[Federal Register Volume 76, Number 248 (Tuesday, December 27, 2011)]
[Rules and Regulations]
[Pages 81019-81058]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-31725]
[[Page 81019]]
Vol. 76
Tuesday,
No. 248
December 27, 2011
Part II
Bureau of Consumer Financial Protection
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12 CFR Part 1005
Electronic Fund Transfers (Regulation E); Interim Final Rule
Federal Register / Vol. 76 , No. 248 / Tuesday, December 27, 2011 /
Rules and Regulations
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BUREAU OF CONSUMER FINANCIAL PROTECTION
12 CFR Part 1005
[Docket No. CFPB-2011-0021]
RIN 3170-AA06
Electronic Fund Transfers (Regulation E)
AGENCY: Bureau of Consumer Financial Protection.
ACTION: Interim final rule with request for public comment.
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SUMMARY: Title X of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (Dodd-Frank Act) transferred rulemaking authority for a
number of consumer financial protection laws from seven Federal
agencies to the Bureau of Consumer Financial Protection (Bureau) as of
July 21, 2011. The Bureau is in the process of republishing the
regulations implementing those laws with technical and conforming
changes to reflect the transfer of authority and certain other changes
made by the Dodd-Frank Act. In light of the transfer of the Board of
Governors of the Federal Reserve System's (Board's) rulemaking
authority for the Electronic Fund Transfer Act (EFTA) to the Bureau,
the Bureau is publishing for public comment an interim final rule
establishing a new Regulation E (Electronic Fund Transfers). This
interim final rule does not impose any new substantive obligations on
persons subject to the existing Regulation E, previously published by
the Board.
DATES: This interim final rule is effective December 30, 2011. Comments
must be received on or before February 27, 2012.
ADDRESSES: You may submit comments, identified by Docket No. CFPB-2011-
0021 or RIN 3170-AA06, by any of the following methods:
Electronic: http://www.regulations.gov. Follow the
instructions for submitting comments.
Mail: Monica Jackson, Office of the Executive Secretary,
Bureau of Consumer Financial Protection, 1500 Pennsylvania Avenue NW.,
(Attn: 1801 L Street), Washington, DC 20220.
Hand Delivery/Courier in Lieu of Mail: Monica Jackson,
Office of the Executive Secretary, Bureau of Consumer Financial
Protection, 1700 G Street NW., Washington, DC 20006.
All submissions must include the agency name and docket number or
Regulatory Information Number (RIN) for this rulemaking. In general,
all comments received will be posted without change to http://www.regulations.gov. In addition, comments will be available for public
inspection and copying at 1700 G Street NW., Washington, DC 20006, on
official business days between the hours of 10 a.m. and 5 p.m. Eastern
Time. You can make an appointment to inspect the documents by
telephoning (202) 435-7275.
All comments, including attachments and other supporting materials,
will become part of the public record and subject to public disclosure.
Sensitive personal information, such as account numbers or social
security numbers, should not be included. Comments will not be edited
to remove any identifying or contact information.
FOR FURTHER INFORMATION CONTACT: Gregory Evans or Jane Gao, Office of
Regulations, at (202) 435-7700.
SUPPLEMENTARY INFORMATION:
I. Background
The Electronic Fund Transfer Act (15 U.S.C. 1693 et seq.) (EFTA),
enacted in 1978, provides a basic framework establishing the rights,
liabilities, and responsibilities of participants in electronic fund
transfer (EFT) systems. Historically, the EFTA was implemented in
Regulation E of the Board of Governors of the Federal Reserve System
(Board), 12 CFR Part 205. The Dodd-Frank Wall Street Reform and
Consumer Protection Act (Dodd-Frank Act) \1\ amended a number of
consumer financial protection laws, including the EFTA. In addition to
various substantive amendments, the Dodd-Frank Act generally
transferred the Board's rulemaking authority for the EFTA to the Bureau
of Consumer Financial Protection (Bureau), effective July 21, 2011.\2\
See sections 1061 and 1084 of the Dodd-Frank Act. Pursuant to the Dodd-
Frank Act and EFTA, as amended, the Bureau is publishing for public
comment an interim final rule establishing a new Regulation E
(Electronic Fund Transfers), 12 CFR Part 1005, implementing the EFTA.
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\1\ Public Law 111-203,124 Stat. 1376 (2010).
\2\ The Dodd-Frank Act section 1029, generally excludes from
this transfer of authority, subject to certain exceptions, any
rulemaking authority over a motor vehicle dealer that is
predominantly engaged in the sale and servicing of motor vehicles,
the leasing and servicing of motor vehicles, or both. See also Dodd-
Frank Act, sections 1002(12)(C), 1084(3) (Board retains rulemaking
authority with respect to section 920 of EFTA, dealing with debit
card interchange fees, network arrangements, and routing
restrictions);12 CFR Part 235.
