance Is not.

2. Notice o f credit The financial institution
may use separate methods of notice for

different types or series of preauthorized
transfers. The institution need not offer
consumers a choice of notice methods.
3. Positive notice. A periodic statement
sent within two business days of the
scheduled transfer, showing the transfer, can
serve as notice of receipt
4. Negative notice. With a negative-notice
system, a financial institution must provide
notice If payment is not received by the close
of the second business day. If preauthorized
transfers cease, the institution should send
negative notices following at least three
separate missed payments; or it may notify
the consumer earlier that It believes the
transfers have stopped and that it will no
longer send negative notices. The absence of
a deposit entry will not serve as negative
notice for purposes of a negative-notice
system.
5. Telephone notice. If a financial
institution uses the telephone notice option,
it should be able in most instances to verify
during a consumer’s initial telephone inquiry
whether a transfer was received. The
institution must respond within two business
days to any inquiry not answered
immediately.
6. Phone number for passbook accounts.
The financial institution may use any
reasonable means necessary to provide the
telephone number to consumers with
passbook accounts that can only be accessed
by preauthorized credits and that do not
receive periodic statements. For example, it
may print the telephone number in the
passbook, or include the number with the
annual error resolution notice.
7. Telephone line availability. To satisfy
the readily-evaileble standard, the financial
institution must provide enough telephone
lines so that consumers get a reasonably
prompt answer. The institution need only
provide telephone service during normal
business hours. Within its primary service
area, an institution must provide a local or
toll-free telephone number. It need not
provide a toll-free number or accept collect
long-distance calls from outside the area
where it normally conducts business.(b) Written Authorization for Preauthorized
Transfers From Consumer's Account
1. Preexisting authorizations. The financial
institution need not require a new
authorization before changing from paperbased to electronic debiting merely because
the existing authorization does not specify
that debiting is to occur electronically or
specifies that the debiting is to occur by
paper means. A new authorization also need
not be obtained when a successor institution
begins collecting payments. For example,
when an institution acquires the servicing
rights for a mortgage loan, it may rely on the
original proauthorized transfer authorization.
2. Authorization obtained by third party.
The account-holding financial institution
does not violate this regulation when a thirdparty payee foils to obtain the authorization
in writing or to give a copy to the consumer;
rather, it is the third-party payee who is in
violation of the regulation.
3. Written authorization for preauthorized
transfers. The requirement that preauthorized
electronic fond transfers be authorized by the

Federal Register / Vol. 59, No. 44 / Monday, March 7, 1994 / Proposed Rules
consumer “only in writing” cannot be met by
a payee’s signing a written authorization on
the consumer’s behalf with only an oral
authorization from the consumer. A tape
recording of a telephone conversation with a
consumer who agrees to preauthorized debits
also does not constitute written authorization
for purposes of this provision.
4. Use o f a confirmation form. A financial
institution or designated payee may comply
with the requirements of this section in
various ways. For example, a payee may
provide the consumer with two copies of a
form to permit preauthorized transfers from
the consumer’s account and require the
consumer to sign and return one, while
retaining the second copy. .
5. Similarly authenticated. An example of
a consumer's authorization that is not in the
form of a signed writing but is instead
“similarly authenticated” is a consumer’s
authorization via a home computer. For a
home banking system to satisfy the
requirements of this section, there must be
some means to identify the consumer (such
as a security code), and the consumer must
have the ability to obtain a printed copy of
the authorization (such as by printing it on
the consumer’s printer or by the payee’s
making a copy for the consumer).
(c) Consumer's Right To Stop Payment
1. Stop-payment order. The financial
institution must honor an oral stop-payment
order made at least three business days
before a scheduled debit. If the debit item is
resubmitted, the institution must continue to
honor the stop-payment order, for example,
by suspending all subsequent payments to
the payee-originator until the consumer
notifies the institution that payments should
resume.
2. Revocation o f authorization. Once the
financial institution has been notified that
the consumer’s authorization is no longer
valid, it must block all future payments for
the particular debit transmitted by the
designated payee-originator. The institution
may not wait for the payee-originator to
terminate the automatic debits. The
institution may confirm that the consumer
has informed the payee-originator of the
revocation by requiring, for example, a copy
of the consumer’s revocation as written
confirmation to be provided within fourteen
days of an oral notification. If the institution
does not receive the required written
confirmation within the fourteen-day period,
it may pay subsequent debits to the account.
(d) Notice o f Transfers Varying in Amount
(d)(1) Notice
1. Preexisting authorizations. A financial
institution holding the consumer's account
does not violate this regulation if the
designated payee fails to provide notice of
varying amounts.
(d)(2) Range
1. Range. Financial institutions that elect
to provide the consumer with a specified
range of amounts for debiting (in lieu of
providing the notice of transfers varying in
amount) must provide a range that could
plausibly be anticipated by the consumer.
For example, if the transfer is for payment of

