Electronic Fund Transfers (Regulation E), 81020-81058 [2011-31725]

Agencies

• BUREAU OF CONSUMER FINANCIAL PROTECTION

[Federal Register Volume 76, Number 248 (Tuesday, December 27, 2011)]
[Rules and Regulations]
[Pages 81020-81058]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-31725]



[[Page 81019]]

Vol. 76

Tuesday,

No. 248

December 27, 2011

Part II





Bureau of Consumer Financial Protection





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12 CFR Part 1005





Electronic Fund Transfers (Regulation E); Interim Final Rule

Federal Register / Vol. 76 , No. 248 / Tuesday, December 27, 2011 / 
Rules and Regulations

[[Page 81020]]


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BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1005

[Docket No. CFPB-2011-0021]
RIN 3170-AA06


Electronic Fund Transfers (Regulation E)

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Interim final rule with request for public comment.

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SUMMARY: Title X of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (Dodd-Frank Act) transferred rulemaking authority for a 
number of consumer financial protection laws from seven Federal 
agencies to the Bureau of Consumer Financial Protection (Bureau) as of 
July 21, 2011. The Bureau is in the process of republishing the 
regulations implementing those laws with technical and conforming 
changes to reflect the transfer of authority and certain other changes 
made by the Dodd-Frank Act. In light of the transfer of the Board of 
Governors of the Federal Reserve System's (Board's) rulemaking 
authority for the Electronic Fund Transfer Act (EFTA) to the Bureau, 
the Bureau is publishing for public comment an interim final rule 
establishing a new Regulation E (Electronic Fund Transfers). This 
interim final rule does not impose any new substantive obligations on 
persons subject to the existing Regulation E, previously published by 
the Board.

DATES: This interim final rule is effective December 30, 2011. Comments 
must be received on or before February 27, 2012.

ADDRESSES: You may submit comments, identified by Docket No. CFPB-2011-
0021 or RIN 3170-AA06, by any of the following methods:
     Electronic: https://www.regulations.gov. Follow the 
instructions for submitting comments.
     Mail: Monica Jackson, Office of the Executive Secretary, 
Bureau of Consumer Financial Protection, 1500 Pennsylvania Avenue NW., 
(Attn: 1801 L Street), Washington, DC 20220.
     Hand Delivery/Courier in Lieu of Mail: Monica Jackson, 
Office of the Executive Secretary, Bureau of Consumer Financial 
Protection, 1700 G Street NW., Washington, DC 20006.
    All submissions must include the agency name and docket number or 
Regulatory Information Number (RIN) for this rulemaking. In general, 
all comments received will be posted without change to https://www.regulations.gov. In addition, comments will be available for public 
inspection and copying at 1700 G Street NW., Washington, DC 20006, on 
official business days between the hours of 10 a.m. and 5 p.m. Eastern 
Time. You can make an appointment to inspect the documents by 
telephoning (202) 435-7275.
    All comments, including attachments and other supporting materials, 
will become part of the public record and subject to public disclosure. 
Sensitive personal information, such as account numbers or social 
security numbers, should not be included. Comments will not be edited 
to remove any identifying or contact information.

FOR FURTHER INFORMATION CONTACT: Gregory Evans or Jane Gao, Office of 
Regulations, at (202) 435-7700.

SUPPLEMENTARY INFORMATION:

I. Background

    The Electronic Fund Transfer Act (15 U.S.C. 1693 et seq.) (EFTA), 
enacted in 1978, provides a basic framework establishing the rights, 
liabilities, and responsibilities of participants in electronic fund 
transfer (EFT) systems. Historically, the EFTA was implemented in 
Regulation E of the Board of Governors of the Federal Reserve System 
(Board), 12 CFR Part 205. The Dodd-Frank Wall Street Reform and 
Consumer Protection Act (Dodd-Frank Act) \1\ amended a number of 
consumer financial protection laws, including the EFTA. In addition to 
various substantive amendments, the Dodd-Frank Act generally 
transferred the Board's rulemaking authority for the EFTA to the Bureau 
of Consumer Financial Protection (Bureau), effective July 21, 2011.\2\ 
See sections 1061 and 1084 of the Dodd-Frank Act. Pursuant to the Dodd-
Frank Act and EFTA, as amended, the Bureau is publishing for public 
comment an interim final rule establishing a new Regulation E 
(Electronic Fund Transfers), 12 CFR Part 1005, implementing the EFTA.
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    \1\ Public Law 111-203,124 Stat. 1376 (2010).
    \2\ The Dodd-Frank Act section 1029, generally excludes from 
this transfer of authority, subject to certain exceptions, any 
rulemaking authority over a motor vehicle dealer that is 
predominantly engaged in the sale and servicing of motor vehicles, 
the leasing and servicing of motor vehicles, or both. See also Dodd-
Frank Act, sections 1002(12)(C), 1084(3) (Board retains rulemaking 
authority with respect to section 920 of EFTA, dealing with debit 
card interchange fees, network arrangements, and routing 
restrictions);12 CFR Part 235.
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II. Summary of the Interim Final Rule

A. General

    The interim final rule substantially duplicates the Board's 
Regulation E as the Bureau's new Regulation E, 12 CFR Part 1005, making 
only certain non-substantive, technical, formatting, and stylistic 
changes. To minimize any potential confusion, the Bureau is preserving 
the numbering of the Board's Regulation E, other than the new part 
number. While this interim final rule generally incorporates the 
Board's existing regulatory text, appendices (including model forms and 
clauses), and supplements, the rule has been edited as necessary to 
reflect nomenclature and other technical amendments required by the 
Dodd-Frank Act. Notably, this interim final rule does not impose any 
new substantive obligations on regulated entities.

