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Federal R eserve Bank
OF DALLAS
ROBERT
D. M C T E E R , J R .
P R E S ID E N T
AND
C H IE F E X E C U T IV E
O F F IC E R
4
A pril 24, 1996
DALLAS, TEXAS
75265-5906
Notice 96-37
TO:
T he C hief Executive Officer of each
m em ber b an k and others concerned in
the E leventh F ed eral R eserve D istrict
SUBJECT
Request for Public Comments on
Regulation E (Electronic Fund Transfers)
DETAILS
T he B oard of G overnors of the F ederal R eserve System has requested public
com m ents on proposed am endm ents to R egulation E (E lectronic Fund Transfers). The
proposed am endm ents relate to
•
the use of electronic com m unication in hom e-banking services for provid
ing disclosures and other docum entation;
•
erro r resolution requirem ents for new accounts; and
•
the treatm ent of stored-value cards.
T he B oard m ust receive comments by July 10, 1996. Please address com
m ents to W illiam W. Wiles, Secretary, B oard of G overnors of the F ed eral R eserve
System, 20th Street and C onstitution Avenue, N.W., W ashington, D.C. 20551. All
com m ents should refer to D ocket No. R-0919.
ATTACHMENT
A copy of the B oard’s notice (F ederal R eserve System D ocket No.
R-0919) is attached.
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 Intrastate (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)
MORE INFORMATION
F o r m ore inform ation, please contact Eugene Coy at (214) 922-6201. F or
additional copies of this B ank’s notice, please contact the Public Affairs D ep artm en t at
(214) 922-5254.
Sincerely yours,
FEDERAL RESERVE SYSTEM
12 CFR Part 205
[Regulation E; Docket No. R-0919]
Electronic Fund Transfers
AGENCY:
ACTION:
Board of Governors of the Federal Reserve System.
Proposed rule.
SUMMARY: The Board is publishing for comment proposed amendments to Regulation E,
which implements the Electronic Fund Transfer Act. The proposed amendments relate to:
(1) the use of electronic communication in home-banking services for providing disclosures
and other documentation; (2) error resolution requirements for new accounts; and (3) the
treatment of stored-value cards (imposing modified Regulation E requirements on storedvalue products in systems that track individual transactions, cards, or consumers; providing
an exemption for cards on which a maximum value of $100 can be stored; and providing that
other stored-value cards are not covered by Regulation E).
DATES: Comments must be received on or before July 10, 1996.
ADDRESSES: Comments should refer to Docket No. R-0919 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.
F O R FU R TH ER IN FORM ATION CONTACT: Regarding the proposed amendments on
electronic communication, Michael Hentrel, Staff Attorney, and regarding the other proposed
amendments, Jane Gell, Natalie Taylor, or Kyung Cho-Miller, Staff Attorneys, 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:
I. BACKGROUND
The Electronic Fund Transfer Act (EFTA) (15 U .S.C . 1693), enacted in 1978,
provides a basic framework establishing the rights, liabilities, and responsibilities of
participants in electronic fund transfer (EFT) systems. The Federal Reserve Board was given
rulewriting authority to issue implementing regulations. Types of transfers covered by the
act and regulation include transfers initiated through an automated teller machine (ATM),
point-of-sale (POS) 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 statements; limitations on
consumer liability for unauthorized transfers; procedures for error resolution; and certain
rights related to preauthorized EFTs.
In 1994 the Board issued for public comment a proposed revision of Regulation E
under the Board’s Regulatory Planning and Review program. (The Board has taken final
action on the proposal; a revised regulation and revised staff commentary will be published
shortly.) As part o f that process, and based in part on the public comments received, the
Board identified areas that offer an opportunity for further burden reduction without
undercutting consumer protection. One such area involves the use of electronic
communication between consumers and financial institutions — for example, by personal
computer and modem — in place of paper documents. The proposed revision published in
1994 included a provision that allowed electronic communication in place of paper for
authorization of recurring electronic debits. The Board now proposes to permit electronic
text messages to substitute for paper under Regulation E generally. The proposed revision
also solicited comment generally on coverage of prepaid cards and other stored-value
products under Regulation E. To resolve issues raised during and following the public
comment period, the Board undertook an analysis of stored-value products and their
treatment under Regulation E. The Board now proposes amendments under which many
stored-value products would be exempt, and others would be covered under limited
requirements.
II. PROPOSED REGULATORY REVISIONS
The following discussion covers the proposed amendments to Regulation E in the
order of the sections of the regulation that would be affected — first addressing electronic
communication, then error resolution for new accounts, and finally stored-value products.
E l e c t r o n ic C o m m u n ic a t io n - S e c t io n 205.4(c)
Financial institutions offer a wide variety of "home banking" services ranging from
account inquiries, verifications, and fund transfers between accounts, to bill payment and full
account management; and they are using various forms of electronic communication to
deliver these services. Telephones and personal computers are the most common means of
access to home banking services. Telephones with digital screens ("screen phones"),
equipped with bar code or magnetic stripe readers, allow consumers to enter transactions off-
-3line, then send the information to the financial institution on-line. Financial institutions may
offer consumers specialized software that allows the user to access bank information via
personal computer; oftentimes this software is integrated with other on-line services. These
EFT services use electronic communication as a fast, convenient, and sometimes less costly
means of communication with the consumer. Electronic communication, for purposes of this
discussion, means an electronically transmitted text message between a financial institution
and a consumer’s home computer or other electronic device possessed by the consumer.
Under Regulation E, certain disclosures (such as initial disclosures and periodic
statements) must be provided to consumers (1) in writing, (2) in a clear and readily
understandable form, and (3) in a form that the consumer may keep. In the context of home
banking and similar services, financial institutions have asked whether they may satisfy these
requirements by providing the information electronically, for example, through a consumer’s
personal computer.
Are Electronic Communications "Writings"
Many Regulation E disclosures must be provided to consumers in writing. A writing,
up to the present, has typically been presumed to mean a paper document. Information that
is produced, stored, or communicated by computer too is generally considered to be a
writing, at least where text is involved. Indeed, in many office environments in the United
States today, documents are produced, edited, revised, and communicated to others within
the organization by the use of computers and electronic mail, and these documents are
considered written documents when kept in electronic form as well as when printed on paper.
Similarly, under other laws that call for information to be in writing, information in
electronic form is considered to be "w ritten."
Communications by telephone (including voicemail systems) are typically
characterized as oral communication as they do not have the feature generally associated with
a writing — visual text. Therefore, pursuant to its authority under section 904(c) of the
EFTA, the Board proposes to permit financial institutions to use an electronic communication
where the regulation calls for information to be provided in writing, but to limit the scope of
the term "electronic communication" to a communication in a form that can be displayed as
visual text. An example would be an electronic message that the receiver could display on a
screen (including a computer monitor or a screen phone).