a gas bill, an appropriate range might be
based on the highest bill in winter and the
lowest bill in summer.
(e) Compulsory Use
(e)(1) Credit
1. Loan payments. Creditors may not
require repayment of loans by electronic
means. A creditor may offer a program with
a reduced annual percentage rate or other
cost-related incentive for an automatic
repayment feature, provided the program
with the automatic payment feature is not the
only loan program offered by the creditor for
the type of credit involved. Examples
include:
• Mortgages with graduated payments in
which a pledged savings account is
automatically debited during an initial
period to supplement the monthly payments
made by the borrower.
• Mortgage plans calling for preauthorized
biweekly payments that are debited
electronically to the consumer’s account and
produce a lower total finance charge.
2. Overdraft. The provision allowing
institutions to require the automatic
repayment of an overdraft credit plan applies
even if the overdraft extension is charged to
an open-end account that may be accessed by
the consumer in ways other than by
overdrafts.
(e)(2) Employment or Government Benefit
1. Payroll. Employers are subject to the
act’s prohibition against compulsory use of
electronic fund transfers as a condition of
employment. For example, a financial
institution (as an employer) may not require
its employees to receive their salary by direct
deposit to that same institution. An employer
may, however, require direct deposit of
salary by electronic means if employees-are
given a choice of institutions that would
receive the direct deposit. Alternatively, an
employer may give employees the choice of
having their salary deposited at a particular
institution, or receiving their salary by check
or cash.
Section 205.11—Procedures for Resolving
Errors
(a) Definition o f Error
1. Terminal location. With regard to
deposits at an ATM, the consumer’s request
for the terminal location or other information
triggers the error resolution procedures. The
financial institution need only provide the
consumer with the ATM location if it has
captured that information with regard to
deposits. If the consumer merely calls to
ascertain whether a deposit made via ATM,
preauthorized transfer, or any other type of
electronic fund transfer was credited to the
account, without asserting an error, the error
resolution procedures do not apply.
2. Loss or theft o f access device. A financial
institution is required to comply with the
error resolution procedures of this section
when a consumer reports the loss or theft of
an access device if the consumer also alleges
possible unauthorized use as a consequence
of the loss or theft.
3. Error asserted after account closed. The
financial institution must comply with-the

10713

error resolution procedures when a consumer
properly asserts an error, even if the account
has been closed.
4. Request for documentation or
information. Requests for documentation or
other information must be treated as errors
unless it is clear that the request by the
consumer is only for duplicate copies for tax
or other record-keeping purposes.
(b) Notice o f Error From Consumer
(b)(1) Timing; Contents
1. Content o f error notice. The notice of
error is effective even if it does not contain
the consumer’s account number, so long as
the financial institution is able to identify the
account in question. For example, the
consumer could provide a social security
number or other unique means of
identification.
2. Requirement o f an affidavit. While a
financial institution may require the
consumer to sign an affidavit relating to a
notice of error, it may not delay initiating or
completing an investigation pending receipt
of the affidavit.
3. Statement held for consumer. When a
consumer has arranged for periodic
statements to be held until picked up, the
statement for a particular cycle is deemed to
have been transmitted on the date the
financial institution first makes the statement
available to the consumer.
4. Failure to provide statement. When a
financial institution fails to provide the
consumer with a periodic statement, a
request for a copy is governed by this section
if the consumer gives notice within 60 days
from the date on which the statement should
have been transmitted.
5. Discovery o f error by institution. The
error resolution procedures of this section
apply only when a notice of error is received
from the consumer. If the financial
institution itself discovers and corrects an
error, it need not comply with the
procedures.
6. Notice at particular phone number or
address. A financial institution may require
the consumer to give notice only at the
telephone number or address disclosed by
the institution, provided the institution
maintains reasonable procedures to refer the
consumer to the specified telephone number
or address if the consumer attempts to give
notice to the institution in a different
manner.
(b)(2) Written Confirmation
1. Written confirmation-of-error notice. If
the consumer sends a written confirmation of
error to the wrong address, the institution
must process the confirmation through
normal procedures. But the institution need
not provisionally credit the consumer’s
account if the written confirmation is
delayed beyond 10 business days because it
was sent to the wrong address.
(c) Time Limits and Extent o f Investigation
1. Notice to consumer. Unless otherwise
indicated in this section, the financial
institution may provide the required notices
to the consumer either orally or in writing.
2. Written confirmation o f oral notice. A
financial institution must begin its