B. Specific Changes

    The Bureau has made certain nomenclature and other non-substantive 
changes consistently throughout Regulation E. References to the Board 
and its administrative structure have been replaced with references to 
the Bureau. Conforming edits have been made to internal cross-
references, as well as addresses or other contact information. 
Conforming edits have also been made to reflect the scope of the 
Bureau's authority pursuant to the EFTA, as amended by the Dodd-Frank 
Act. Historical references that are no longer applicable, and 
references to effective dates that have passed, have been removed as 
appropriate. In addition, certain changes have been made to the text of 
the Board's Regulation E to conform to current codification standards 
of the Code of Federal Regulations. For example, previously 
undesignated paragraphs in the regulation and the official commentary 
have been enumerated.
    The Bureau is eliminating three provisions of Regulation E that are 
no longer applicable and renumbering one section that is affected by 
this deletion. The deleted provisions include the following:

     Section 1005.3(b)(2)(iii), which expired December 31, 
2009. What would have been Sec.  1005.3(b)(2)(iv) was renumbered 
1005.3(b)(2)(iii).
     Section 1005.3(b)(3)(iii), which expired December 31, 
2007.
     Section 1005.16(d), which provided a technical 
exemption for certain automated teller machines through December 31, 
2004. What would have been Sec.  1005.16(e) was renumbered 
1005.16(d).


[[Page 81021]]


    The Bureau is also eliminating Appendix B, entitled ``Federal 
Enforcement Agencies,'' because it was designed to be informational 
only and is unnecessary for the implementation of the EFTA, as amended.
    Moreover, the Bureau is revising Form A-9, Model Consent Form for 
Overdraft Services, in Appendix A to the Bureau's new Regulation E. The 
revised Form A-9 is, however, identical to the Board's version in 
substance. The only revision was to modernize the spelling of 
``website'' (in place of ``Web site'') to parallel a stylistic change 
the Bureau is making in the corresponding regulatory text of Sec. Sec.  
1005.18 and 1005.20. This change does not necessitate any revision to 
standard forms that institutions may use in reliance on Model Form A-9 
because the term, ``website,'' appears in the model form within 
brackets, indicating that the institution is to replace the placeholder 
with its own website address. Thus, neither ``website'' nor ``website'' 
appears in overdraft services consent forms actually delivered to 
consumers.
    Finally, the Bureau is updating references to the EFTA by 
correcting statutory citations to the EFTA in cases where the numbering 
of the Act was altered by section 1084 of the Dodd-Frank Act. These 
updated references occur in the following provisions of Regulation E:

     Section 1005.3(c)(5)
     Section 1005.3(c)(7)
     Section 1005.12(c)(2)
     Section 1005.13(b)(2)
     Section 1005.20(h)(2)
     Appendix C--Official Interpretations

III. Legal Authority

A. Rulemaking Authority

    The Bureau is issuing this interim final rule pursuant to its 
authority under the EFTA and the Dodd-Frank Act. Effective July 21, 
2011, section 1061 of the Dodd-Frank Act transferred to the Bureau the 
``consumer financial protection functions'' previously vested in 
certain other Federal agencies. The term ``consumer financial 
protection function'' is defined to include ``all authority to 
prescribe rules or issue orders or guidelines pursuant to any Federal 
consumer financial law, including performing appropriate functions to 
promulgate and review such rules, orders, and guidelines.'' \3\ The 
EFTA is a Federal consumer financial law, except with respect to 
section 920 of the EFTA, dealing with debit card interchange fees, 
network arrangements, and routing restrictions.\4\ Accordingly, 
effective July 21, 2011, the authority of the Board to issue 
regulations pursuant to the EFTA transferred to the Bureau.\5\
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    \3\ Public Law 111-203, section 1061(a)(1). Effective on the 
designated transfer date, the Bureau is also granted ``all powers 
and duties'' vested in each of the Federal agencies, relating to the 
consumer financial protection functions, on the day before the 
designated transfer date. Until this and other interim final rules 
take effect, existing regulations for which rulemaking authority 
transferred to the Bureau continue to govern persons covered by this 
rule. See 76 FR 43569 (July 21, 2011).
    \4\ Public Law 111-203, section 1002(14) (defining ``Federal 
consumer financial law'' to include the ``enumerated consumer 
laws''); id. Section 1002(12) (defining ``enumerated consumer laws'' 
to include the EFTA, except with respect to section 920 of the 
EFTA).
    \5\ Section 1066 of the Dodd-Frank Act grants the Secretary of 
the Treasury interim authority to perform certain functions of the 
Bureau. Pursuant to that authority, Treasury is publishing this 
interim final rule on behalf of the Bureau.
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    EFTA section 904(a) authorizes the Bureau to prescribe regulations 
necessary to carry out the purposes of the title. The express purposes 
of the EFTA, as amended by the Dodd-Frank Act, are to establish ``the 
rights, liabilities, and responsibilities of participants in electronic 
fund and remittance transfer systems'' and to provide ``individual 
consumer rights.'' EFTA section 902(b), 15 U.S.C. 1693. EFTA section 
904(c), as amended by the Dodd-Frank Act, further provides that 
regulations prescribed by the Bureau may contain any classifications, 
differentiations, or other provisions, and may provide for such 
adjustments or exceptions for any class of electronic fund transfers or 
remittance transfers that the Bureau deems necessary or proper to 
effectuate the purposes of the title, to prevent circumvention or 
evasion, or to facilitate compliance.\6\
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    \6\ 15 U.S.C. 1693b.
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B. Authority To Issue an Interim Final Rule Without Prior Notice and 
Comment