Clear and Readily Understandable Form
Regulation E requires financial institutions to provide required information in a clear
and readily understandable form. Some means of displaying an electronic communication
appear to meet this standard; for example, a personal computer monitor should allow the
consumer to read the text of a disclosure. Others may not have this capability; a screen
phone, for example, may display only a few lines of text at a time, making it difficult for a
consumer to review initial disclosures or a periodic statement, where it may be necessary to
move back and forth between various parts of the document. The Board believes that the
requirement for clear and readily understandable disclosures applies fully to electronic
communications. The Board requests specific comments on the likelihood and extent of
-4 compliance problems that could be caused by this requirement, as well as suggestions for
resolving such problems.
Retainability
The act and regulation establish a retainability requirement. In general, if information
must be provided in writing, Regulation E requires that the information must be in a form
that the consumer may retain.
Consumers with home banking systems will most likely have the ability to download
information, print it out, and store it on a computer disk for later retrieval. The
responsibility to provide EFTA information in a retainable form belongs to the financial
institution. Still, the Board recognizes that to satisfy the retainability requirement for
electronic communications, financial institutions will have to rely on the consumer’s having
the capability to download data. The Board believes that where a consumer has agreed to
receive information electronically, the financial institution should be deemed to satisfy the
retention requirement by making information available for downloading, provided some
consumer safeguards are established. In the event of printer malfunctions and other
unforeseen computer problems, for instance, the consumer may be precluded from effectively
retaining an electronic message received from a financial institution.
The Board proposes to amend Regulation E to provide that if a financial institution
uses electronic communication to send information that is required to be in writing, the
consumer may request a paper copy of the information within one year after receipt of the
electronic communication. Commenters are asked to address whether this is an appropriate
time period, and if not, to offer suggestions for an alternative.
The Board also solicits comment on possible alternatives to providing a paper copy
upon request to consumers. One such means might be for a financial institution to maintain
the information in data storage and re-send the information electronically to a consumer
whose computer facilities were temporarily inoperable.
Some electronic messages from a consumer to an institution trigger the need for a
response from the institution. For example, an oral or written notice of error from a
consumer requires the institution to investigate and resolve the error within a specified
period. Some financial institutions have indicated that in accepting electronic
communications from consumers, they may want to require paper verifications, for their own
and the consumer’s protection. For example, Regulation E provides that a consumer may
stop payment of a preauthorized electronic fund transfer by notifying the institution orally or
in writing, and that the institution may require written confirmation of an oral stop-payment
order. If an institution accepts an electronic stop-payment order, the institution might want
to require confirmation of the order in paper form, to make sure that a preauthorized
payment is not dishonored by mistake.
The Board believes that (as in the case of an oral communication) if the consumer
sends an electronic communication to the institution, the institution could require a
-5confirmation from the consumer in paper form. Comment is requested, however, on whether
and how the regulation should address this point.
Electronic communication between financial institutions and consumers could also be
used in contexts other than home banking. For example, a consumer who possesses a
modem-equipped personal computer may wish to send and receive information required by
Regulation E about an EFT service used by the consumer, such as debit card access to the
consumer’s account. The proposal covers this situation. The Board solicits comment on
whether the regulation should, as proposed, permit electronic communication to substitute for
paper disclosures and other required paper messages for EFT services other than home
banking, or should limit electronic communication to home-banking services.
E r r o r R e s o l u t io n
for
N e w A c c o u n t s - S e c t io n 205.11
Regulation E requires a financial institution to investigate and resolve a consumer’s
claim of error within specified time limits. An institution generally is expected to resolve the
alleged error within ten business days after receiving a notice of error. If the institution
needs more time, it must provisionally credit the consumer’s account and resolve the error no
later than 45 calendar days after receiving the notice.
In the course of commenting on the Board’s 1994 proposal to revise Regulation E,
some institutions requested that the Board use its exception authority under the statute either
(1) to exempt new accounts from the requirement to provisionally credit the account by the
tenth business day or (2) to extend the time period for resolving errors.
Commenters expressed concern about individuals who open a new account with the
intent to defraud. Such individuals may open an account, immediately withdraw all or a
large amount of the funds through ATMs, and file a claim with the financial institution
disputing the ATM transactions. Often they receive provisional credit because of the
financial institution’s inability to research the claim (such as by obtaining photographic
evidence from ATM cameras) within ten business days. At that point, the individual
immediately withdraws the funds that were provisionally credited and abandons the account.
Commenters believe that having more time to investigate errors involving new accounts
would enable institutions to limit their losses and control this type of fraud.
Some commenters pointed to the Board’s exception for new accounts under
Regulation CC, which implements the Expedited Funds Availability Act. There, the
regulation extends the time within which an institution is required to make funds available to
a customer for new accounts. Regulation CC defines a new account as an account during the
first 30 calendar days after the first deposit to the account is made.
The Board proposes to amend Regulation E, pursuant to its section 904(c) authority to
provide for adjustments and exceptions in the regulation, to extend the time periods for
resolving errors that involve new accounts. The proposal would allow 20 business days for
resolving an error before an institution is required to provisionally credit, and an outside
limit of 90 calendar days for resolving the claim. Comment is solicited on the proposed
-6extensions o f time, on the 30-day definition for new accounts, and on whether consumer
protections relating to error resolution would be adversely affected.
S t o r e d -V a l u e S y s t e m s - S e c t io n 2 0 5 .1 6
Over the past few years the financial services industry has shown increasing interest
in providing "stored-value cards" (also referred to as prepaid or value-added cards) to
consumers. These cards maintain, typically in a computer chip or magnetic stripe, a "stored
value" of funds available to the consumer for access primarily at retail- locations. The
balance recorded on the card is debited at a merchant’s POS terminal when the consumer
makes a purchase.
Products that could be characterized broadly as "stored-value" cover a wide range. In
their simplest form, stored-value systems are targeted at low-value uses (public transit, pay
telephones, or photocopiers, for example); the amount that can be stored on the card is
limited; and the card is disposed of once its value has been used up. These cards typically
have a single type of use, and only one card issuer and one entity (likely to be the same as
the issuer) that accepts the card as payment for goods or services.
M ore sophisticated systems can involve large transactions and permit consumers to
store value in the hundreds of dollars on a card. The cards may have multiple uses, and
there may be multiple card issuers and multiple card-accepting merchants. The cards may
allow the consumer to obtain cash from ATMs instead of, or in addition to, making
purchases. At least one system (now in the pilot stage) would enable the consumer to
transfer stored-value balances to another person’s card. Some systems would provide access
to funds in foreign currencies. Cards tend to be reloadable, allowing the consumer to load
value onto the card, for example, by withdrawing funds from an account at a depository
institution through a teller, via an ATM, or, potentially, via a specially-equipped telephone.
