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Consumer Banking and Payments Law: Appendix C to Part 1005—Issuance of Official Interpretations

Official Interpretations

Pursuant to section 916(d) of the Act, the Bureau has designated the Associate Director and other officials of the Division of Research, Markets, and Regulations as officials “duly authorized” to issue, at their discretion, official interpretations of this part. Except in unusual circumstances, such interpretations will not be issued separately but will be incorporated in an official commentary to this part, which will be amended periodically.

Consumer Banking and Payments Law: Introduction

Regulation E and commentary was initially promulgated by the Federal Reserve Board (FRB). As of 2010, the Consumer Financial Protection Bureau (CFPB) has authority to issue Regulation E and its official interpretations. See Pub. L. No. 111-203, tit. X §§ 1084(2), 1100H, 124 Stat. 2083, 2113 (July 21, 2010). On December 27, 2011, the CFPB issued its version of Regulation E and its interpretations. See 76 Fed. Reg. 81,023 (Dec. 27, 2011).

Consumer Banking and Payments Law: 2(a) Access Device

1. Examples. The term “access device” includes debit cards, personal identification numbers (PINs), telephone transfer and telephone bill payment codes, and other means that may be used by a consumer to initiate an electronic fund transfer (EFT) to or from a consumer account. The term does not include magnetic tape or other devices used internally by a financial institution to initiate electronic transfers.

Consumer Banking and Payments Law: 2(b) Account

1. Consumer asset account. The term “consumer asset account” includes:

i. Club accounts, such as vacation clubs. In many cases, however, these accounts are exempt from the regulation under § 1005.3(c)(5) because all electronic transfers to or from the account have been preauthorized by the consumer and involve another account of the consumer at the same institution.

Consumer Banking and Payments Law: 2(d) Business Day

1. Duration. A business day includes the entire 24-hour period ending at midnight, and a notice required by the regulation is effective even if given outside normal business hours. The regulation does not require, however, that a financial institution make telephone lines available on a 24-hour basis.

Consumer Banking and Payments Law: 2(h) Electronic Terminal

1. Point-of-sale (POS) payments initiated by telephone. Because the term “electronic terminal” excludes a telephone operated by a consumer, a financial institution need not provide a terminal receipt when:

i. A consumer uses a debit card at a public telephone to pay for the call.

ii. A consumer initiates a transfer by a means analogous in function to a telephone, such as by home banking equipment or a facsimile machine.

Consumer Banking and Payments Law: 2(k) Preauthorized Electronic Fund Transfer

1. Advance authorization. A “preauthorized electronic fund transfer” under Regulation E is one authorized by the consumer in advance of a transfer that will take place on a recurring basis, at substantially regular intervals, and will require no further action by the consumer to initiate the transfer. In a bill-payment system, for example, if the consumer authorizes a financial institution to make monthly payments to a payee by means of EFTs, and the payments take place without further action by the consumer, the payments are preauthorized EFTs.

Consumer Banking and Payments Law: 2(m) Unauthorized Electronic Fund Transfer

1. Transfer by institution’s employee. A consumer has no liability for erroneous or fraudulent transfers initiated by an employee of a financial institution.

2. Authority. If a consumer furnishes an access device and grants authority to make transfers to a person (such as a family member or co-worker) who exceeds the authority given, the consumer is fully liable for the transfers unless the consumer has notified the financial institution that transfers by that person are no longer authorized.

Consumer Banking and Payments Law: 3(a) General

1. Accounts covered. The requirements of the regulation apply only to an account for which an agreement for EFT services to or from the account has been entered into between:

i. The consumer and the financial institution (including an account for which an access device has been issued to the consumer, for example);

Consumer Banking and Payments Law: 3(b)(1) Definition

1. Fund transfers covered. The term “electronic fund transfer” includes:

i. A deposit made at an ATM or other electronic terminal (including a deposit in cash or by check) provided a specific agreement exists between the financial institution and the consumer for EFTs to or from the account to which the deposit is made.

Consumer Banking and Payments Law: 3(b)(2) Electronic Fund Transfer Using Information From a Check

1. Notice at POS not furnished due to inadvertent error. If the copy of the notice under section 1005.3(b)(2)(ii) for electronic check conversion (ECK) transactions is not provided to the consumer at POS because of a bona fide unintentional error, such as when a terminal printing mechanism jams, no violation results if the payee maintains procedures reasonably adapted to avoid such occurrences.