    The Administrative Procedure Act (APA) \7\ generally requires 
public notice and an opportunity to comment before promulgation of 
regulations.\8\ The APA provides exceptions to notice-and-comment 
procedures, however, where an agency for good cause finds that such 
procedures are impracticable, unnecessary, or contrary to the public 
interest or when a rulemaking relates to agency organization, 
procedure, and practice.\9\ The Bureau finds that there is good cause 
to conclude that providing notice and opportunity for comment would be 
unnecessary and contrary to the public interest under these 
circumstances. In addition, substantially all the changes made by this 
interim final rule, which were necessitated by the Dodd-Frank Act's 
transfer of EFTA authority from the Board to the Bureau, relate to 
agency organization, procedure, and practice and are thus exempt from 
the APA's notice-and-comment requirements.
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    \7\ 5 U.S.C. 551 et seq.
    \8\ 5 U.S.C. 553(b), (c).
    \9\ 5 U.S.C. 553(b)(3)(A), (B).
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    The Bureau's good cause findings are based on the following 
considerations. As an initial matter, the Board's existing regulation 
was a result of notice-and-comment rulemaking to the extent required. 
Moreover, the interim final rule published today does not impose any 
new, substantive obligations on regulated entities. Rather, the interim 
final rule makes only non-substantive, technical changes to the 
existing text of the regulation, such as renumbering, changing internal 
cross-references, replacing appropriate nomenclature to reflect the 
transfer of authority to the Bureau, and changing the address for 
filing applications and notices. Given the technical nature of these 
changes, and the fact that the interim final rule does not impose any 
additional substantive requirements on covered entities, an opportunity 
for prior public comment is unnecessary. In addition, recodifying the 
Board's regulation to reflect the transfer of authority to the Bureau 
will help facilitate compliance with the EFTA and its implementing 
regulation, and the new regulation will help reduce uncertainty 
regarding the applicable regulatory framework. Using notice-and-comment 
procedures would delay this process and thus be contrary to the public 
interest.
    The APA generally requires that rules be published not less than 30 
days before their effective dates. See 5 U.S.C. 553(d). As with the 
notice and comment requirement, however, the APA allows an exception 
when ``otherwise provided by the agency for good cause found and 
published with the rule.'' 5 U.S.C. 553(d)(3). The Bureau finds that 
there is good cause for providing less than 30 days notice here. A 
delayed effective date would harm consumers and regulated entities by 
needlessly perpetuating discrepancies between the amended statutory 
text and the implementing regulation, thereby hindering compliance and 
prolonging uncertainty regarding the applicable regulatory 
framework.\10\
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    \10\ This interim final rule is one of 14 companion rulemakings 
that together restate and recodify the implementing regulations 
under 14 existing consumer financial laws (part III.C, below, lists 
the 14 laws involved). In the interest of proper coordination of 
this overall regulatory framework, which includes numerous cross-
references among some of the regulations, the Bureau is establishing 
the same effective date of December 30, 2011 for those rules 
published on or before that date and making those published 
thereafter (if any) effective immediately.

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    In addition, delaying the effective date of the interim final rule 
for 30 days would provide no practical benefit to regulated entities in 
this context and in fact could operate to their detriment. As discussed 
above, the interim final rule published today does not impose any new, 
substantive obligations on regulated entities. Instead, the rule makes 
only non-substantive, technical changes to the existing text of the 
regulation. Thus, regulated entities that are already in compliance 
with the existing rules will not need to modify business practices as a 
result of this rule.

C. Section 1022(b)(2) of the Dodd-Frank Act

    In developing the interim final rule, the Bureau has conducted an 
analysis of potential benefits, costs, and impacts.\11\ The Bureau 
believes that the interim final rule will benefit consumers and covered 
persons by updating and recodifying Regulation E to reflect the 
transfer of authority to the Bureau and certain other changes mandated 
by the Dodd-Frank Act. This will help facilitate compliance with the 
EFTA and its implementing regulation and help reduce any uncertainty 
regarding the applicable regulatory framework. The interim final rule 
will not impose any new substantive obligations on consumers or covered 
persons and it is not expected to have any impact on consumers' access 
to consumer financial products and services.
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    \11\ Section 1022(b)(2)(A) of the Dodd-Frank Act addresses the 
consideration of the potential benefits and costs of regulation to 
consumers and covered persons, including the potential reduction of 
access by consumers to consumer financial products or services; the 
impact on depository institutions and credit unions with $10 billion 
or less in total assets as described in section 1026 of the Dodd-
Frank Act; and the impact on consumers in rural areas. Section 
1022(b)(2)(B) requires that the Bureau ``consult with the 
appropriate prudential regulators or other Federal agencies prior to 
proposing a rule and during the comment process regarding 
consistency with prudential, market, or systemic objectives 
administered by such agencies.'' The manner and extent to which 
these provisions apply to interim final rules and to benefits, 
costs, and impacts that are compelled by statutory changes rather 
than discretionary Bureau action is unclear. Nevertheless, to inform 
this rulemaking more fully, the Bureau performed the described 
analyses and consultations.
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    Although not required by the interim final rule, covered entities 
may incur some costs in updating compliance manuals and related 
materials to reflect the new numbering and other technical changes 
reflected in the new Regulation E. The Bureau has worked to reduce any 
such burden by preserving the existing numbering to the extent possible 
and believes that such costs will likely be minimal. These changes 
could be handled in the short term by providing a short, standalone 
summary alerting users to the changes and in the long term could be 
combined with other updates at the covered person's convenience. The 
Bureau intends to continue investigating the possible costs to affected 
entities of updating manuals and related materials to reflect these 
changes and solicits comments on this and other issues discussed in 
this section.
    The interim final rule will have no unique impact on depository 
institutions or credit unions with $10 billion or less in assets as 
described in section 1026(a) of the Dodd-Frank Act. Also, the interim 
final rule will have no unique impact on rural consumers.
    In undertaking the process of recodifying Regulation E, as well as 
regulations implementing thirteen other existing consumer financial 
laws,\12\ the Bureau consulted the Federal Deposit Insurance 
Corporation, the Office of the Comptroller of the Currency, the 
National Credit Union Administration, the Board of Governors of the 
Federal Reserve System, the Federal Trade Commission, and the 
Department of Housing and Urban Development, including with respect to 
consistency with any prudential, market, or systemic objectives that 
may be administered by such agencies.\13\ The Bureau also has consulted 
with the Office of Management and Budget for technical assistance. The 
Bureau expects to have further consultations with the appropriate 
Federal agencies during the comment period.
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    \12\ The fourteen laws implemented by this and its companion 
rulemakings are: the Consumer Leasing Act, the Electronic Fund 
Transfer Act (except with respect to section 920 of that Act), the 
Equal Credit Opportunity Act, the Fair Credit Reporting Act (except 
with respect to sections 615(e) and 628 of that act), the Fair Debt 
Collection Practices Act, Subsections (b) through (f) of section 43 
of the Federal Deposit Insurance Act, sections 502 through 509 of 
the Gramm-Leach-Bliley Act (except for section 505 as it applies to 
section 501(b)), the Home Mortgage Disclosure Act, the Real Estate 
Settlement Procedures Act, the S.A.F.E. Mortgage Licensing Act, the 
Truth in Lending Act, the Truth in Savings Act, section 626 of the 
Omnibus Appropriations Act, 2009, and the Interstate Land Sales Full 
Disclosure Act.
    \13\ In light of the technical but voluminous nature of this 
recodification project, the Bureau focused the consultation process 
on a representative sample of the recodified regulations, while 
making information on the other regulations available. The Bureau 
expects to conduct differently its future consultations regarding 
substantive rulemakings.
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IV. Request for Comment

