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Consumer Banking and Payments Law: 5.11.1.1 Federal Law

EFTA initial disclosures must provide notice to the consumer that a fee may be imposed when the consumer initiates an electronic fund transfer or makes a balance inquiry.1302 This notice is required whether the fee may be imposed by the ATM operator or by any network that is used to complete the transaction. Regulation E includes a model clause for this initial fee disclosure.1303

Consumer Banking and Payments Law: 5.11.1.2 State Law

Several years ago, when banks first started charging ATM surcharges to non-customers who use their ATMs, some states and localities passed laws banning those fees. More recently, some state laws have attempted to limit ATM surcharges imposed on non-customers who use EBT or prepaid cards to access public benefits.1321

Consumer Banking and Payments Law: 5.11.2.1 Introduction

The financial institution must “make a receipt available” to the consumer at the time the consumer initiates an electronic fund transfer at any electronic terminal,1327 including ATMs, point-of-sale (POS) terminals, and cash dispensing machines.1328 The required receipt need only be provided if the consumer takes the required steps to instruct the terminal that a receipt should be furnished to the consumer.1329 The institution can satisfy thi

Consumer Banking and Payments Law: 5.11.2.2 Promotional Materials Placed on the Receipt

The institution is permitted to include promotional material on the required receipt as long as the information required on the receipt is set forth clearly so it is not confused with the promotional material.1337 The receipt must be in a form that can be retained by the consumer. Therefore, the consumer cannot be required to return or surrender the receipt in order to take advantage of the promotion.

Consumer Banking and Payments Law: 5.11.2.3 Defenses to Institution’s Failure to Provide a Receipt

If the institution’s failure to comply with the EFTA’s requirements, including the receipt requirements, was not intentional and resulted from a bona fide error, the financial institution is not liable under the EFTA for actual damages if the institution maintains procedures reasonably adapted to avoid violating the EFTA.1338 For example, the institution is not liable for failure to provide a receipt if the terminal runs out of paper or the mechanism for providing the receipt jams, as long as the institution maintains procedures reasonably

Consumer Banking and Payments Law: 5.11.2.4 Contents of the Receipt

The receipt must contain several items of information in addition to the amount of the transfer.1340 The institution is permitted to include a transaction fee for using the terminal as long as the amount of the fee is disclosed on the receipt and the fee is displayed on or at the terminal.

Consumer Banking and Payments Law: 5.11.3.1 Introduction

When a consumer claims that an ATM deposit is not credited correctly, there are at least three possibilities: the consumer may be wrong, the ATM may not be working properly, or the bank employees that emptied the ATM may have mistakenly or deliberately misplaced or tampered with the consumer’s deposit envelope.

Consumer Banking and Payments Law: 5.11.3.3 Common Law Approaches to Withdrawal Errors

There is a lack of case law for regarding the situation in which a consumer claims the ATM dispensed less cash than requested. The leading case is Porter v. Citibank,1357 in which the consumer claimed that on two occasions he tried to withdraw money from an ATM but the ATM failed to dispense any cash. The court’s analysis was influenced by cases involving night depositories.

Consumer Banking and Payments Law: 5.11.3.4 Bailment Law and Deposit Errors

McEvans v. Citibank1359 is a seminal case involving an ATM error concerning a cash deposit. Lacking specific statutory guidance either in state or federal law, the court relied by analogy on case law involving night depositories. In these cases, the normal debtor-creditor relationship between the bank and the depositor does not arise until the bank officially credits the deposit to the consumer’s account during regular banking hours; until the credit occurs, the consumer depositor is a bailor.

Consumer Banking and Payments Law: 5.12.1 Overview

When a consumer attempts to pay by check, that check may be turned into an electronic payment submitted through the ACH system. The ACH transaction may be for the original payment, in the case of electronic check conversion; a means of re-presenting a dishonored check; or a way for the merchant to collect a return item fee.

Consumer Banking and Payments Law: 5.12.2.1 Accounts Receivable Entries (ARC)

Accounts receivable entries (ARCs) are single-entry electronic debits initiated using information from a check that a receiver mails or delivers to pay a bill and is sent or delivered to either a dropbox or a manned bill payment location.1362 ARCs may be initiated only from checks that are drawn on a consumer’s account, that is, completed and signed by the consumer.1363 Certain checks may not be used as the source document for an ARC entry, including checks drawn on a corporate or business a

Consumer Banking and Payments Law: 5.12.2.2 Point-of-Purchase (POP) and Back Office Conversion (BOC) Entries

For point of purchase (POP) ECCs, NACHA rules prohibit the merchant from manually entering information about the check.1374 Instead, the merchant must use a check reader that scans the check and records the routing number, account number, and check number from the MICR line on the check. After the merchant obtains information from the check, the merchant enters the amount of the transaction.

Consumer Banking and Payments Law: 5.12.3.1 Introduction

When a merchant takes a consumer’s check and uses it as a source document to create an electronic check conversion (ECC), the ECC is introduced to the ACH system by the merchant’s (or the merchant’s payment processor’s) bank. In order to ensure the integrity of the ACH system and to prevent unauthorized ECCs, NACHA rules impose duties on originating depository financial institutions (ODFIs). Among those duties, the ODFI makes certain warranties to the consumer’s bank, the ACH operator, and NACHA.1384

Consumer Banking and Payments Law: 5.12.3.2 ARC Bank Warranties

In an ARC transaction, the merchant’s bank makes certain warranties to the consumer’s bank, the ACH operator, and NACHA.1386 Although these warranties do not run to the consumer, an examination of the warranties leads to an understanding of the allocation of loss among the parties, which can be critical in obtaining relief for the consumer.

Consumer Banking and Payments Law: 5.12.3.3 Bank Warranties in POP and BOC Entries

The merchant’s bank in a POP entry makes certain warranties to the consumer’s bank, the ACH operator, and the association of NACHA members, but not directly to the consumer.1393 One warranty is that the check that was used as the source document was returned void to the consumer after the merchant gathered the information. Through this warranty, the merchant’s bank is required to ensure that its customer, the merchant, has voided the check.

Consumer Banking and Payments Law: 5.13.1 NACHA Limits on Whether an Item May Be Re-Presented Electronically

When a consumer’s check or electronic payment is rejected, the merchant may wish to re-present the item. NACHA rules permit the merchant to re-present a dishonored check as an electronic payment through the ACH system (known as a re-presented check entry, or RCK), although such items are not considered to be electronic fund transfers for EFTA purposes.1397 NACHA also permits ACH debits that have been rejected to be re-presented.