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Consumer Banking and Payments Law: 5.13.5 Bank Warranties Relating to Duplicate Presentments, Defenses to Payment, and the Consumer’s Insolvency

Because a merchant might simultaneously re-present a check electronically and in paper form, NACHA rules require that the merchant’s bank warrants that, subsequent to the origination of the RCK entry, the check to which the RCK entry relates or a copy of that check will not be presented to the consumer’s bank until the related RCK entry has been returned by the consumer’s bank. These rules, however, only impose limits on ACH re-presentment. The merchant can re-present the check via non-ACH methods free of those limits.

Consumer Banking and Payments Law: 5.14.1 Overview

A wide variety of new payment systems are emerging that are accessible either through mobile phones or online. Mobile devices and computers can be access devices within the meaning of the EFTA.1434 But whether and how the EFTA or other laws apply is not always easy to sort out. The use of mobile devices can pose a wide range of issues that are beyond the scope of this treatise.1435

Consumer Banking and Payments Law: 5.14.1a Faster Payment Systems

Electronic payments seem immediate, but most older electronic payments actually take a day or longer to move money. Debit cards confirm authorization at the point of sale, but funds do not transfer immediately to the merchant. Similarly, electronic payments through the ACH system take one or more business days to settle.

Consumer Banking and Payments Law: 5.15.1.1 What Is A Data Aggregator?

Data aggregators provide access, usually with consumer consent,1452 to a consumer’s bank, credit card or other types of account data from one or more institutions.1453 Data aggregators are typically middlemen that allow another entity, often one offering a mobile app, to use that data to offer the consumer a service.

Consumer Banking and Payments Law: 5.15.2 How Aggregators Obtain a Consumer’s Data; Consumers’ Right to Their Data

After obtaining the consumer’s consent,1455 data aggregators typically access consumers’ data in one of two ways. In a “direct data-feed,” the data aggregator uses an application programming interface (API) that enables the financial institutions holding the consumer’s accounts to feed the account information directly to the aggregator. The API allows read-only access, so the aggregation can access data but cannot make transactions.

Consumer Banking and Payments Law: 5.15.3 Security Issues Involving Data Aggregators

Data aggregators collect and transfer significant amounts of financial information about a consumer. The aggregator may have access to the consumer’s usernames, passwords, and PINs. This creates a tempting target for hackers and others bent on fraud. A lax security system can lead to the theft of data, identity theft, and unauthorized transfers.

Consumer Banking and Payments Law: 5.15.5 EFTA Coverage of Service Providers that Employ Data Aggregation

In general, the EFTA covers financial institutions that hold consumer deposit or other asset accounts.1467 However, an entity is a “financial institution” within the scope of the EFTA if it issues an access device and agrees with the consumer to provide electronic fund transfer services.1468 Typically, data aggregators do not contract directly with consumers, do not provide access devices, and

Consumer Banking and Payments Law: 5.15.6 EFTA Responsibilities of Account-Holding Financial Institutions When Consumers Use Apps that Rely on Data Aggregation

Some financial institutions have tried to discourage consumers from providing their login credentials to services that rely on data aggregators by disclaiming responsibility for unauthorized charges in various situations. Some banks include language in their account agreements that impose on the consumer the entire risk for any fraudulent, unauthorized, or otherwise improper use of a password or PIN number.

Consumer Banking and Payments Law: 5.15.8 CFPB Consumer Protection Principles for Consumer-Authorized Financial Data Sharing and Aggregation

The CFPB has published a set of consumer protection principles on consumer-authorized data sharing and aggregation.1475 The principles are not intended to alter, interpret, or otherwise provide guidance on—although they may accord with—the scope of protections under existing law, and do not themselves establish binding requirements or obligations.1476

The principles address:

Consumer Banking and Payments Law: 5.16.1 Overview

In recent years, a number of crypto assets (sometimes called “cryptocurrencies,” “virtual currencies,” or “digital assets”) have been created, such as Bitcoin, Ether, Tether, Litecoin, Peercoin, Freicoin, and XRP. Crypto assets purport to be a form of private money that is not issued by a central bank or government. But in reality, these assets are primarily used for speculation and/or illicit finance.