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II. Summary of the Interim Final Rule
A. General
The interim final rule substantially duplicates the Board's
Regulation E as the Bureau's new Regulation E, 12 CFR Part 1005, making
only certain non-substantive, technical, formatting, and stylistic
changes. To minimize any potential confusion, the Bureau is preserving
the numbering of the Board's Regulation E, other than the new part
number. While this interim final rule generally incorporates the
Board's existing regulatory text, appendices (including model forms and
clauses), and supplements, the rule has been edited as necessary to
reflect nomenclature and other technical amendments required by the
Dodd-Frank Act. Notably, this interim final rule does not impose any
new substantive obligations on regulated entities.
B. Specific Changes
The Bureau has made certain nomenclature and other non-substantive
changes consistently throughout Regulation E. References to the Board
and its administrative structure have been replaced with references to
the Bureau. Conforming edits have been made to internal cross-
references, as well as addresses or other contact information.
Conforming edits have also been made to reflect the scope of the
Bureau's authority pursuant to the EFTA, as amended by the Dodd-Frank
Act. Historical references that are no longer applicable, and
references to effective dates that have passed, have been removed as
appropriate. In addition, certain changes have been made to the text of
the Board's Regulation E to conform to current codification standards
of the Code of Federal Regulations. For example, previously
undesignated paragraphs in the regulation and the official commentary
have been enumerated.
The Bureau is eliminating three provisions of Regulation E that are
no longer applicable and renumbering one section that is affected by
this deletion. The deleted provisions include the following:
Section 1005.3(b)(2)(iii), which expired December 31,
2009. What would have been Sec. 1005.3(b)(2)(iv) was renumbered
1005.3(b)(2)(iii).
Section 1005.3(b)(3)(iii), which expired December 31,
2007.
Section 1005.16(d), which provided a technical
exemption for certain automated teller machines through December 31,
2004. What would have been Sec. 1005.16(e) was renumbered
1005.16(d).
[[Page 81021]]
The Bureau is also eliminating Appendix B, entitled ``Federal
Enforcement Agencies,'' because it was designed to be informational
only and is unnecessary for the implementation of the EFTA, as amended.
Moreover, the Bureau is revising Form A-9, Model Consent Form for
Overdraft Services, in Appendix A to the Bureau's new Regulation E. The
revised Form A-9 is, however, identical to the Board's version in
substance. The only revision was to modernize the spelling of
``website'' (in place of ``Web site'') to parallel a stylistic change
the Bureau is making in the corresponding regulatory text of Sec. Sec.
1005.18 and 1005.20. This change does not necessitate any revision to
standard forms that institutions may use in reliance on Model Form A-9
because the term, ``website,'' appears in the model form within
brackets, indicating that the institution is to replace the placeholder
with its own website address. Thus, neither ``website'' nor ``website''
appears in overdraft services consent forms actually delivered to
consumers.
Finally, the Bureau is updating references to the EFTA by
correcting statutory citations to the EFTA in cases where the numbering
of the Act was altered by section 1084 of the Dodd-Frank Act. These
updated references occur in the following provisions of Regulation E:
Section 1005.3(c)(5)
Section 1005.3(c)(7)
Section 1005.12(c)(2)
Section 1005.13(b)(2)
Section 1005.20(h)(2)
Appendix C--Official Interpretations
III. Legal Authority
A. Rulemaking Authority
The Bureau is issuing this interim final rule pursuant to its
authority under the EFTA and the Dodd-Frank Act. Effective July 21,
2011, section 1061 of the Dodd-Frank Act transferred to the Bureau the
``consumer financial protection functions'' previously vested in
certain other Federal agencies. The term ``consumer financial
protection function'' is defined to include ``all authority to
prescribe rules or issue orders or guidelines pursuant to any Federal
consumer financial law, including performing appropriate functions to
promulgate and review such rules, orders, and guidelines.'' \3\ The
EFTA is a Federal consumer financial law, except with respect to
section 920 of the EFTA, dealing with debit card interchange fees,
network arrangements, and routing restrictions.\4\ Accordingly,
effective July 21, 2011, the authority of the Board to issue
regulations pursuant to the EFTA transferred to the Bureau.\5\
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\3\ Public Law 111-203, section 1061(a)(1). Effective on the
designated transfer date, the Bureau is also granted ``all powers
and duties'' vested in each of the Federal agencies, relating to the
consumer financial protection functions, on the day before the
designated transfer date. Until this and other interim final rules
take effect, existing regulations for which rulemaking authority
transferred to the Bureau continue to govern persons covered by this
rule. See 76 FR 43569 (July 21, 2011).
\4\ Public Law 111-203, section 1002(14) (defining ``Federal
consumer financial law'' to include the ``enumerated consumer
laws''); id. Section 1002(12) (defining ``enumerated consumer laws''
to include the EFTA, except with respect to section 920 of the
EFTA).
\5\ Section 1066 of the Dodd-Frank Act grants the Secretary of
the Treasury interim authority to perform certain functions of the
Bureau. Pursuant to that authority, Treasury is publishing this
interim final rule on behalf of the Bureau.