    Although notice and comment rulemaking procedures are not required, 
the Bureau invites comments on this notice. Commenters are specifically 
encouraged to identify any technical issues raised by the rule. The 
Bureau is also seeking comment in response to a notice published at 76 
FR 75825 (Dec. 5, 2011) concerning its efforts to identify priorities 
for streamlining regulations that it has inherited from other Federal 
agencies to address provisions that are outdated, unduly burdensome, or 
unnecessary.

V. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), as amended by the Small 
Business Regulatory Enforcement Fairness Act of 1996, requires each 
agency to consider the potential impact of its regulations on small 
entities, including small businesses, small governmental units, and 
small not-for-profit organizations.\14\ The RFA generally requires an 
agency to conduct an initial regulatory flexibility analysis (IRFA) and 
a final regulatory flexibility analysis (FRFA) of any rule subject to 
notice-and-comment rulemaking requirements, unless the agency certifies 
that the rule will not have a significant economic impact on a 
substantial number of small entities.\15\ The Bureau also is subject to 
certain additional procedures under the RFA involving the convening of 
a panel to consult with small business representatives prior to 
proposing a rule for which an IRFA is required.\16\
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    \14\ 5 U.S.C. 601 et seq.
    \15\ 5 U.S.C. 603, 604.
    \16\ 5 U.S.C. 609.
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    The IRFA and FRFA requirements described above apply only where a 
notice of proposed rulemaking is required,\17\ and the panel 
requirement applies only when a rulemaking requires an IRFA.\18\ As 
discussed above in part III, a notice of proposed rulemaking is not 
required for this rulemaking.
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    \17\ 5 U.S.C. 603(a), 604(a); 5 U.S.C. 553(b)(B).
    \18\ 5 U.S.C. 609(b).
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    In addition, as discussed above, this interim final rule has only a 
minor impact on entities subject to Regulation E. The rule imposes no 
new, substantive obligations on covered entities. Accordingly, the 
undersigned certifies that this interim final rule will not have a 
significant economic impact on a substantial number of small entities.

VI. Paperwork Reduction Act

    The Bureau may not conduct or sponsor, and a respondent is not 
required to respond to, an information collection unless it displays a 
currently valid Office of Management and Budget (OMB) control number. 
This rule contains information collection

[[Page 81023]]

requirements under the Paperwork Reduction Act (PRA), which have been 
previously approved by OMB under the following OMB control number 
issued to the Board, and the PRA burden for which is unchanged by this 
rule: OMB Control No(s). 7100-0200. There are no new information 
collection requirements in this interim final rule. The Bureau's OMB 
control number for this information collection is: 3170-0014.

List of Subjects in 12 CFR Part 1005

    Banks, Banking, Consumer protection, Credit unions, Electronic fund 
transfers, National banks, Reporting and recordkeeping requirements, 
Savings Associations.

Authority and Issuance

    For the reasons set forth above, the Bureau of Consumer Financial 
Protection adds part 1005 to Chapter X in Title 12 of the Code of 
Federal Regulations to read as follows:

PART 1005--ELECTRONIC FUND TRANSFERS (REGULATION E)

Sec.
1005.1 Authority and purpose.
1005.2 Definitions.
1005.3 Coverage.
1005.4 General disclosure requirements; jointly offered services.
1005.5 Issuance of access devices.
1005.6 Liability of consumer for unauthorized transfers.
1005.7 Initial disclosures.
1005.8 Change in terms notice; error resolution notice.
1005.9 Receipts at electronic terminals; periodic statements.
1005.10 Preauthorized transfers.
1005.11 Procedures for resolving errors.
1005.12 Relation to other laws.
1005.13 Administrative enforcement; record retention.
1005.14 Electronic fund transfer service provider not holding 
consumer's account.
1005.15 Electronic fund transfer of government benefits.
1005.16 Disclosures at automated teller machines.
1005.17 Requirements for overdraft services.
1005.18 Requirements for financial institutions offering payroll 
card accounts.
1005.20 Requirements for gift cards and gift certificates.
Appendix A to Part 1005--Model Disclosure Clauses and Forms
Appendix B to Part 1005--[Reserved]
Appendix C to Part 1005--Issuance of Official Interpretations
Supplement I to Part 1005--Official Interpretations

    Authority:  12 U.S.C. 5512, 5581; 15 U.S.C. 1693b.


Sec.  1005.1  Authority and purpose.

    (a) Authority. The regulation in this part, known as Regulation E, 
is issued by the Bureau of Consumer Financial Protection (Bureau) 
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. 3170-0014.
    (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 part is the protection of individual 
consumers engaging in electronic fund transfers.


