Regulation E does not cover all types of accounts offered by credit unions. What types of accounts are covered, and which are not?
Covered - Member asset accounts (e.g., savings, checking, payroll cards)
Not covered - Business, trust, escrow accounts
What types of transactions are included in the term “electronic funds transfer” (EFT)?
EFT - 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
Types:
› Point–of–sale (POS) transfers – including both PIN based and signature–based;
› ACH transfers;
› ATM transfers;
› Direct deposit or withdrawal of funds;
› Transfers initiated by telephone;
› Transfers initiated by a debit card –regardless of whether conducted through an electronic terminal;
› Electronic transfers using information from a check, such as a check processed via ACH;
› Online bill payments
How does Regulation E define an unauthorized electronic funds transfer? Which transactions are not considered unauthorized transfers?
Any EFT from an account initiated by a person other than the consumer without actual authority to initiate the transfer and from which the consumer receives no benefit
- An unauthorized EFT does not include a situation where the member acts, alone or with another person, with fraudulent intent.
- If the member provides another person with authorization to make transfers from the account and they exceed the authority given by the member, those transfers are not unauthorized EFTs
What are the different liability levels for unauthorized transfers? For each, when does the member need to provide notice and how much is the member liable for?
- Loss/Theft of Device - 3 liability levels
- Occurring within two business days of when the member first learns of the loss or theft. Under this level, the member’s liability cannot exceed $50.
- The member’s liability can reach up to $500 for the unauthorized transfers occurring after the two business days but still within 60 days after the periodic statement showing the unauthorized transfer was sent
- Applies to all transfers occurring more than 60 days after the periodic statement showing the unauthorized transfer was sent. Members can be held fully liable for the transfers occurring after the 60 days. - No Access Device Used - 2 levels
- 1st first level - Applies to all transfers occurring within the first 60 days after the periodic statement showing the unauthorized transfer was sent. Member cannot be held liable for any amount.
- 2nd level - The member can be held fully liable for unauthorized transfers that occur more than 60 days after the periodic statement is sent and prior to notice to the credit union
What are the timelines the credit union has for completing its investigation? What notice is the credit union required to provide after it completes its investigation?
Credit union has 10 days to complete its investigation. Can take up to 45 days if the following is done:
› Provisionally credits the member’s account with the amount of the alleged error within 10 business days from the date of the notice. If the credit union requires, but does not receive, written confirmation within 10 business days of an oral notice of error, provisional credit need not be provided;
› Notifies the member, within two business days, of the provisional credit in their account;
› Provides the member with full use of the provisionally credited funds during the investigation;
› Corrects any errors within one business day from determining the error occurred as described; and
› Notifies the member of the investigation results within three business days.
- 20 Business Days to investigate if the alleged error occurred within 30 calendar days of first deposit made in account
- 90 days to investigate if:
› Transfer was not initiated in a state
› Transfer resulted from POS debit card transaction
› Alleged error occurred within 30 calendar days of first deposit
What is the timing requirement for sending periodic statements? Is there a difference in timing depending on whether an EFT occurred or not? If so, what is the difference?
- Send statements for each monthly cycle in which an EFT has occurred
- Statements are sent quarterly if no transfer occurred
Can credit unions require members to repay a loan via an EFT in order to be approved for the loan? What can the credit union offer to incentivize its members that agree to repay using EFTs?
- The credit union cannot create a product that forces the member to set up automatic electronic payments to repay the loan
- The credit union can offer lower rates or fees on loans that have automatic repayment
What is the definition of a remittance transfer?
The electronic transfer of funds requested by a sender to a designated recipient that is sent by a remittance transfer provider.
- A “sender” is the person requesting the remittance transfer be sent to the designated recipient for personal, family or household purposes.
- A “designated recipient” is the person receiving the remittance transfer. The designated recipient must be located in a foreign country and can be either an individual or a business.
What is a remittance transfer provider? When is a remittance transfer provider not providing remittance transfers in the normal course of business?
The person who provides remittance transfers in the normal course of business.
- A credit union is not providing transfers in the normal course of business if it provided 500 or fewer transfers in the previous calendar year and provides 500 or fewer transfers in the current calendar year.
What types of accounts are included in the definition of prepaid account?
› Employer-established payroll card accounts to which electronic transfers of salary or other employee compensation are made on a recurring basis;
› Government benefits accounts established by a government agency for distributing government benefits to a consumer electronically;
› Accounts marketed or labeled as “prepaid” and redeemable at multiple, unaffiliated merchants or usable at ATMs; or
› Accounts meeting the three following conditions:
- Is either issued on a prepaid basis in a specified amount or is not issued on a prepaid basis but capable of being loaded with funds thereafter;
- Primary function is to conduct transfers with multiple, unaffiliated merchants, at ATMs or for person-to-person (P2P) transfers; and
- Is not a checking account, share draft account or negotiable order of withdrawal account.
When may a credit union take advantage of the modified time periods for error resolution and liability for prepaid accounts?
An error must be investigated if notice is received by the earlier of:
1) 60 days after the consumer accesses an electronic history that reflects the error, or
2) 60 days after the credit union sends a written history that reflects the error.
What types of transactions are covered by the Regulation E opt-in rule for overdrafts? What types of overdraft services are not included?
Covered: ATM and one-time debit card transactions (excludes lines of credit and transfers between a member’s accounts)
- Does not cover checks, ACH transfers, or recurring debit card transactions
What are the requirements for allowing members to opt in for overdraft protection? How long is an opt-in valid for? What is the process for revocation?
› The credit union provides the member an opt-in notice in writing (or electronically if agreed), which describes the credit union’s overdraft program and discloses the potential fees;
› The credit union provides the member with a reasonable opportunity to provide the opt-in;
› The member provides affirmative consent (i.e., opt-in);
› The credit union provides a written confirmation (or electronic if agreed) of the member’s consent, which must include information about the member’s ability to revoke their consent in the future.
A member’s opt-in is effective until it is revoked by the member or the credit union ceases to offer the overdraft service. The credit union must provide the same methods for a member to revoke as it does to allow a member to provide the initial opt-in consent.
Can credit unions offer different account terms or features to members who do not opt-in to overdraft protection? Can credit unions condition other overdraft services on the member’s decision to opt-in?
- The member must be able to obtain overdraft protection for checks, ACH and other transfers without being also required to opt-in for overdraft of ATM and one-time debit card transactions.
- The credit union must offer the same account terms, conditions and features to members who do not opt-in as the credit union offers to those that do opt-in
All members must be treated similarly, without regard to whether a member has opted-in or not.