Some systems are designed as stand-alone products. In other cases, stored-value features
may be added to debit or credit cards. Some of these more sophisticated stored-value
systems are in operation as pilot programs or are under development by financial institutions
or associations o f institutions.
Colleges and universities are increasingly adding a stored-value feature to student
identification cards, so that students can make purchases at campus locations such as
cafeterias, bookstores, and vending machines. In some cases, the educational institution is
both the issuer and the only card-accepting entity; in others, the card is also accepted by offcampus merchants. In addition to the stored-value features that some student card systems
may have, these systems may operate with student asset accounts maintained by the
university or by a depository institution on behalf of the university; these accounts are
covered by Regulation E.
There are significant differences among proposed systems in the manner that they
handle balances and transaction data. Some systems operate off-line, with transaction
approval and data retention occurring only at the merchant level. The balance of available
funds may be stored only on the card itself as transactions occur, and transactions neither
require nor receive authorization from a central database. The data for a given transaction
are kept at the merchant location, and are not forwarded to the central data facility. Only the
aggregate amount for a batch of transactions is transmitted by the merchant (usually daily) so
that the merchant can receive appropriate credit from a financial institution. In other off-line
systems, the dollar value remaining on the card is stored both on the card and in a central
data facility. Data for individual transactions are transmitted to the central data facility,
typically at the end of each business day, and maintained there. Still other systems operate
on-line, and transactions are authorized by communication between a terminal and a central
database.
Status of Stored-Value Cards Under the EFTA
In 1994, the Board issued proposed revisions to Regulation E under the Board’s
Regulatory Planning and Review program. At that time, the Board generally requested
comment on whether, and the extent to which, the regulation should apply to stored-value
cards. The Board made clear that a transaction involving such cards is covered by
Regulation E when the transaction accesses a consumer’s account (such as when value is
"loaded" onto the card from the consumer’s deposit account via an ATM). Among the
commenters that addressed this issue, many asked the Board to provide an exemption from
Regulation E for stored-value cards and other stored-value products so as not to hinder their
development or, alternatively, to modify the requirements applicable to them.
Legislation introduced and still pending in the Congress would exempt stored-value
cards and other stored-value products from the EFTA and Regulation E. (H.R. 2520, 104th
Cong., 1st Sess., § 443; S. 650, 104th Cong., 1st Sess., § 601 (1995).) The Board has
suggested in congressional testimony that, while certain provisions of Regulation E should
not apply, it would be appropriate to first examine basic issues raised by these new payments
systems before legislating a blanket exemption from the EFTA. The Board mentioned
terminal receipts and periodic statements as examples of requirements that should not apply,
but suggested that consumers might benefit from receiving initial disclosures (such as
disclosure of a consumer’s risk for unauthorized transactions), a requirement that would
likely entail minimal added expense for card issuers.
Coverage Issue
Coverage of stored-value systems under the EFTA and Regulation E depends on
whether a stored-value transaction involves an EFT from a consumer’s asset account. The
act defines an "electronic fund transfer" as a transfer of funds initiated through electronic
means (such as an electronic terminal or a computer) that results in a debit or credit to an
account. Stored-value transactions involve a transfer of funds and are carried out through
electronic means — namely, terminals in retail locations that read the magnetic strip or chip
embedded in the card.
The act defines "account" as a demand deposit, savings, or other "asset account" —
as described in regulations of the Board — that is established primarily for personal, family,
or household purposes. Asset accounts are not limited to traditional checking and other
deposit accounts. For example, the term includes a consumer’s money market mutual fund
or other securities account held by a broker-dealer. The Board also interprets the term
-8"account" to include accounts established by government agencies under electronic benefit
transfer (EBT) programs (59 FR 10678, March 7, 1994).
The legislative history of the act provides guidance as to the Board’s regulatory
authority under the EFTA for determining issues of coverage. Senate Banking Committee
reports noted that the "definitions of ’financial institution’ and ’account’ are deliberately
broad so as to assure that all persons who offer equivalent EFT services involving any type
of asset account are subject to the same standards and consumers owning such accounts are
assured of uniform protection." (S. Rep. No. 915, 95th Cong., 2d Sess. 9 (1978).) This
concept is captured in section 904(d) of the EFTA, which provides that if EFT services "are
made available to consumers by a person other than a financial institution holding a
consumer’s account, the Board shall by regulation assure that the disclosures, protections,
responsibilities, and remedies created by this title are made applicable to such persons and
services."
Further, section 904(c) provides that the rules issued by the Board "may contain such
classifications, differentiations, or other provisions . . . as in the judgment o f the Board are
necessary or proper to effectuate the purposes of this title, [or] to prevent circumvention or
evasion thereof . . . ." Senate Banking Committee reports on two separate bills, in
discussing section 904(c), stated that "since no one can foresee EFT developments in the
future, regulations would keep pace with new services and assure that the act’s basic
protections continue to apply." (S. Rep. No. 915, 95th Cong., 2d Sess. 10 (1978).)
Types of Stored-Value Systems
In some stored-value systems, the balance of funds available is recorded on the card,
but is also maintained at a central data facility at a bank or elsewhere. The systems operate
off-line; there is no authorization of transactions by communication with a database at a
financial institution or elsewhere. Transaction data are periodically transmitted to and
maintained by a data facility. As in the case of the traditional consumer deposit account
accessed by a debit card, in these stored-value card systems a consumer has the right to draw
upon funds held by an institution. The maintenance of a record of value and of transactions
for a given card apart from the card itself — so that transactions are traceable to the
individual card — strongly parallels the functioning of a deposit account. The Board believes
that the facts support a finding that such systems involve an account for purposes of the
EFTA. These systems are referred to below as "off-line accountable stored-value systems."
In another type of stored-value system that also operates off-line, the record of value
is maintained only on the card itself, and not in a central database. Transaction data for
debits to the card’s "stored value" are recorded on the card and captured at merchant
terminals (where they are maintained for a limited period of time). Only the aggregate
amount of transactions for a given period is transmitted by the merchant to a financial
institution or other entity so that the merchant can receive credit. Given the lack of a
centrally maintained, ongoing record of individual card balances or of transaction data in
these systems, it is more difficult to conclude that an "account" exists for purposes of
Regulation E. These systems will be referred to below as "off-line unaccountable storedvalue systems."