Sec.  1005.2  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 consumer asset account (other than an occasional or incidental 
credit balance in a credit plan) held directly or indirectly by a 
financial institution and established primarily for personal, family, 
or household purposes.
    (2) The term includes a ``payroll card account'' which is an 
account that is directly or indirectly established through an employer 
and to which electronic fund transfers of the consumer's wages, salary, 
or other employee compensation (such as commissions), are made on a 
recurring basis, whether the account is operated or managed by the 
employer, a third-party payroll processor, a depository institution or 
any other person. For rules governing payroll card accounts, see Sec.  
1005.18.
    (3) The term does not include an account held 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 Act, 15 U.S.C. 1693 et seq.).
    (d) ``Business day'' means any day on which the offices of the 
consumer's financial institution are open to the public for carrying on 
substantially all business functions.
    (e) ``Consumer'' means a natural person.
    (f) ``Credit'' means the right granted by a financial institution 
to a consumer to defer payment of debt, incur debt and defer its 
payment, or purchase property or services and defer payment therefor.
    (g) ``Electronic fund transfer'' is defined in Sec.  1005.3.
    (h) ``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-of-sale terminals, automated teller machines (ATMs), 
and cash dispensing machines.
    (i) ``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, 
other than a person excluded from coverage of this part by section 1029 
of the Consumer Financial Protection Act of 2010, Title X of the Dodd-
Frank Wall Street Reform and Consumer Protection Act, Public Law 111-
203, 124 Stat. 1376.
    (j) ``Person'' means a natural person or an organization, including 
a corporation, government agency, estate, trust, partnership, 
proprietorship, cooperative, or association.
    (k) ``Preauthorized electronic fund transfer'' means an electronic 
fund transfer authorized in advance to recur at substantially regular 
intervals.
    (l) ``State'' means any state, territory, or possession of the 
United States; the District of Columbia; the Commonwealth of Puerto 
Rico; or any political subdivision of the thereof in this paragraph 
(l).
    (m) ``Unauthorized electronic fund 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:

[[Page 81024]]

    (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 acting in 
concert with the consumer; or
    (3) By the financial institution or its employee.


Sec.  1005.3  Coverage.

    (a) General. This part applies to any electronic fund transfer that 
authorizes a financial institution to debit or credit a consumer's 
account. Generally, this part applies to financial institutions. For 
purposes of Sec. Sec.  1005.3(b)(2) and (3), 1005.10(b), (d), and (e), 
1005.13, and 1005.20 this part applies to any person, other than a 
person excluded from coverage of this part by section 1029 of the 
Consumer Financial Protection Act of 2010, Title X of the Dodd-Frank 
Wall Street Reform and Consumer Protection Act, Public Law 111-203, 124 
Stat. 1376.
    (b) Electronic fund transfer. (1) Definition. The term ``electronic 
fund transfer'' means any transfer of funds that is initiated through 
an electronic terminal, telephone, computer, or magnetic tape for the 
purpose of ordering, instructing, or authorizing a financial 
institution to debit or credit a consumer's account. The term includes, 
but is not limited to:
    (i) Point-of-sale transfers;
    (ii) Automated teller machine transfers;
    (iii) Direct deposits or withdrawals of funds;
    (iv) Transfers initiated by telephone; and
    (v) Transfers resulting from debit card transactions, whether or 
not initiated through an electronic terminal.
    (2) Electronic fund transfer using information from a check. (i) 
This part applies where a check, draft, or similar paper instrument is 
used as a source of information to initiate a one-time electronic fund 
transfer from a consumer's account. The consumer must authorize the 
transfer.
    (ii) The person initiating an electronic fund transfer using the 
consumer's check as a source of information for the transfer must 
provide a notice that the transaction will or may be processed as an 
electronic fund transfer, and obtain a consumer's authorization for 
each transfer. A consumer authorizes a one-time electronic fund 
transfer (in providing a check to a merchant or other payee for the 
MICR encoding, that is, the routing number of the financial 
institution, the consumer's account number and the serial number) when 
the consumer receives notice and goes forward with the underlying 
transaction. For point-of-sale transfers, the notice must be posted in 
a prominent and conspicuous location, and a copy thereof, or a 
substantially similar notice, must be provided to the consumer at the 
time of the transaction.
    (iii) A person may provide notices that are substantially similar 
to those set forth in Appendix A-6 to comply with the requirements of 
this paragraph (b)(2).
    (3) Collection of returned item fees via electronic fund 
transfer.(i) General. The person initiating an electronic fund transfer 
to collect a fee for the return of an electronic fund transfer or a 
check that is unpaid, including due to insufficient or uncollected 
funds in the consumer's account, must obtain the consumer's 
authorization for each transfer. A consumer authorizes a one-time 
electronic fund transfer from his or her account to pay the fee for the 
returned item or transfer if the person collecting the fee provides 
notice to the consumer stating that the person may electronically 
collect the fee, and the consumer goes forward with the underlying 
transaction. The notice must state that the fee will be collected by 
means of an electronic fund transfer from the consumer's account if the 
payment is returned unpaid and must disclose the dollar amount of the 
fee. If the fee may vary due to the amount of the transaction or due to 
other factors, then, except as otherwise provided in paragraph 
(b)(3)(ii) of this section, the person collecting the fee may disclose, 
in place of the dollar amount of the fee, an explanation of how the fee 
will be determined.
    (ii) Point-of-sale transactions. If a fee for an electronic fund 
transfer or check returned unpaid may be collected electronically in 
connection with a point-of-sale transaction, the person initiating an 
electronic fund transfer to collect the fee must post the notice 
described in paragraph (b)(3)(i) of this section in a prominent and 
conspicuous location. The person also must either provide the consumer 
with a copy of the posted notice (or a substantially similar notice) at 
the time of the transaction, or mail the copy (or a substantially 
similar notice) to the consumer's address as soon as reasonably 
practicable after the person initiates the electronic fund transfer to 
collect the fee. If the amount of the fee may vary due to the amount of 
the transaction or due to other factors, the posted notice may explain 
how the fee will be determined, but the notice provided to the consumer 
must state the dollar amount of the fee if the amount can be calculated 
at the time the notice is provided or mailed to the consumer.
    (c) Exclusions from coverage. The term ``electronic fund transfer'' 
does not include:
    (1) Checks. Any transfer of funds originated by check, draft, or 
similar paper instrument; or any payment made by check, draft, or 
similar paper instrument at an electronic terminal.
    (2) Check guarantee or authorization. Any transfer of funds that 
guarantees payment or authorizes acceptance of a check, draft, or 
similar paper instrument but that does not directly result in a debit 
or credit to a consumer's account.
    (3) Wire or other similar transfers. Any transfer of funds through 
Fedwire or through a similar wire transfer system that is used 
primarily for transfers between financial institutions or between 
businesses.
    (4) Securities and commodities transfers. Any transfer of funds the 
primary purpose of which is the purchase or sale of a security or 
commodity, if the security or commodity is:
    (i) Regulated by the Securities and Exchange Commission or the 
Commodity Futures Trading Commission;
    (ii) Purchased or sold through a broker-dealer regulated by the 
Securities and Exchange Commission or through a futures commission 
merchant regulated by the Commodity Futures Trading Commission; or
    (iii) Held in book-entry form by a Federal Reserve Bank or Federal 
agency.
    (5) Automatic transfers by account-holding institution. Any 
transfer of funds under an agreement between a consumer and a financial 
institution which provides that the institution will initiate 
individual transfers without a specific request from the consumer:
    (i) Between a consumer's accounts within the financial institution;
    (ii) From a consumer's account to an account of a member of the 
consumer's family held in the same financial institution; or
    (iii) Between a consumer's account and an account of the financial 
institution, except that these transfers remain subject to Sec.  
1005.10(e) regarding compulsory use and sections 916 and 917 of the Act 
regarding civil and criminal liability.
    (6) Telephone-initiated transfers. Any transfer of funds that:
    (i) Is initiated by a telephone communication between a consumer 
and a financial institution making the transfer; and
    (ii) Does not take place under a telephone bill-payment or other 
written