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Federal Register / Vol. 59, No. 44 / Monday, March 7, 1994 / Proposed Rules

investigation promptly upon receipt of an
oral notice. It may not delay until it has
received a written confirmation.
3. No charge for error resolution. The
financial institution may not impose charges
for any aspect of the error-rasolution process,
including charges for documentation or
investigation.
4. Correction without investigation. A
financial Institution may make, without
investigation, a final correction to a
consumer’s account in the amount or manner
alleged by the consumer to be In error, but
must comply with all other applicable
requirements of § 205.11.
5. Correction notice. A financial institution
may include the notice of correction on a
periodic statement that is mailed or delivered
within the 10-business-day or 45-calendarday time limits and that clearly identifies the
correction to the consumer’s account.
Whether such a mailing will be prompt
enough to satisfy the requirements of this
section must be determined by the
institution, taking into account the specific
facts involved.
6. Correction o f an error. If the financial
institution determines an error occurred,
within either the 10-day or 45-day period, it
shall correct the error (subject to the liability
provisions of § 205.6 (a) and (b)) including,
where applicable, the crediting of interest
and the refunding of any fees imposed by the
institution. In a combined credit/electronic
fund transfer transaction, for example, the
institution must refund any finance charges
incurred as a result of the error. The
institution need not Tefund fees that would
have been Imposed whether or not the error
occurred.
7. Extent o f required investigation. A
financial institution complies with its duty to
investigate, correct, and report its
determination regarding an error described in
5 205.11(a)(l)(vii) by transmitting the
requested information, clarification, or
documentation within the time limits set
forth in paragraph (c) of this section. If the
institution has provisionally credited the
consumer’s account in accordance with
paragraph (cK2) of this section, it may debit
the amount upon transmitting the requested
information, clarification, or documentation.
Paragraph (cH2Hi)
1. Compliance with all requirements.
Financial institutions exempted from
provisionally crediting a consumer’s account
under § 205.11(c)(2)(i) (A) and (B) must still
comply with all other requirements of the
section.
(c)(3) Extension o f Time Periods
1. POS debit card transactions. The
extended deadlines for investigating errors
resulting from POS debit card transactions
include all debit card transactions, including
those for cash only, at merchants' point-ofsale terminals. The deadlines do not apply to
transactions at an ATM, however, even
though the ATM may be in a merchant
location. POS debit card transactions also
include mail and telephone orders.

(c)(4) Investigation
1. Third parties. When information or
documentation requested by the consumer is