-9A third type of stored-value system operates in a manner that is the functional
equivalent of using a debit card to access a traditional deposit account. Notably, this type of
system involves on-line access to a database for purposes of transaction authorization and
data capture. That is, when the card is used at an ATM or a POS terminal, the transaction is
authorized by means of on-line communication with the data facility, where the transaction
data are stored (including information such as merchant identification, amount, date, and card
number). The balance of funds available to the consumer is not recorded on the card itself,
as in off-line stored-value systems; instead, the balance information is maintained in the data
facility. Two distinctions between these systems and traditional deposit accounts accessed by
debit card are (1) the value associated with a card is limited to the amount that the cardholder
has chosen to make accessible through the card (as opposed to a deposit account accessed by
debit card, where the entire account is accessible and funds available may fluctuate); and (2)
the value associated with the card is accessible only through use of the card itself (in contrast
to deposit accounts accessible by debit card, which typically may be accessed through various
means, including check, withdrawal slip, ACH, or telephone bill payment).
The Board believes these systems — which are referred to as "on-line stored-value
systems" — meet the definition of a consumer asset account, and thus are covered by
Regulation E, based on their on-line operation and extensive data capture and retention. As
discussed below, however, the Board also believes it is appropriate to propose modifying the
rules applicable to these systems.
Modifications and Exceptions for Various Types of Stored-Value Systems
The discussion that follows is organized to address separately each of the three types
of systems described above — off-line accountable stored-value systems, off-line
unaccountable stored-value systems, and on-line stored-value systems. The Board notes that,
in all three types of systems, a transaction in which a stored-value card is used to access a
consumer’s deposit account, such as "reloading" the card by drawing on the consumer’s
checking account at an ATM, is covered by Regulation E and subject to all Regulation E
requirements. The discussion below, therefore, relates to transactions in which value stored
on a card is drawn down to obtain cash or purchase goods or services.
A. Off-line "accountable" stored-value systems
To the extent that off-line accountable stored-value systems are similar to systems
involving debit cards and traditional deposit accounts, parallel consumer protections under
Regulation E may be appropriate. If these stored-value systems were to be covered by all
requirements of Regulation E, however, their further development could be seriously slowed
or even halted in some cases. The following discussion presents an analysis of the major
provisions of Regulation E, including the compliance burdens to financial institutions and the
benefits to consumers associated with each.
1. Restrictions on unsolicited issuance o f access devices
Generally Regulation E prohibits issuing a debit card, personal identification number
(PIN), or other "access device" to a consumer (for example, by mail) unless the consumer
has requested the device, orally or in writing. The purpose is to avoid making consumers’
accounts accessible by a means that consumers may not want and that may subject them to
- 10added risk, and to reduce the likelihood of unauthorized transactions from interception of
cards. There is a qualified exception, for an access device that is not "validated" (meaning
usable) at the time of issuance and that the issuer will validate only upon request by the
consumer and verification of the consumer’s identity.
As a practical matter, most providers o f stored-value products will likely issue storedvalue cards only to consumers who request them. Some may choose to promote their
product by targeting populations and sending unsolicited cards with small amounts of "free
money" on the card. Such a practice would not appear to harm consumers, since there
would be no access to the consumer’s own deposit-account funds.
Application of the unsolicited issuance rules to off-line accountable stored-value cards
(aside from those that could access a consumer’s existing deposit account, where the rules
already apply) appears unnecessary for consumer protection. The Board proposes to exclude
off-line accountable stored-value cards from the Regulation E rules on unsolicited issuance,
but solicits specific comment on whether there is any practical need for the rules to apply.
2. Initial disclosures
Regulation E requires that at the time a financial institution and a consumer enter into
an agreement for an EFT service, the institution must disclose certain terms and conditions.
Items to be disclosed include a summary of the consumer’s liability for unauthorized
transfers, error-resolution procedures, any limits on the frequency or dollar amount of
transfers, and any fees or charges for individual transfers or for the service.
Without the disclosure of terms and conditions, consumers might regard off-line
accountable stored-value products as comparable to debit or credit cards, and thus might
expect similar rights and remedies to apply. This could be particularly likely if the storedvalue feature were made part of the consumer’s debit or credit card, or if a consumer could
use the card for transactions in the same locations where debit or credit card transactions take
place.
Financial institutions that provide stored-value products may disclose certain
information voluntarily; however, the disclosures that they opt to give could vary
considerably. Requiring disclosures under Regulation E would ensure that uniform
information is given to consumers. Such disclosures would be useful in alerting consumers
to important features of these new services, such as transaction charges and risk of loss for
lost or stolen cards.
Providing initial disclosures would probably not impose significant compliance costs.
The disclosures can be given along with the card or other account-opening material in a
preprinted format; they need not be individually customized for each account. Accordingly,
the Board proposes to amend Regulation E to require initial disclosures for off-line
accountable stored-value systems.
The proposed amendment would not include all the items generally required to be
disclosed under Regulation E, but only those that appear relevant to off-line accountable
-11 stored-value systems. These include the disclosures of consumer liability for unauthorized
transactions; the types of transfers available; transaction charges, if any; and error resolution
procedures available to the consumer, if any. The disclosure of consumer liability for
unauthorized transactions would expressly state that the consumer bears the full risk of loss
(if such is the case), or would state any limits on liability that might be adopted by
agreement with the consumer.
3. Change-in-terms notices
Under Regulation E, if terms or conditions required to be disclosed (such as limits on
transfers, or transaction fees) were to change from those initially in effect, the institution
must generally notify the consumer at least 21 days before the effective date of the change.
Whether change-in-terms notices are relevant for off-line accountable stored-value
products depends on whether contract terms applicable to the card are likely to change. If
there are increases in transaction charges, for instance, it is reasonable for consumers to be
informed of the increase before it takes effect. (It appears that, currently at least, charges
are not imposed on stored-value transactions.) But issuers of some of these products may not
expect to have an ongoing relationship with the consumer, and thus may not typically obtain
an address at the time the consumer purchases the card. In some cases, stored-value cards
are freely transferrable; even if the card issuer has the address of the original cardholder, the
issuer may not have the address of a subsequent holder. If the value stored on the card is
likely to be used within a short period, it is also probable that new transaction charges would
not be imposed or charges increased during its lifetime.
The Board believes that the potential costs of having to comply with the change-interms notice requirement outweighs the consumer protections that would be afforded by such
notices and proposes to exempt off-line accountable stored-value systems from this
requirement. The Board specifically solicits comment on whether there might be
circumstances in which the notice requirement should apply.
4. Transaction receipts and periodic statements
For an EFT initiated at an ATM or a POS terminal, Regulation E requires that a
transaction receipt be made available to a consumer. The receipt must show the date,
amount, type of transaction and account, card or account number, terminal location, and
name of any third party (such as a merchant) involved in the transfer. The regulation also
requires periodic account statements, generally monthly, that detail largely the same
information as on terminal receipts and provide other information such as opening and
closing account balances and fees or charges assessed during the statement period. These
receipts and periodic statements allow consumers to verify account activity and to detect
unauthorized transactions and errors, so that they can be reported and resolved.