[[Page 81025]]

plan in which periodic or recurring transfers are contemplated.
    (7) Small institutions. Any preauthorized transfer to or from an 
account if the assets of the account-holding financial institution were 
$100 million or less on the preceding December 31. If assets of the 
account-holding institution subsequently exceed $100 million, the 
institution's exemption for preauthorized transfers terminates one year 
from the end of the calendar year in which the assets exceed $100 
million. Preauthorized transfers exempt under this paragraph (c)(7) 
remain subject to Sec.  1005.10(e) regarding compulsory use and 
sections 916 and 917 of the Act regarding civil and criminal liability.


Sec.  1005.4  General disclosure requirements; jointly offered 
services.

    (a)(1) Form of disclosures. Disclosures required under this part 
shall be clear and readily understandable, in writing, and in a form 
the consumer may keep, except as otherwise provided in this part. The 
disclosures required by this part may be provided to the consumer in 
electronic form, subject to compliance with the consumer-consent and 
other applicable provisions of the Electronic Signatures in Global and 
National Commerce Act (E-Sign Act) (15 U.S.C. 7001 et seq.). A 
financial institution may use commonly accepted or readily 
understandable abbreviations in complying with the disclosure 
requirements of this part.
    (2) Foreign language disclosures. Disclosures required under this 
part may be made in a language other than English, provided that the 
disclosures are made available in English upon the consumer's request.
    (b) Additional information; disclosures required by other laws. A 
financial institution may include additional information and may 
combine disclosures required by other laws (such as the Truth in 
Lending Act (15 U.S.C. 1601 et seq.) or the Truth in Savings Act (12 
U.S.C. 4301 et seq.) with the disclosures required by this part.
    (c) Multiple accounts and account holders.(1) Multiple accounts. A 
financial institution may combine the required disclosures into a 
single statement for a consumer who holds more than one account at the 
institution.
    (2) Multiple account holders. For joint accounts held by two or 
more consumers, a financial institution need provide only one set of 
the required disclosures and may provide them to any of the account 
holders.
    (d) Services offered jointly. Financial institutions that provide 
electronic fund transfer services jointly may contract among themselves 
to comply with the requirements that this part imposes on any or all of 
them. An institution need make only the disclosures required by 
Sec. Sec.  1005.7 and 1005.8 that are within its knowledge and within 
the purview of its relationship with the consumer for whom it holds an 
account.


Sec.  1005.5  Issuance of access devices.

    (a) Solicited issuance. Except as provided in paragraph (b) of this 
section, a financial institution may issue an access device to a 
consumer only:
    (1) In response to an oral or written request for the device; or
    (2) As a renewal of, or in substitution for, an accepted access 
device whether issued by the institution or a successor.
    (b) Unsolicited issuance. A financial institution may distribute an 
access device to a consumer on an unsolicited basis if the access 
device is:
    (1) Not validated, meaning that the institution has not yet 
performed all the procedures that would enable a consumer to initiate 
an electronic fund transfer using the access device;
    (2) Accompanied by a clear explanation that the access device is 
not validated and how the consumer may dispose of it if validation is 
not desired;
    (3) Accompanied by the disclosures required by Sec.  1005.7, of the 
consumer's rights and liabilities that will apply if the access device 
is validated; and
    (4) Validated only in response to the consumer's oral or written 
request for validation, after the institution has verified the 
consumer's identity by a reasonable means.


Sec.  1005.6  Liability of consumer for unauthorized transfers.