Consumer Banking and Payments Law: 3(b)(3) Collection of Returned Item Fees via Electronic Fund Transfer

1. Fees imposed by account-holding institution. The requirement to obtain a consumer’s authorization to collect a fee via EFT for the return of an EFT or check unpaid applies only to the person that intends to initiate an EFT to collect the returned item fee from the consumer’s account. The authorization requirement does not apply to any fees assessed by the consumer’s account-holding financial institution when it returns the unpaid underlying EFT or check or pays the amount of an overdraft.

Consumer Banking and Payments Law: 3(c)(1) Checks

1. Re-presented checks. The electronic re-presentment of a returned check is not covered by Regulation E because the transaction originated by check. Regulation E does apply, however, to any fee debited via an EFT from a consumer’s account by the payee because the check was returned for insufficient or uncollected funds. The person debiting the fee electronically must obtain the consumer’s authorization.

2. Check used to capture information for a one-time EFT. See comment 3(b)(1)-1.v.

Consumer Banking and Payments Law: 3(c)(2) Check Guarantee or Authorization

1. Memo posting. Under a check guarantee or check authorization service, debiting of the consumer’s account occurs when the check or draft is presented for payment. These services are exempt from coverage, even when a temporary hold on the account is memo-posted electronically at the time of authorization.

Consumer Banking and Payments Law: 3(c)(4) Securities and Commodities Transfers

1. Coverage. The securities exemption applies to securities and commodities that may be sold by a registered broker-dealer or futures commission merchant, even when the security or commodity itself is not regulated by the Securities and Exchange Commission or the Commodity Futures Trading Commission.

2. Example of exempt transfer. The exemption applies to a transfer involving a transfer initiated by a telephone order to a stockbroker to buy or sell securities or to exercise a margin call.

Consumer Banking and Payments Law: 3(c)(6) Telephone-Initiated Transfers

1. Written plan or agreement. A transfer that the consumer initiates by telephone is covered by Regulation E if the transfer is made under a written plan or agreement between the consumer and the financial institution making the transfer. A written statement available to the public or to account holders that describes a service allowing a consumer to initiate transfers by telephone constitutes a plan; for example, a brochure, or material included with periodic statements. The following, however, do not by themselves constitute a written plan or agreement:

Consumer Banking and Payments Law: 3(c)(7) Small Institutions

1. Coverage. This exemption is limited to preauthorized transfers; institutions that offer other EFTs must comply with the applicable sections of the regulation as to such services. The preauthorized transfers remain subject to sections 913, 916, and 917 of the Act and § 1005.10(e), and are therefore exempt from UCC Article 4A.

Consumer Banking and Payments Law: 4(a) Form of Disclosures

1. General. The disclosures required by this part must be in a clear and readily understandable written form that the consumer may retain. Additionally, except as otherwise set forth in §§ 1005.18(b)(7) and 1005.31(c), no particular rules govern type size, number of pages, or the relative conspicuousness of various terms. Numbers or codes are considered readily understandable if explained elsewhere on the disclosure form.

Consumer Banking and Payments Law: 1005.5-1. Coverage

1. Coverage. The provisions of this section limit the circumstances under which a financial institution may issue an access device to a consumer. Making an additional account accessible through an existing access device is equivalent to issuing an access device and is subject to the limitations of this section.

Consumer Banking and Payments Law: 5(a) Solicited Issuance

Paragraph 5(a)(1)

1. Joint account. For a joint account, a financial institution may issue an access device to each account holder if the requesting holder specifically authorizes the issuance.

2. Permissible forms of request. The request for an access device may be written or oral (for example, in response to a telephone solicitation by a card issuer).

Paragraph 5(a)(2)

Consumer Banking and Payments Law: 5(b) Unsolicited Issuance

1. Compliance. A financial institution may issue an unsolicited access device (such as the combination of a debit card and PIN) if the institution’s ATM system has been programmed not to accept the access device until after the consumer requests and the institution validates the device. Merely instructing a consumer not to use an unsolicited debit card and PIN until after the institution verifies the consumer’s identity does not comply with the regulation.