For off-line accountable stored-value products, documentation requirements could
present compliance difficulties and considerable costs, while providing only limited benefits
to consumers. In some cases, receipts may be given whether or not required by Regulation
E. A retailer that accepts debit cards must provide receipts under Regulation E for debit
card transactions, and therefore might provide receipts for stored-value card transactions as
- 12 well. But if the card can be used at places not equipped with printers (such as vending
machines), to require receipts would necessitate a retrofitting of terminals and would impose
ongoing compliance costs. Moreover, for small or commonly-made transactions, many
consumers may not want or need a receipt.
The requirement for periodic statements too may present compliance problems for
some off-line accountable stored-value systems. In some of these systems, transaction data
are collected in centralized data facilities, not by the card-issuing financial institutions.
Given that lack of data, providing periodic statements would be costly and could impede the
development of stored-value products. Moreover, as in the case of receipts, for small or
commonly-made transactions on these cards, consumers may not need or want documentation
on a periodic statement.
The Board believes that the consumer benefits of terminal receipts and periodic
statements — in the context of stored-value transactions -- may be somewhat limited and be
outweighed by the compliance costs. Consequently, the Board proposes to exempt off-line
accountable stored-value systems from these requirements.
5. Limitations on consumer liability for unauthorized transfers
Regulation E generally limits a consumer’s losses for unauthorized EFT debits to a
maximum of $50. If the consumer fails to notify the financial institution of the loss or theft
of a debit card or other "access device" within two business days of learning of the loss or
theft, the consumer’s potential liability rises to $500. If the consumer fails to notify the
institution of unauthorized transfers appearing on a periodic statement within 60 days after
the institution sent the statement, the consumer’s liability for any further unauthorized
transfers is unlimited.
Absent Regulation E ’s limits on liability, stored-value cardholders bear the entire risk
unless the issuer opts to assume some part of it (or offers insurance to consumers against
losses). If the regulatory liability limits applied, the risk would be imposed on the issuer,
because these systems operate off-line and will not typically require PIN-protection or any
other means of identifying the consumer. Without PIN-protection there is an almost certain
likelihood that lost or stolen cards could and would be used.
Some off-line accountable systems could conceivably store negative files at merchant
POS terminals for blocking unauthorized transactions. Thus, they might be able to prevent
unauthorized use, assuming a consumer promptly reported loss or theft o f the card. But
many systems do not have this capability. In addition, even for those that could, the cost of
transmitting negative files to terminals frequently enough to effectively block unauthorized
transactions could be prohibitive.
Arguably, the lack of PIN-protection in these systems may lead consumers to be more
careful in handling the cards. Consumers might act more prudently if initial disclosures were
provided, explaining the risk. In addition, if loss does occur, the amount stored on the card
may be substantially less than would typically be at risk with the loss or theft of a traditional
- 13 debit card, where the deposit account may serve several purposes (as a repository for savings
or for paying bills, for instance), and thus may tend to have a larger account balance.
In light of these factors, the Board proposes to exempt off-line accountable storedvalue cards from the liability provisions. Under the proposal, the initial disclosures given to
consumers would summarize the full extent of their risk.
6. Error resolution procedures
Regulation E requires financial institutions to investigate and resolve claims of error
made by consumers within specified times — generally, no later than ten business days after
receiving the consumer’s notice of error; or 45 days after the notice if the institution
provisionally credits the consumer’s account, in the amount of the claimed error, within ten
business days. A summary of these procedures is given to consumers with the initial
disclosures, and consumers also receive an annual notice as a reminder. "Error" includes an
unauthorized electronic debit, a transaction in an incorrect amount, and failure to provide
required identification of transactions.
Prompt resolution of errors is an important consumer protection, but the detailed
procedures prescribed by the act and regulation pose a potentially difficult compliance
problem for off-line accountable stored-value systems. Investigation and resolution of errors
in accordance with Regulation E would be complicated and costly.
After weighing the potential costs against the consumer’s need for these protections,
the Board proposes to exempt off-line accountable stored-value systems from application of
the error resolution procedures and also from the related requirement to mail an annual
notice describing them. Initial disclosures would inform consumers that they bear the full
risk of loss in case of lost or stolen cards, if that is the case, and would summarize any error
resolution procedures available.
The Board requests specific comment on whether, alternatively, some minimal error
resolution procedures should be required. For example, an error within the financial
institution’s control, such as one resulting from a malfunctioning card, may not be unduly
difficult to correct. Commenters are also asked to address whether, if no error resolution
requirements are imposed, the initial disclosures should include a statement that there are no
error resolution procedures available to the consumer.
7. De minimis exclusion
In addition to the modifications presented above, the Board proposes a de minimis
exclusion for off-line accountable stored-value systems based on the maximum balance that
can be stored on the card or other device. For a stored-value product limited to a relatively
small amount of funds, the amount at risk would be sufficiently minimal that application of
even modified Regulation E protections appears unnecessary. This provision would apply to
off-line accountable devices that are limited to a maximum of $100 at a given time; such
devices would be completely exempt from Regulation E.
- 14 B. Off-line "unaccountable" stored-value systems
As described above, off-line unaccountable stored-value systems are those in which
the card balances and transaction data are maintained only on the card itself. Transaction
data may be maintained for a limited time at merchant terminals, but are not captured or
maintained by the issuer or a central database. Photocopier cards and farecards for the mass
transit systems in some cities are examples of such cards. Under the proposed amendments,
off-line unaccountable stored-value systems would not be covered by Regulation E. The
proposed amendments do not provide an explicit exemption; instead, the definitions of
systems that would be covered under the proposal do not capture off-line unaccountable
systems.
Most off-line unaccountable systems currently involve small dollar amounts and a
single use, such as paying transit fares. Other proposed systems, however, could involve
substantially larger transaction amounts and maximum card values, and could have multiple
uses. These features may make such a system more comparable to traditional debit cards
than the small-value cards, in terms of potential uses by consumers. This being the case, the
Board could consider whether to exercise its authority under the EFTA (to provide uniform
protections for all equivalent consumer EFT services) by proposing to bring off-line
unaccountable systems within the coverage of the act. If the requirements applicable to off
line unaccountable stored-value systems were the same as those that the Board is proposing
with regard to off-line accountable systems — initial disclosures, with an exemption for card
values of $100 or less -- compliance would not be particularly costly or difficult. Since the
concern about consumer protection would exist primarily for systems that store substantial
amounts on a card, any proposal could be framed in terms of covering only those cards with
a maximum value of more than a certain amount.