    (a) Conditions for liability. A consumer may be held liable, within 
the limitations described in paragraph (b) of this section, for an 
unauthorized electronic fund transfer involving the consumer's account 
only if the financial institution has provided the disclosures required 
by Sec.  1005.7(b)(1), (2), and (3). If the unauthorized transfer 
involved an access device, it must be an accepted access device and the 
financial institution must have provided a means to identify the 
consumer to whom it was issued.
    (b) Limitations on amount of liability. A consumer's liability for 
an unauthorized electronic fund transfer or a series of related 
unauthorized transfers shall be determined as follows:
    (1) Timely notice given. If the consumer notifies the financial 
institution within two business days after learning of the loss or 
theft of the access device, the consumer's liability shall not exceed 
the lesser of $50 or the amount of unauthorized transfers that occur 
before notice to the financial institution.
    (2) Timely notice not given. If the consumer fails to notify the 
financial institution within two business days after learning of the 
loss or theft of the access device, the consumer's liability shall not 
exceed the lesser of $500 or the sum of:
    (i) $50 or the amount of unauthorized transfers that occur within 
the two business days, whichever is less; and
    (ii) The amount of unauthorized transfers that occur after the 
close of two business days and before notice to the institution, 
provided the institution establishes that these transfers would not 
have occurred had the consumer notified the institution within that 
two-day period.
    (3) Periodic statement; timely notice not given. A consumer must 
report an unauthorized electronic fund transfer that appears on a 
periodic statement within 60 days of the financial institution's 
transmittal of the statement to avoid liability for subsequent 
transfers. If the consumer fails to do so, the consumer's liability 
shall not exceed the amount of the unauthorized transfers that occur 
after the close of the 60 days and before notice to the institution, 
and that the institution establishes would not have occurred had the 
consumer notified the institution within the 60-day period. When an 
access device is involved in the unauthorized transfer, the consumer 
may be liable for other amounts set forth in paragraphs (b)(1) or 
(b)(2) of this section, as applicable.
    (4) Extension of time limits. If the consumer's delay in notifying 
the financial institution was due to extenuating circumstances, the 
institution shall extend the times specified above to a reasonable 
period.
    (5) Notice to financial institution. (i) Notice to a financial 
institution is given when a consumer takes steps reasonably necessary 
to provide the institution with the pertinent information, whether or 
not a particular employee or agent of the institution actually receives 
the information.
    (ii) The consumer may notify the institution in person, by 
telephone, or in writing.
    (iii) Written notice is considered given at the time the consumer 
mails the notice or delivers it for transmission to the institution by 
any other usual means. Notice may be considered constructively given 
when the institution becomes aware of

[[Page 81026]]

circumstances leading to the reasonable belief that an unauthorized 
transfer to or from 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 
agreement.


Sec.  1005.7  Initial disclosures.

    (a) Timing of 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 of disclosures. A financial institution shall provide 
the following disclosures, as applicable:
    (1) Liability of consumer. A summary of the consumer's liability, 
under Sec.  1005.6 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 of transfers; limitations. The type of electronic fund 
transfers that the consumer may make and any limitations on the 
frequency and dollar amount of transfers. 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 receipts 
and periodic statements, as provided in Sec.  1005.9 of this part, and 
notices regarding preauthorized transfers as provided in Sec.  
1005.10(a) and (d).
    (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 stop-payment order, as provided in Sec.  1005.10(c).
    (8) Liability of institution. A summary of the financial 
institution's liability to the consumer under section 910 of the Act 
for failure to make or to stop certain transfers.
    (9) Confidentiality. The circumstances under which, in 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 
Model Form A-3 as set out in Appendix A of this part concerning error 
resolution.
    (11) ATM fees. A notice that a fee may be imposed by an automated 
teller machine operator as defined in Sec.  1005.16(a)(1), when the 
consumer initiates an electronic fund transfer or makes a balance 
inquiry, and by any network used to complete the transaction.
    (c) Addition of electronic fund transfer services. If an electronic 
fund transfer service is added to a consumer's account and is subject 
to terms and conditions different from those described in the initial 
disclosures, disclosures for the new service are required.


Sec.  1005.8  Change in terms notice; error resolution notice.

    (a) Change in terms notice. (1) Prior notice required. A financial 
institution shall mail or deliver a written notice to the consumer, at 
least 21 days before the effective date, of any change in a term or 
condition required to be disclosed under Sec.  1005.7(b) of this part 
if the change would result in:
    (i) Increased fees for the consumer;
    (ii) Increased liability for the consumer;
    (iii) Fewer types of available electronic fund transfers; or
    (iv) Stricter limitations on the frequency or dollar amount of 
transfers.
    (2) Prior notice exception. A financial institution need not give 
prior notice if an immediate change in terms or conditions is necessary 
to maintain or restore the security of an account or an electronic fund 
transfer system. If the institution makes such a change permanent and 
disclosure would not jeopardize the security of the account or system, 
the institution shall notify the consumer in writing on or with the 
next regularly scheduled periodic statement or within 30 days of making 
the change permanent.
    (b) Error resolution notice. For accounts to or from which 
electronic fund transfers can be made, a financial institution shall 
mail or deliver to the consumer, at least once each calendar year, an 
error resolution notice substantially similar to the model form set 
forth in Appendix A of this part (Model Form A-3). Alternatively, an 
institution may include an abbreviated notice substantially similar to 
the model form error resolution notice set forth in Appendix A of this 
part (Model Form A-3), on or with each periodic statement required by 
Sec.  1005.9(b).


Sec.  1005.9  Receipts at electronic terminals; periodic statements.

