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Compliance Guide to Small Entities

Regulation E: Compliance Guide 6 Go

Regulation E: Electronic Fund Transfers

12 CFR 205
This description should not be interpreted as a comprehensive statement of the regulation. Rather, it is intended to give a
broad overview of the regulation's requirements. The full regulation is available on the Government Printing Office web site.

Regulation E provides a basic framework that establishes the rights, liabilities, and responsibilities of participants in electronic
fund transfer systems such as automated teller machine transfers, telephone bill-payment services, point-of-sale (POS) terminal
transfers in stores, and preauthorized transfers from or to a consumer's account (such as direct deposit and social security
payments). The term "electronic fund transfer" (EFT) generally refers to a transaction initiated through an electronic terminal,
telephone, computer, or magnetic tape that instructs a financial institution either to credit or to debit a consumer's asset
account.

A general description of the regulation, by section, follows.

Section 205.1 Authority and purpose

States that the primary objective of the regulation is to protect individual consumers who engage in electronic fund transfers.

Section 205.2 Definitions

Defines key terms used in the regulation.

Section 205.3 Coverage

Lists the types of transactions covered by the regulation--those initiated through an electronic terminal, telephone, computer, or
magnetic tape to either order, instruct, or authorize a financial institution to debit or credit an account. These transfers include,
but are not limited to, POS and ATM transfers, direct deposits or withdrawals, telephone transfers, and transfers initiated
through a debit card transaction.

Section 205.4 General disclosure requirements; jointly offered services

States that a financial institution may combine the disclosure information required by the regulation with that required by other
laws such as the Truth in Lending Act or the Truth in Savings Act as long as it is clear and understandable and is in a written
form that consumers can keep.

Section 205.5 Issuance of access devices

Stipulates that a depository institution may issue an access device (such as a debit card) only if a consumer has requested it
either orally or in writing.

Section 205.6 Liability of consumer for unauthorized transfers

Limits a consumer's liability for unauthorized electronic fund transfers, such as those arising from loss or theft of an access
device, to $50; if the consumer fails to notify the depository institution in a timely fashion, the amount may be $500 or
unlimited.

Section 205.7 Initial disclosures

Requires financial institutions to provide to consumers initial disclosures of the terms and conditions of EFT services.
Institutions must disclose the consumer's liability for unauthorized EFTs, the types of EFTs the consumer may make, and any
limit on the frequency or dollar amount; fees charged by the institution; and error-resolution procedures. Institutions must also
provide a summary of various consumer rights under the regulation.

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Section 205.8 Change-in-terms notice; error-resolution notice

States that if there are adverse changes in fees, the consumer's liability, types of transfers available, or limits on transfers, the
institution must provide a change-in-terms notice at least twenty-one days before the changes take effect. The institution must
periodically send a reminder of the error-resolution procedures. It may send a detailed notice annually or provide an
abbreviated notice with each account statement.

Section 205.9 Receipts at electronic terminals; periodic statements

States that consumers must be provided documentation in two forms: terminal receipts and periodic statements. Consumers
must receive a receipt when they initiate an electronic transfer and monthly in the form of periodic statements. Both documents
must include the type of electronic transfer; the amount and date of the transaction; the location of the terminal; and other
information.

Section 205.10 Preauthorized transfers

Requires financial institutions to provide the consumer with some form of notice that electronic transfers that recur at
substantially regular intervals, such as the direct deposit of salaries or benefits and the preauthorized payment of bills, occurred
as scheduled.

Section 205.11 Procedures for resolving errors

States that if a consumer notifies an institution that an error involving an EFT has occurred, the institution must investigate and
resolve the claim within specified deadlines. Errors covered by this requirement include unauthorized EFTs, incorrect EFTs,
and the omission from an account statement of an EFT that should have been included.

Section 205.12 Relation to other laws

States that with regard to the issuance of access devices, consumer liability, and the unsolicited issuance of credit cards, the
financial institution must take into account the provisions set forth in Regulation Z, Truth in Lending. In addition, the Federal
Reserve Board shall determine whether the request of a state, financial institution, or other interested party is preempted by
state laws relating to electronic fund transfers. Only state laws that are inconsistent with the act and this regulation are
preempted, and then only to the extent of the inconsistency.

Section 205.13 Administrative enforcement; record retention

Indicates which federal agency enforces the regulation for particular classes of institutions. Records are to be retained for a
period of not less than two years from the date disclosures are required to be made or an action is required to be taken.

Section 205.14 Electronic fund transfer service provider not holding consumer's account
States that a person who provides an electronic fund transfer service to a consumer but does not hold the consumer's account is
subject to many of the same requirements set forth in the regulation.

Section 205.15 Electronic fund transfer of government benefits

States that a government agency is subject to the requirements of the regulation if directly or indirectly it issues an access
device to a consumer for use in initiating an electronic fund transfer of government benefits from an account, other than needs-
tested benefits in a program established under state or local law or administered by a state or local agency.

Appendix A Model disclosure clauses and forms

Appendix B Federal enforcement agencies

Appendix C Issuance of staff interpretations

Supplement I Official staff interpretations (Commentary)

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http://www.federalreserve.gov/bankinforeg/regecg.htm 9/27/2010