Although some off-line stored-value systems that permit larger maximum card values
may fall within the unaccountable category, it is not clear that such systems would operate in
this manner at all times and with respect to all transactions. As systems are further
developed, they could evolve into systems that capture and maintain some transactions in a
location other than on cards and at merchant terminals. If so, the Board believes such
systems could be characterized as off-line accountable, rather than off-line unaccountable.
systems, and thus would be subject to the same set o f rules.
There is some risk that the application of Regulation E to off-line accountable storedvalue systems, but not to off-line unaccountable systems, could act as an incentive for
developers of stored-value systems to structure systems as unaccountable in order to avoid
being covered under the regulation. It is not desirable to have system design be guided by
regulatory rather than economic considerations. However, the requirements applicable to
off-line accountable systems — initial disclosures — are so minimal when compared to other
factors that could affect system design (for example, the transaction data collected in
accountable systems may be useful for various purposes including fraud detection and
marketing) that it seems unlikely the potential for coverage by Regulation E would have
much impact.
- 15 On balance, the Board believes that it is preferable to state that off-line unaccountable
cards are not covered by Regulation E. The Board solicits specific comment, however, on
whether the distinction between off-line accountable and off-line unaccountable systems
(especially high-value ones) reaches the right result, in light of the considerations discussed
above, and accordingly on whether the Board should consider coverage of off-line
unaccountable systems, under very limited requirements such as initial disclosures. The
Board also solicits comment on whether, if Regulation E coverage were extended to off-line
unaccountable systems, it would be preferable in defining the scope of coverage to focus on
the value capable of being stored, on whether the system has multiple uses, or on both of
these features.
C. "On-line" stored-value systems
The third type of stored-value system in some respects resembles off-line accountable
stored-value systems, and in others resembles traditional deposit accounts accessed by debit
cards. As in off-line accountable stored-value systems, data about individual card balances
and transactions (including merchant identification, amount, date, and card number) are
collected and maintained at centralized locations; and the value associated with a card is
limited to an amount that the consumer chooses, not a fluctuating balance in the consumer’s
checking or savings account.
As in traditional deposit accounts accessed by debit cards, these stored-value systems
operate on-line. When a card is used at an ATM or a POS terminal, the transaction is
authorized by means of on-line communication with a financial institution or central data
facility. The balance of funds available to the consumer is not recorded on the card itself, as
in off-line stored-value systems; instead, the balance information is maintained only at the
data facility. In this respect too, an on-line stored-value system is the functional equivalent
of a deposit account accessed by a debit card, and thus can be viewed as representing a
consumer asset account for Regulation E purposes, subject to coverage by the regulation.
In general, compliance with Regulation E requirements does not appear to be a
significant problem. For example, because these systems operate on-line, they are designed
to block unauthorized access, and compliance with the limitations on consumer liability for
unauthorized transactions should not be more burdensome than for a traditional deposit
account accessed by debit card. However, a few exceptions from particular provisions of
Regulation E may be appropriate, as presented below.
1. Exceptions for periodic statements and annual error resolution notices
Regulation E requires statements that detail account activity. In some on-line storedvalue systems, cards are not reloadable, but instead are meant to be discarded after the funds
associated with the card are drawn down to zero. For example, a consumer may purchase a
card for use on a trip of a few weeks, and draw down all value tied to the card within that
time. In such cases, the potentially short-term nature of the product and the lack of an
ongoing account relationship may make periodic statements unnecessary.
As an alternative to the periodic statement requirement, an issuer could provide
account balances and account histories upon request, for the preceding one or two months.
- 16 This treatment would parallel the exception adopted by the Board under the rules applicable
to EBT systems. (See 59 FR 10678, M arch 7, 1994, codified at 12 CFR § 205.15.) This
alternative documentation would not appear to be unduly burdensome, because cardholders
who have used up the value associated with the card will presumably not request an account
history. For similar reasons, the Board believes that it would be appropriate to propose
exempting these systems from the requirement to send annual notices summarizing error
resolution procedures. Again, if the card is used and discarded within a year, this annual
notice would serve little purpose.
It may also be appropriate to propose an exemption from the periodic statement
requirement for on-line stored-value systems involving cards that are reloadable. Since the
stored value is accessible only through use of the card itself (not, for example, by check),
then periodic statements may be unnecessary. If a consumer receives a receipt for each
transaction, periodic statements may not be needed even if the relationship between the
consumer and the issuer is ongoing. If the consumer needed to check on recent account
transactions, the consumer could request the issuer to provide an account history.
There may be less reason to exempt reloadable on-line cards from the annual error
resolution notice requirement. If a card issuer has an ongoing relationship with the
consumer, sending the annual notice does not seem burdensome. However, extending the
exemption to both requirements — periodic statements and the annual error notice —
regardless of whether a card is reloadable, would avoid making the proposed rule overly
complex.
Accordingly, the Board proposes to provide that on-line stored-value systems are not
subject to (1) the periodic statement requirement, but may instead provide the account
balance and transaction history to the cardholder upon request; or (2) the requirement for an
annual reminder o f error resolution procedures. The Board solicits comment on whether the
proposed modifications should be different for on-line stored-value cards that are reloadable.
2. Change-in-terms notices
Under Regulation E, if terms or conditions required to be disclosed (such as limits on
transfers, or transaction fees) were to change from those initially in effect, the institution
must generally notify the consumer at least 21 days before the effective date of the change.
For the reasons discussed in connection with off-line accountable stored-value
products, the Board believes that the change-in-terms notice requirements need not apply to
on-line accountable stored-value products and, accordingly, proposes to exempt them from
this requirement. Specific comment is solicited on whether there might be circumstances in
which the notice requirement should apply.
3. De minimis exclusion
Some on-line stored-value systems may make relatively small amounts accessible
through use of the card. For example, a number of prepaid telephone card systems
apparently operate on-line. As in the case of off-line accountable stored-value systems, if the
amount associated with a consumer’s card is limited to a relatively small amount, application
- 17 of Regulation E protections such as the limitation on the consumer’s liability for unauthorized
transactions seems less important. And if transaction amounts are on average quite small (as
is likely to be true if the maximum amount on a card is low), the cost impact of Regulation
E compliance would be proportionately greater than for systems involving large transactions.
For these reasons, the Board proposes to exempt on-line stored-value systems completely
from coverage under Regulation E if the maximum amount that can be associated with a card
is limited to $100.
Computer Network Payment Products
Parallel to the development of stored-value card products, there has been an
increasing interest in other products that might adopt stored-value concepts. Systems are
being proposed, for example, for making payments over computer networks, such as the
Internet. In these cases, a balance of funds could be accessed via a consumer’s personal
computer, and transferred or used in purchases via a computer network. As in the case of
card-based products, there is a range of network payment products in operation or under
development.
