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Consumer Banking and Payments Law: 5.5.3 Burden of Proof; No Consumer Liability Based on Consumer Negligence; Consumer Cannot Waive EFTA Rules

If a consumer alleges that an EFT is unauthorized, the burden of proof is on the financial institution to show that it was authorized or that the conditions for consumer liability have been met.776 If the consumer did not timely report the unauthorized transfers, the financial institution must show that timely notice would have prevented subsequent unauthorized transfers.777

Consumer Banking and Payments Law: 5.5.4.2 Maximum $50 or No Liability When Consumer Promptly Reports the Loss

If an access device is lost or stolen, the consumer’s liability for unauthorized use is limited to a maximum of $50 if the consumer reports the card as being lost or stolen within two business days after the consumer learns of the card’s loss or theft.791

The time period may be extended to four business days if the lost or stolen access device is issued by a service provider that is not the account-holding institution and that does not provide periodic statements.792

Consumer Banking and Payments Law: 5.5.4.3 Liability Up to $500 When Loss or Theft of Access Device Not Reported Within Two Business Days of Discovering Loss or Theft

The consumer’s maximum liability for unauthorized use of an access device is $500 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 time period may be extended to four business days if the lost or stolen access device is issued by a service provider that is not the account-holding institution and that does not provide periodic statements.798

Consumer Banking and Payments Law: 5.5.5.1 When Must Unauthorized Charges Be Reported?

Contrary to popular understanding, there is no time limit in the EFTA for reporting the first unauthorized transfer. However, in order to trigger the financial institution’s error resolution requirements—and to obtain maximum liability protection if there are subsequent unauthorized transfers—the consumer generally must report an unauthorized charge within sixty days of the financial institution’s transmittal of a statement showing those charges.

Consumer Banking and Payments Law: 5.6.1.1 General

The EFTA contains a detailed procedure for consumers to use to resolve errors related to electronic fund transfers.873 These procedures apply not just to money coming out of the consumer’s account but also to money going into it. Regulation E specifically states that the error resolution procedures apply to an incorrect electronic fund transfer “to or from” the consumer’s account.874

Consumer Banking and Payments Law: 5.6.2.1 Timing of Notice

In order to trigger the error resolution requirements, the consumer must notify the financial institution of the error no later than sixty days after the financial institution sends the periodic statement or provides the passbook documentation on which the error is first reflected.895

Consumer Banking and Payments Law: 5.6.2.2 Form and Content of Notice

The consumer can give either an oral or written notice.905 The Official Interpretations state that the institution may request a written signed statement but may not delay initiating or completing an investigation pending receipt of the statement.906 However, the institution may later reverse a provisional credit if it does not receive the requested statement.907

Consumer Banking and Payments Law: 5.6.6 Extension of Investigation Period from Ten to Forty-Five Days; Requirement to Provide Provisional Credit

The institution is given the option of completing its investigation and determination within forty-five calendar days, instead of ten business days from receipt of a notice of error, but only if it is “unable to complete its investigation within ten business days.”968 This forty-five-day period is extended to ninety days for certain situations, including point-of-sale transactions.969

Consumer Banking and Payments Law: 5.5.5.2 No Specific Time Limit for Reporting Initial Set of Unauthorized Charges

If a lost or stolen access device is not involved, the EFTA imposes no time limit for reporting unauthorized charges that occurred within sixty days of the statement, and financial institutions must protect consumers from liability for such charges even if they are reported late.806 Though the EFTA imposes a responsibility to report unauthorized charges within sixty days, if the c

Consumer Banking and Payments Law: 5.5.5.3.1 Potentially unlimited liability if financial institution establishes that subsequent unauthorized transfers would not have occurred with timely notice

If the unauthorized transfer appears on a periodic statement and the consumer fails to report that transfer within sixty816 calendar days of transmittal of the periodic statement (or longer in some situations817), the consumer’s liability “shall not exceed the amount of the unauthorized transfers that occur after

Consumer Banking and Payments Law: 5.5.6.1 Form of Notice

Crucial to limiting the consumer’s liability for unauthorized transfers is the consumer’s providing effective notice to the financial institution. The consumer is merely required to take “steps reasonably necessary to provide the institution with the pertinent information.”831 The notice is effective “whether or not a particular employee or agent of the institution actually receives the information.”832

Consumer Banking and Payments Law: 5.5.6.2 Notice When Unauthorized Transfer Is Initiated Through Service Provider That Does Not Hold the Consumer’s Account

Account aggregators and other service providers may issue access devices that can be used to initiate electronic fund transfers at a different institution.840 If an unauthorized transfer is initiated using an access device provided by an account aggregator or other service provider that does not have an agreement with the account-holding institution, notice should be given to the service provider rather than the account-holding institution.841 The time to provide notice may be extended.

Consumer Banking and Payments Law: 5.5.7 Bank’s Responsibility in Absence of Consumer Notice

A consumer’s bank will generally have no basis on which to question the validity of a debit entry absent a consumer complaint.843 In the case of an ACH transaction, the ACH message received by the receiving depository financial institution (RFDI) contains only payment information, not information about the substance of the underlying transaction. Moreover, the RDFI has a warranty from the ODFI that the transaction is properly authorized.844

Consumer Banking and Payments Law: 5.5.8 Other Law Can Lessen Consumer Liability, Increase Bank’s Liability

The consumer may be entitled to lower liability limits if such limits are required by state law or if the agreement between the consumer and the institution provides for lesser liability.849

In addition, although the UCC generally does not apply to electronic transfers, the UCC may provide for consequential damages when a bank causes an unauthorized electronic withdrawal from the consumer’s account, resulting in insufficient funds to pay paper checks.