BY EMILY M. MORRISSEY, CRCM, PAUL R. OSBORNE,
CPA, AMLP, CAMS, AND NIALL K. TWOMEY, CRCM
Congress passed the Electronic Fund Transfer Act (EFTA) in 1978
to protect consumers engaging in electronic fund transfers (EFTs).
The law provides the legal framework for the rights, liabilities, and
responsibilities of participants in EFT systems that consumers use
such as automated teller machines (ATMs), debit point-of-sale
terminals in retail stores, and automated clearing house (ACH)
transactions such as electronic payment of a creditor’s bill from
a consumer’s checking account. Regulation E implements the
Among its provisions, Regulation E specifies procedures that in-
stitutions must follow for investigating and resolving errors alleged
by consumers for EFTs including ATM withdrawals, telephone
bill-payment services, point-of-sale terminal transfers in stores,
and Automated Clearing House (ACH) payments from or to a
consumer's account. It also serves as guidelines for the sale and
issuance of electronic debit cards and includes the rules regarding
consumer liability for unauthorized card usage. The regulation
also specifies the extent to which a consumer
can be held liable for unauthorized EFTs.
The regulation generally requires that when
an institution is notified by a customer of an EFT
error, they must investigate and resolve the claim
within specified deadlines. Customers have 60 days
after receipt of their periodic statements to report
an error. Covered errors include unauthorized EFTs,
incorrect EFTs, and the omission from an account
statement of an EFT that should have been included.
FIs generally have an initial period of 10 days to investigate an EFT error, but they can extend this period to 45
days under certain conditions. To extend the investigation time
frame, an FI must provisionally credit the customer’s account for
the amount of the error (and make these funds fully available). It
also must notify the consumer of the amount and date of the credit.
Under limited circumstances, the FI can extend the investigation
to 90 days, such as for point of sale debit card transactions. The
OVER TIME, MANY FINANCIAL INSTITUTIONS (FIs) have come to view Regulation E as a deposit regulation with little to no risk. That perspective could prove dangerous in today’s regulatory environment, where systemic violations of the requirements could lead to the downgrading of an FI’s overall compliance management system.
Reg E Primer
Amending the Error