Some of these network payment products involve on-line access to a consumer
account in a financial institution, and thus are fully subject to Regulation E. Other products
may involve various procedures for authorizing and carrying out transactions, and may or
may not be subject to the regulation. The Board requests specific comment on the extent to
which the Board should consider proposing that Regulation E apply to various types of
network payment products. In general, the Board believes that the same principles should
apply to network payment products as to stored-value card products in analyzing coverage
under Regulation E. For example, the Board might consider applying a de minimis
exemption to network payment products in the same way the Board is proposing for storedvalue card products.
Summary of Proposed Amendments for Stored-Value Systems
To summarize, with respect to stored-value systems, the Board proposes to amend
Regulation E to:
(1) Exempt completely from Regulation E off-line unaccountable stored-value
systems;
(2) Exempt completely from Regulation E both off-line accountable stored-value
systems and on-line stored-value systems if the maximum amount that can be stored on or
associated with a card at any given time is $100 or less;
(3) Establish modified requirements for coverage of off-line accountable stored-value
systems, applying only the requirements relating to initial disclosures; and
(4) Modify the requirements applicable to on-line stored-value systems, under which
such systems would not be subject to (a) the periodic statement requirement, if an account
balance and a summary of recent transactions is provided upon request; (b) the annual error
resolution notice requirement; or (c) change-in-terms notices.
III. FORM OF COMMENT LETTERS
Comment letters should refer to Docket No. R-0919. The Board requests that, when
possible, comments be prepared using a standard courier typeface with a type size of 10 or
- 18 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 computer diskettes, using either the 3.5" or
5.25" size, in any DOS-compatible format. Comments on computer diskettes must be
accompanied by a paper version.
IV. REGULATORY FLEXIBILITY ANALYSIS
In accordance with section 603 of the Regulatory Flexibility Act and section 904(a)(2)
of the EFTA, the Board’s Division of Research and Statistics has prepared an economic
impact statement on the proposed regulation. A copy of the analysis may be requested from
Publications Services, Board of Governors of the Federal Reserve System, Washington, DC
20551, or by telephone at (202) 452-3245.
V. PAPERWORK REDUCTION ACT
In accordance with section 3506 of the Paperwork Reduction Act of 1995 (44 U .S.C.
Ch. 35; 5 CFR 1320 Appendix A .l), the Board reviewed the proposed rule under the
authority delegated to the Board by the Office of Management and Budget. Comments on
the collection of information should be sent to the Office of Management and Budget,
Paperwork Reduction Project (7100-0200), Washington, DC 20503, with copies of such
comments to be sent to Mary M. McLaughlin, Federal Reserve Board Clearance Officer,
Division of Research and Statistics, Mail Stop 97, Board of Governors of the Federal
Reserve System, Washington, DC 20551.
The collection of information requirements in this proposed regulation are found in
12 CFR Part 205. This information would be mandatory (15 USC 1693 et sea.) to ensure
adequate disclosure of basic terms, costs, and rights relating to electronic fund transfer (EFT)
services affecting consumers using certain stored-value cards or home-banking services and
consumers exercising their error resolution rights under Regulation E. The
respondents/recordkeepers are for-profit financial institutions, including small businesses.
Regulation E applies to all types of financial institutions, not just state member banks.
However, under Paperwork Reduction Act regulations, the Federal Reserve accounts for the
burden of the paperwork associated with the regulation only for state member banks. Other
agencies account for the Regulation E paperwork burden on their respective constituencies.
The Federal Reserve has no data on which to estimate the burden the proposed
requirements would impose on state member banks. With regard to stored-value cards, there
are as yet no such systems in full operation in the United States, and only a few stored-value
card pilot projects. It is difficult to predict how many state member banks will choose to
offer these products and how many cards will be issued to consumers. However, because the
proposed amendments include a number of exemptions for stored-value products from
Regulation E requirements, the proposed amendments could have the effect o f reducing
paperwork burden, compared to what the burden would be without the amendments in place.
The proposed amendments on the use of electronic communication in home banking
would likely reduce the paperwork burden of financial institutions. Institutions offering
home banking programs would be able to use electronic communication to provide
- 19 disclosures, periodic statements, and other information required by Regulation E rather than
having to print and mail the information in paper form.
The proposed amendment relating to error resolution for new accounts may reduce
paperwork burden, because institutions may be able to complete error investigations within
the longer time allowed under the proposal (20 business days), rather than have to
provisionally credit consumer’s accounts within ten business days and provide related notices
to the consumer, as is required currently under Regulation E.
The Federal Reserve requests comments from issuers, especially state member banks,
that will help to estimate the number and burden of the various disclosures that would be
made in the first year this regulation is effective. Comments are invited on: (a) the cost of
compliance; (b) ways to enhance the quality, utility, and clarity of the information to be
disclosed; and (c) ways to minimize the burden of disclosure on respondents, including
through the use of automated disclosure techniques or other forms of information technology.
LIST O F SUBJECTS IN 12 C FR PART 205
Banks, banking, Consumer protection, Electronic fund transfers, Federal Reserve
System, Reporting and recordkeeping requirements.
TEX T O F PRO PO SED REVISIONS
Certain conventions have been used to highlight the proposed changes to Regulation
E. New language is shown inside bold-faced arrows, while language that would be removed
is set off with brackets.
Pursuant to the authority granted in sections 904(a), (c), and (d) of the Electronic
Fund Transfer Act, 15 U.S.C. 1693b(a), (c), and (d), and for the reasons set forth in the
preamble, the Board proposes to amend 12 CFR Part 205 as set forth below:
PART 205 - ELEC TR O N IC FUND TRANSFERS (REG U LATIO N E)
1. The authority citation for Part 205 continues to read as follows:
Authority: 15 U .S.C . 1693-1693r.
2. Section 205.4 would be amended by adding language to paragraph (c) to read as follows:
§ 205.4 G eneral disclosure requirem ents; jointly offered services.
*
*
*
*
*
►
(c) Electronic communication. (1) Definition. For purposes of this regulation,
the term electronic communication means an electronically transmitted text message between
a consumer and a financial institution; in the case of a communication to the consumer, the
message shall allow text to be displayed on equipment in the consumer’s possession such as a
modem-equipped personal computer or screen telephone.
-20(2) Communication between financial institution and consumer, (i) By agreement
between a financial institution and a consumer, either may send to the other by electronic
communication any information required by this regulation to be provided orally or in
writing. Information required by the regulation to be in writing and sent to a consumer by
electronic communication shall be clear and readily understandable and shall be provided in a
manner that would allow a consumer to retain the information.
(ii) If the regulation specifies that information be provided to the consumer in writing,
the consumer may request a paper copy of the information up to one year after receiving the
electronic communication. •«
3. Section 205.11 would be amended by adding a new paragraph (c)(3)(iii), to read as
follows:
§ 205.11 Procedures for resolving errors.