in the possession of a third party with whom finance charges to which it is entitled, if any.
under an overdraft credit plan.
the financial institution does not have an
agreement, the institution satisfies the error
(e) Reassertion o f Error
resolution requirement by so advising the
1. Withdrawal o f error; right to reassert.
consumer within the specified time frame.
The financial institution has no further error
2. Scope o f investigation. When an alleged
resolution responsibilities if the consumer
error involves a payment to a third party
voluntarily withdraws the notice. A
under the financial institution’s telephone
consumer who has withdrawn an allegation
bill-payment plan, a review of the
of error has the right to reassert the allegation
institution's own records is sufficient,
unless the financial institution had already
assuming no agreement exists between the
institution and the third party concerning the complied with all of the error resolution
requirements before the allegation was
bill-payment service.
3. POS transfers. When a consumer alleges withdrawn.'The consumer must do so,
however, within the original 60-day period.
an error involving a transfer to a merchant
via a POS terminal, the institution must
Section 205.12—Relation to Other Laws
verify the information previously transmitted
(a) Relation to Truth in Lending
in executing the transfer. For example, the
1. Determining applicable regulation. For
financial institution may request a copy of
transactions involving access devices that
the sales receipt to verify that the amount of
also constitute credit cards, the applicability
the transfer correctly corresponds to the
of Regulation E versus Regulation Z depends
amount of the consumer's purchase.
on the nature of the transaction. For example,
4. Agreement. A financial institution does
if the transaction is purely an extension of
not have an agreement for purposes of
§ 205.1 l(c)(4)(ii) solely because it participates credit, and does not include a debit to a
checking account (or other consumer asset
in transactions occurring under the federal
account), the liability limitations and error
recurring payments programs, or that are
resolution requirements of Regulation Z
cleared through an ACH or similar
apply. If the transaction only debits a
arrangement for the clearing and settlement
checking account (with no credit extended),
of fund transfers generally, or because it
the comparable provisions of Regulation E
agrees to be bound by the rules of such an
apply. Finally, if the transaction debits a
arrangement. But an agreement that a third
checking account but also draws on an
party will honor an access device is an
overdraft line of credit, the Regulation E
agreement for purposes of this paragraph.
provisions apply, as well as 12 CFR 226.13(d)
(d) Procedures if Financial Institution
and (g) of Regulation Z As a result, a
Determines No Error or Different Error
consumer might be liable for up to $50 under
Occurred
Regulation Z and, in addition, for $50, $500,
or an unlimited amount under Regulation E.
1. Error different from that alleged. When
2. Issuance rules. For access devices that
a financial institution determines that an
also constitute credit cards, the issuance
error occurred in a manner or amount
rules of Regulation E apply if the only credit
different from that described by the
feature is a preexisting credit line attached to
consumer, it must comply with the
the asset account to cover overdrafts (or to
requirements of both paragraphs (c) and (d)
maintain a specified minimum balance).
of this section, as relevant The institution
Regulation Z rules apply if there is another
may give the notice of correction and the
type of credit feature, for example, one
explanation separately or in a combined
permitting direct extensions of credit that do
form.
not involve the asset account.
(d)(1) Written Explanation
(b) Preemption o f Inconsistent State Laws
1. Request for documentation. When •
1. Specific determinations. The regulation
consumer requests copies of documents, the
prescribes standards for determining whether
financial institution must provide the copies
state laws that govern electronic fund
in an understandable form. If an institution
transfers are preempted by the act and the
relied on magnetic tape it must translate the
regulation. A state law that is inconsistent
applicable data into readable form, for
may be preempted even If the Board has not
example, by printing it and explaining any
issued a determination. However, nothing in
codes.
§ 205.12(b) provides a financial institution
(d)(2) Debiting Provisional Credit
with immunity for violations of state law if
the institution chooses not to make state
1. Alternative procedure for debiting o f
credited funds. The financial institution may disclosures and the Board later determines
comply with the requirements of this section that the state law is not preempted.
2. Preemption determination. Effective
by notifying the consumer that the
March 30,1981, the Board has determined
consumer's account will be debited five
that certain provisions in the state law of
business days from the transmittal of the
Michigan are preempted by the federal law:
notification, specifying the calendar date on
• Section 5(4)—Definition of unauthorized
which the debiting will occur.
use. This provision is preempted to the
2. Fees for overdrafts. The financial
extent that it relates to the section of state
institution may not impose fees for items it
law governing consumer liability for
is required to honor under this section. It
unauthorized use of an access device.
may, however, impose any normal
• Section 14—Consumer liability for
transaction or item fee that is unrelated to an
unauthorized use of an account. This
overdraft resulting from the debiting. If the
provision is inconsistent with § 205.6 and is
account is still overdrawn after five business
less protective of the consumer than the
days, the institution may impose the fees or