    (a) Receipts at electronic terminals--General. Except as provided 
in paragraph (e) of this section, a financial institution shall make a 
receipt available to a consumer at the time the consumer initiates an 
electronic fund transfer at an electronic terminal. The receipt shall 
set forth the following information, as applicable:
    (1) Amount. The amount of the transfer. A transaction fee may be 
included in this amount, provided the amount of the fee is disclosed on 
the receipt and displayed on or at the terminal.
    (2) Date. The date the consumer initiates the transfer.
    (3) Type. The type of transfer and the type of the consumer's 
account(s) to or from which funds are transferred. The type of account 
may be omitted if the access device used is able to access only one 
account at that terminal.
    (4) Identification. A number or code that identifies the consumer's 
account or accounts, or the access device used to initiate the 
transfer. The number or code need not exceed four digits or letters to 
comply with the requirements of this paragraph (a)(4).
    (5) Terminal location. The location of the terminal where the 
transfer is initiated, or an identification such as a code or terminal 
number. Except in limited circumstances where all terminals are located 
in the same city or state, if the location is disclosed, it shall 
include the city and state or foreign country and one of the following:
    (i) The street address; or
    (ii) A generally accepted name for the specific location; or
    (iii) The name of the owner or operator of the terminal if other 
than the account-holding institution.
    (6) Third party transfer. The name of any third party to or from 
whom funds are transferred.
    (b) Periodic statements. For an account to or from which electronic 
fund transfers can be made, a financial institution shall send a 
periodic statement for each monthly cycle in which an electronic fund 
transfer has occurred; and shall send a periodic statement at least 
quarterly if no transfer has occurred. The statement shall set forth 
the following information, as applicable:
    (1) Transaction information. For each electronic fund transfer 
occurring during the cycle:
    (i) The amount of the transfer;
    (ii) The date the transfer was credited or debited to the 
consumer's account;

[[Page 81027]]

    (iii) The type of transfer and type of account to or from which 
funds were transferred;
    (iv) For a transfer initiated by the consumer at an electronic 
terminal (except for a deposit of cash or a check, draft, or similar 
paper instrument), the terminal location described in paragraph (a)(5) 
of this section; and
    (v) The name of any third party to or from whom funds were 
transferred.
    (2) Account number. The number of the account.
    (3) Fees. The amount of any fees assessed against the account 
during the statement period for electronic fund transfers, the right to 
make transfers, or account maintenance.
    (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 under Sec.  
1005.8(b) 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 Sec.  
1005.10(a)(1)(iii).
    (c) Exceptions to the periodic statement requirement for certain 
accounts. (1) Preauthorized transfers to accounts. For accounts that 
may be accessed only by preauthorized transfers to the account the 
following rules apply:
    (i) Passbook accounts. For passbook accounts, the financial 
institution need not provide a periodic statement if the 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 
financial institution must send a periodic statement at least 
quarterly.
    (2) Intra-institutional transfers. For an electronic fund transfer 
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 periodic statement requirement.
    (3) Relationship between paragraphs (c)(1) and (2) of this section. 
An account that is accessed by preauthorized transfers to the account 
described in paragraph (c)(1) of this section and by intra-
institutional transfers described in paragraph (c)(2) of this section, 
but by no other type of electronic fund transfers, qualifies for the 
exceptions provided by paragraph (c)(1) of this section.
    (d) Documentation for foreign-initiated 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 part if:
    (1) The transfer is not initiated within a state; and
    (2) The financial institution treats an inquiry for clarification 
or documentation as a notice of error in accordance with Sec.  1005.11.
    (e) Exception for receipts in small-value transfers. A financial 
institution is not subject to the requirement to make available a 
receipt under paragraph (a) of this section if the amount of the 
transfer is $15 or less.


Sec.  1005.10  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 
account-holding financial institution shall provide notice to the 
consumer by:
    (i) Positive notice. Providing oral or written notice of the 
transfer within two business days after the transfer occurs; or
    (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) Readily-available telephone line. Providing a readily 
available telephone line that the consumer may call to determine 
whether 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 of a transfer if the payor gives the consumer positive notice 
that the transfer has been initiated.
    (3) Crediting. A financial institution that receives a 
preauthorized transfer of the type described in paragraph (a)(1) of 
this section shall credit the amount of the transfer as of the date the 
funds for the transfer are received.
    (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 of 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 the consumer written notice of the amount and 
date of the transfer 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 agreed-
upon amount.
    (e) Compulsory use. (1) Credit. No financial institution or other 
person may condition an extension of credit to a consumer on the 
consumer's repayment by preauthorized electronic fund transfers, except 
for credit extended under an overdraft credit plan or 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.


Sec.  1005.11  Procedures for resolving errors.

    (a) Definition of error. (1) Types of transfers or inquiries 
covered. The term ``error'' means:

[[Page 81028]]

    (i) An unauthorized electronic fund transfer;
    (ii) An incorrect electronic fund transfer to or from the 
consumer's account;
    (iii) The omission of an electronic fund transfer from a periodic 
statement;
    (iv) A computational or bookkeeping error made by the financial 
institution relating to an electronic fund transfer;
    (v) The consumer's receipt of an incorrect amount of money from an 
electronic terminal;
    (vi) An electronic fund transfer not identified in accordance with 
Sec.  1005.9 or Sec.  1005.10(a); or
    (vii) The consumer's request for documentation required by Sec.  
1005.9 or Sec.  1005.10(a) or for additional information or 
clarification concerning an electronic fund transfer, including a 
request the consumer makes to determine whether an error exists under 
paragraphs (a)(1)(i) through (vi) of this section.
    (2) Types of inquiries not covered. The term ``error'' does not 
include:
    (i) A routine inquiry about the consumer's account balance;
    (ii) A request for information for tax or other recordkeeping 
purposes; or
    (iii) A request for duplicate copies of documentation.
    (b) Notice of error from consumer. (1) Timing; contents. A 
financial institution shall comply with the requirements of this 
section with respect to any oral or written notice of error from the 
consumer that:
    (i) Is received by the institution no later than 60 days after the 
institution sends the periodic statement or provides the passbook 
documentation, required by Sec.  1005.9, 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)(1)(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 the consumer 
requested under paragraph (a)(1)(vii) of this section, the consumer's 
notice of error is timely if received by the financial institution no 
later than 60 days after the institution sends the information 
requested.
    (c) Time limits and extent of investigation. (1) Ten-day period. A 
financial institution shall investigate promptly and, except as 
otherwise provided in this paragraph (c), shall determine whether an 
error occurred within 10 business days of receiving a notice of error. 
The institution shall report the results to the consumer within three 
business days after completing its investigation. The institution shall 
correct the error within one business day after determining that an 
error occurred.
    (