*
*
*
*
*
(c) Time limits and extent of investigation.
5je
jjc
j|e
3|«
jjc
(3) Extension of time periods. The applicable time periods in this paragraph are 20
business days in place of 10 business days, and 90 days in place of 45 days, if a notice of
error involves an electronic fund transfer that:
(i) Was not initiated within a state; [or]
(ii) Resulted from a point-of-sale debit card transaction; ► o r
(iii) Involves a new account during the first 30 calendar days after the first deposit to
the account is made. <
4. A new section 205.16 would be added, to read as follows:
► § 205.16 Certain stored-value services.
(a) General. The rules in this section apply to stored-value accounts as defined in
paragraph (b) of this section.
(b) Definitions. For purposes o f this section, the following definitions apply:
(1)
Off-line stored-value account means a balance of funds recorded on a card that a
consumer may use at electronic terminals to obtain cash or purchase goods or services,
where the record of such balance is also maintained on a separate database, apart from the
- 21 card, and where on-line authorization of transactions is not required to access the funds.
Off-line stored-value accounts are subject to the requirements in paragraph (d).
(2) On-line stored-value account means a balance of funds that may be accessed only
through the use of a card that a consumer may use at electronic terminals to obtain cash or
purchase goods or services, where the record of such balance is maintained on a separate
database, and not on the card, and where on-line authorization of transactions is required to
access the funds. On-line stored-value accounts are subject to the requirements in paragraph
(e).
(3) Financial institution includes any person that, directly or indirectly, holds an on
line or off-line stored-value account, or that issues a card to a consumer for use in obtaining
cash or purchasing goods or services by accessing such an account.
(c) $100 exemption. A stored-value account, as defined in paragraphs (b)(1) and (2),
is exempt from the requirements of this regulation if the maximum amount that may be in the
account at any given time is $100 or less.
(d) Modified requirements for off-line stored-value accounts: initial disclosures.
Stored-value accounts as defined in paragraph (b)(1) are subject only to the following initial
disclosure requirements of Regulation E, as applicable:
(1) Liability of consumer. A summary of the consumer’s liability, under state or
other applicable law or agreement, for unauthorized transfers.
(2) Types of transfers: limitations. The type of electronic fund transfers that the
consumer may make and any limitations on the frequency and the dollar amount of transfers.
(3) Fees. Any fees imposed by the financial institution for electronic fund transfers
or for the right to make transfers.
(4) Error resolution. A summary of the financial institution’s procedures for
resolving errors concerning electronic fund transfers, including the telephone number and
address of the person or office to be notified in the event of an error.
(e) Modified requirements for on-line stored-value accounts. Stored-value accounts
as defined in paragraph (b)(2) are subject to the requirements of Regulation E, with the
following modifications:
(1) Exceptions: change-in-terms notice: error resolution notice. The account is
exempt from the requirements of § 205.8 of the regulation.
(2) Alternative to periodic statement. A financial institution need not furnish the
periodic statement required by § 205.9(b) if the financial institution makes available to the
consumer:
-22 (i) The consumer’s account balance, through a readily available telephone line and at
a terminal; and
(ii) A written history of the consumer’s account transactions that is provided
promptly in response to an oral or written request and that covers at least 60 days preceding
the date of a request by the consumer.
(3)
Additional modifications. A financial institution that does not furnish periodic
statements, in accordance with paragraph (e)(2) of this section, shall comply with the
following special rules:
(i) Initial disclosures. The financial institution shall modify the disclosures under
§ 205.7 by disclosing:
(A) Account balance. The means by which the consumer may obtain information
concerning the account balance, including a telephone number. This disclosure may be made
by providing a notice substantially similar to the notice in paragraph A-6 of Appendix A.
(B) Written account history. A summary of the consumer’s right to receive a written
account history upon request, in place of the periodic-statement disclosure required by
section 205.7(b)(6), and the telephone number to call to request an account history. This
disclosure may be made by providing a notice substantially similar to the notice in paragraph
A-6 of Appendix A.
(C) Error resolution. A notice concerning error resolution that is substantially
similar to the notice contained in paragraph A-6 of Appendix A.
(ii) Limitations on liability. For purposes of § 205.6(b)(3), regarding a 60-day
period for reporting any unauthorized transfer that appears on a periodic statement, the 60day period shall begin with the transmittal of a written account history provided to the
consumer under paragraph (e)(2) of this section.
(iii) Error resolution. The financial institution shall comply with the requirements of
section 205.11 in response to an oral or written notice of an error from the consumer that is
received no later than 60 days after the consumer obtains the written account history, under
paragraph (e)(2) of this section, in which the error is first reflected. *
5. Appendix A would be amended by adding a new paragraph A-6, to read as follows:
APPENDIX A TO PART 205 — Model Disclosure Clauses and Forms
*
*
*
*
*
- 23 A-6 -- Model Forms for On-Line Stored-Value Card Services (§ 205.16(e)(3))
(1) Disclosure of information about obtaining account balances and account histories in on
line stored-value card service (§ 205.16(e)(3)(i)(A) and (B))
You may find out about the balance remaining on your card by calling [telephone
number]. You can also learn your remaining balance [by making a balance inquiry at an
ATM] [on the receipt you get when withdrawing cash from an ATM] [on the receipt you get
when making a purchase].
You also have the right to get a written summary of transactions made with your card
for the 60 days preceding your request by calling [telephone number].
(2) Disclosure of error resolution procedures in on-line stored-value card service
(§ 205.16(e)(3)(i)(C))
In Case of Errors of Questions About Your
Card Transactions
Telephone us at [telephone number]
or
Write us at [address]
as soon as you can, if you think an error has occurred involving a transaction made with
your card. We must hear from you no later than 60 days after you receive a written
summary of transactions (which you can request from us), showing the error. You will need
to tell us:
•
•
•
Your name and card number.
Why you believe there is an error, and the dollar amount involved.
Approximately when the error took place.
If you tell us orally, we may require that you send us your complaint or question in
writing within 10 business days. We will generally complete our investigation within 10
business days and correct any error promptly. In some cases, an investigation may take
longer, but you will have the use of the funds in question after the 10 business days.
However, 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 the funds in question back to the card during the
investigation.
If we decide that there was no error, we will send you a written explanation within
three business days after we finish our investigation. You may ask for copies of the
documents that we used in our investigation.
If you need more information about our error resolution procedures, call us at
[telephone number] [the telephone number shown above].
- 24 -
By order of the Board of Governors of the Federal Reserve System, April 2, 1996.
(signed) William W. Wiles
William W. Wiles
Secretary of the Board
@FedFRASER