Federal Register / Vol. 59, No. 44 / Monday, March 7, 1994 / Proposed Rules
federal law. The state law places liability on
the consumer for the unauthorized use of an
account in cases involving the consumer's
negligence. Under the federal law, a
consumer’s liability for unauthorized use is
not related to the consumer’s negligence and
depends instead on the consumer’s
promptness in reporting the loss or theft of
the access device.
• Section 15—Error resolution. This
provision is preempted because it is
inconsistent with § 205.11 and is less
protective of the consumer than the federal
law. The state law allows financial
institutions up to 70 days to resolve errors,
whereas the federal law generally requires
errors to be resolved in 45 days.
• Sections 17 and 18—Receipts and
periodic statements. These provisions are
preempted because they are inconsistent
with § 205.9. The provisions require a
different disclosure of information than does
the federal law. The receipt provision is also
preempted because it allows the consumer to
be charged for receiving a receipt if a
machine cannot furnish one at the time of a
transfer.
Section 205.13—Administrative
Enforcement; Record Retention
(b) Record Retention
1. Requirements. To evidence compliance,
a financial institution should be able to
establish that its procedures reasonably
ensure the consumer’s receipt of required
disclosures and documentation.
Section 205.14—Electronic Fund Transfer
Service Provider Not Holding Consumer's
Account
(a) Electronic Fund Transfer Service
Providers Subject to Regulation
1. Applicability. This section applies only
when a service provider issues an access
device (a debit card or a code, for example)
to a consumer with which the consumer can
initiate transfers to or from the consumer’s
account at a financial institution and the two
entities have no agreement regarding this
electronic fund transfer service. If the service
provider does not issue an access device to
the consumer, it does not qualify for the
treatment accorded by this section. For
example, this section does not apply to an
institution that initiates preauthorized

payroll deposits on behalf of an employer to
the consumer’s account at another
institution. By contrast, this section does
apply to an institution that issues a code for
initiating telephone transfers from a
consumer’s account at another institution
(provided the account-holding institution
does not have an agreement with the other
institution regarding the service). This is the
case even if the consumer has accounts at
both institutions.
2. ACH agreements. An ACH agreement
under which members agree to honor each
other’s electronic fund transfer cards
constitutes an “agreement” for purposes of
this section.
(b) Compliance by Electronic Fund Transfer
Service Provider
1. Liability. The service provider is liable
for unauthorized electronic fund transfers
that exceed the consumer’s liability limits in
§ 205.6.
(b)( 1) Disclosures and Documentation
1. Periodic statements from electronic fund
transfer service provider. A service provider
that meets the conditions set forth in the
regulation does not have to issue periodic
statements. A service provider that does not
meet the condition need only include
information on periodic statements sent to
the consumer about transfers initiated with
the access device it has issued.
(b)(2) Error Resolution
1. Error resolution. When a consumer
notifies the service provider of an error, the
electronic fund transfer service provider
must investigate and resolve the error as set
forth in the regulation. If an error occurred,
any fees or charges imposed as a result of the
error, either by the service provider or by the
account-holding institution (for example,
overdraft or dishonor fees) must be
reimbursed to the consumer by the service
provider.
(c) Compliance by Account-Holding
Institution
Paragraph (c)(1)
1. Periodic statements from accountholding institution. The periodic statement
provided by the account-holding institution
need only contain the information required
by § 205.9(c)(1).

10715

A ppendix A—Model Disclosure Clauses and
Forms
1. Review o f forms. Neither the Board nor
its staff will review or approve disclosure
forms or statements for financial institutions.
However, the Board has issued model clauses
for institutions to use in designing their
disclosures. If an institution uses these
clauses accurately to reflect its service, the
institution is protected from liability for
failure to make disclosures in proper form.
2. Use o f the forms. The appendix contains
model disclosure clauses for optional use by
financial institutions to facilitate compliance
with the disclosure requirements of
§§ 205.5(b)(2), and (b)(3), 205.6(a), 205.7, and
205.14(b)(l)(ii). Section 915(d)(2) of the
statute provides that use of these clauses in
conjunction with other requirements of the
regulation will protect a financial institution
from liability under sections 915 and 916 of
the act to the extent that the clauses
accurately reflect the institution’s electronic
fund transfer services.
3. Altering the clauses. Financial
institutions may use clauses of their own
design in conjunction with the Board’s model
clauses. The inapplicable words or portions
of phrases in parentheses should be deleted.
The underscored catchlines are not part of
the clauses and need not be used. Financial
institutions may make alterations,
substitutions, or additions in the clauses to
reflect the services offered, such as technical
changes (e.g., substitution of a trade name for
the word "card,” deletion of inapplicable
services, or substitution of lesser liability
limits. Model Clauses A-(2) include
■references to a telephone number and
address. Where two or more of these clauses
are used in a disclosure, the telephone
number and address may be referenced and
need not be repeated.
Supplement II to Part 205 [Removed]

3. Supplement II to Part 205 is removed.
By order of the Board of Governors of the
Federal Reserve System, February 24,1994.

William W. Wiles,
Secretary o f the Board.
(FR Doc. 94-4682 Filed 3-2-94; 12:38 pm]
BILLING CODE S210-01-P