Electronic Fund Transfer Act

The Electronic Fund Transfer Act was passed by the U.S. Congress in 1978 and signed by President Jimmy Carter, to establish the rights and liabilities of consumers as well as the responsibilities of all participants in electronic funds transfer activities.^[1]

The act was implemented in Federal Reserve Board Regulation E.

EFT Errors

EFT is not a perfect system; therefore customers should still be diligent in reviewing their EFT statements for possible errors as they would with any other type of transaction. Should a customer notice that there has been an error in an electronic fund transfer relating to their account certain steps must be taken:

Under the Act the Customer must:

• Write or call the financial institution immediately if possible
• Must be no later than 60 days from the date of erroneous statement
• Give name and account number
• Explain why you believe there is an error, the type, dollar amount and date
• May be required to send details of error in writing within 10 business days^[2]

Under the Act the Financial Institution must:

• Promptly investigate the error and resolve it within 45 days
• Errors involving new accounts (opened last 30 days), POS transactions, and foreign transactions may take up to 90 days
• If takes > 10 business days to complete investigation:
  • Must recredit the amount in question
• For new accounts may take up to 20 business days to recredit the account
• Must notify customer of the results of investigation:
  • If there was error – correct it or make recredit final
  • If no error – explanation in writing, notify customer of deducted recredit
• Customer has the right to ask for copies of any documents relied on in the investigation^[2]

Loss or Theft: Customer Liability

If a customer reports the card missing to the institution before any transactions occur, they are not held responsible. A customer can be liable for unauthorized withdrawals if their EFT card is lost or stolen and they do not follow certain criteria:

• Loss is limited to $50 if institution is notified within two business days
• Loss could be up to $500 if institution is notified between 3 and 59 days
• If loss is not reported within 60 business days customer risks unlimited loss on transfers made after the 60 day period – could lose all money in account plus maximum over draft if any^[2]

Financial Institution Liability

The financial institution must give the customer notice of their liability in case the card is lost or stolen. This must include a phone number for reporting the loss and a description of its error resolution process.^[2]

What the EFT Act Covers

• The EFT Act does not apply to all preauthorized plans. The EFT Act does not apply to automatic transfers from any account held in the name of the institution the consumer uses to the account the consumer uses.
  • An example of this would be where the EFT Act would not apply to any automatic payments put towards a mortgage held by the financial institution where a consumer would hold their electronic funds account.
• The EFT Act would also not apply to automatic transfers among a consumer’s account at a specific financial institution.
• The EFT Act also does not cover all transfers. Some banks, other financial institutions, and vendors will produce cards with a cash value imprinted into the card itself.^[2]
  • Examples of these include public transit passes, store gift cards, and prepaid telephone cards. These cards may not be covered by the EFT Act.
• When using electronic funds transfer, the Act does not give the consumer the right to stop payment.
• State law or any contract that imposes a lower liability limit than those mentioned in the “Loss or Theft: Customer Liability” will be preempted (overridden) by the federal EFT Act unless the state law provides protections that are greater than that provided under Federal law. (See Section 919 of the Act).

Rights

The EFT Act allows consumers the right to choose their own institution if the consumer is required to receive their salary or government benefit check by electronic funds transfer means.^[2]

The EFT Act also forbids any creditor or lender from asking a consumer to repay a loan or other credit via an electronic fund transfer – with the exception of one instance: when there is an overdraft on checking plans.^[3]

See also

• Electronic funds transfer

References

Further reading

• The Federal Reserve Board. (2001). Consumer Handbook to Credit Protection Laws: Electronic Fund Transfers. Retrieved June 26, 2006, from the World Wide Web: http://federalreserve.gov/pubs/consumerhdbk/electronic.htm
• Federal Trade Commission. (2003). Electronic Banking. Retrieved June 26, 2006, from the World Wide Web: http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre14.shtm
• Lloyd, Crystal T. (n.d.). Electronic funds transfer act. Retrieved June 1, 2006, from the World Wide Web: http://www.google.com/search?q=cache:_nqOZ60_VG8J:www.bankersonline.com/tools/efta.ppt+%22electronic+funds+transfer+act%22&hl=en&ct=clnk&cd=5&client=safari
• Regulation E at BankersOnline.com: http://www.bankersonline.com/regs/205/205.html
• Regulation E at FDIC: http://www.fdic.gov/regulations/laws/rules/6500-3100.html
• W., C. H. (Oct., 1983). "Overcoming the obstacles to implementation of point-of-sale electronic fund transfer systems: EFTA and the new uniform payments code". Virginia Law Review (Virginia Law Review) 69 (7): 1351–1379. doi:10.2307/1072866. JSTOR 1072866. 
• Brown, Tom; Plache, Lacey (Winter, 2006). "Paying with plastic: maybe not so crazy". The University of Chicago Law Review (The University of Chicago Law Review) 73 (1): 63–86. JSTOR 4495544. 

External links

• Text of the Act
• Text of Regulation E