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EFTA section 904(a) authorizes the Bureau to prescribe regulations
necessary to carry out the purposes of the title. The express purposes
of the EFTA, as amended by the Dodd-Frank Act, are to establish ``the
rights, liabilities, and responsibilities of participants in electronic
fund and remittance transfer systems'' and to provide ``individual
consumer rights.'' EFTA section 902(b), 15 U.S.C. 1693. EFTA section
904(c), as amended by the Dodd-Frank Act, further provides that
regulations prescribed by the Bureau may contain any classifications,
differentiations, or other provisions, and may provide for such
adjustments or exceptions for any class of electronic fund transfers or
remittance transfers that the Bureau deems necessary or proper to
effectuate the purposes of the title, to prevent circumvention or
evasion, or to facilitate compliance.\6\
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\6\ 15 U.S.C. 1693b.
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B. Authority To Issue an Interim Final Rule Without Prior Notice and
Comment
The Administrative Procedure Act (APA) \7\ generally requires
public notice and an opportunity to comment before promulgation of
regulations.\8\ The APA provides exceptions to notice-and-comment
procedures, however, where an agency for good cause finds that such
procedures are impracticable, unnecessary, or contrary to the public
interest or when a rulemaking relates to agency organization,
procedure, and practice.\9\ The Bureau finds that there is good cause
to conclude that providing notice and opportunity for comment would be
unnecessary and contrary to the public interest under these
circumstances. In addition, substantially all the changes made by this
interim final rule, which were necessitated by the Dodd-Frank Act's
transfer of EFTA authority from the Board to the Bureau, relate to
agency organization, procedure, and practice and are thus exempt from
the APA's notice-and-comment requirements.
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\7\ 5 U.S.C. 551 et seq.
\8\ 5 U.S.C. 553(b), (c).
\9\ 5 U.S.C. 553(b)(3)(A), (B).
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The Bureau's good cause findings are based on the following
considerations. As an initial matter, the Board's existing regulation
was a result of notice-and-comment rulemaking to the extent required.
Moreover, the interim final rule published today does not impose any
new, substantive obligations on regulated entities. Rather, the interim
final rule makes only non-substantive, technical changes to the
existing text of the regulation, such as renumbering, changing internal
cross-references, replacing appropriate nomenclature to reflect the
transfer of authority to the Bureau, and changing the address for
filing applications and notices. Given the technical nature of these
changes, and the fact that the interim final rule does not impose any
additional substantive requirements on covered entities, an opportunity
for prior public comment is unnecessary. In addition, recodifying the
Board's regulation to reflect the transfer of authority to the Bureau
will help facilitate compliance with the EFTA and its implementing
regulation, and the new regulation will help reduce uncertainty
regarding the applicable regulatory framework. Using notice-and-comment
procedures would delay this process and thus be contrary to the public
interest.
The APA generally requires that rules be published not less than 30
days before their effective dates. See 5 U.S.C. 553(d). As with the
notice and comment requirement, however, the APA allows an exception
when ``otherwise provided by the agency for good cause found and
published with the rule.'' 5 U.S.C. 553(d)(3). The Bureau finds that
there is good cause for providing less than 30 days notice here. A
delayed effective date would harm consumers and regulated entities by
needlessly perpetuating discrepancies between the amended statutory
text and the implementing regulation, thereby hindering compliance and
prolonging uncertainty regarding the applicable regulatory
framework.\10\
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\10\ This interim final rule is one of 14 companion rulemakings
that together restate and recodify the implementing regulations
under 14 existing consumer financial laws (part III.C, below, lists
the 14 laws involved). In the interest of proper coordination of
this overall regulatory framework, which includes numerous cross-
references among some of the regulations, the Bureau is establishing
the same effective date of December 30, 2011 for those rules
published on or before that date and making those published
thereafter (if any) effective immediately.
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In addition, delaying the effective date of the interim final rule
for 30 days would provide no practical benefit to regulated entities in
this context and in fact could operate to their detriment. As discussed
above, the interim final rule published today does not impose any new,
substantive obligations on regulated entities. Instead, the rule makes
only non-substantive, technical changes to the existing text of the
regulation. Thus, regulated entities that are already in compliance
with the existing rules will not need to modify business practices as a
result of this rule.
C. Section 1022(b)(2) of the Dodd-Frank Act
In developing the interim final rule, the Bureau has conducted an
analysis of potential benefits, costs, and impacts.\11\ The Bureau
believes that the interim final rule will benefit consumers and covered
persons by updating and recodifying Regulation E to reflect the
transfer of authority to the Bureau and certain other changes mandated
by the Dodd-Frank Act. This will help facilitate compliance with the
EFTA and its implementing regulation and help reduce any uncertainty
regarding the applicable regulatory framework. The interim final rule
will not impose any new substantive obligations on consumers or covered
persons and it is not expected to have any impact on consumers' access
to consumer financial products and services.
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\11\ Section 1022(b)(2)(A) of the Dodd-Frank Act addresses the
consideration of the potential benefits and costs of regulation to
consumers and covered persons, including the potential reduction of
access by consumers to consumer financial products or services; the
impact on depository institutions and credit unions with $10 billion
or less in total assets as described in section 1026 of the Dodd-
Frank Act; and the impact on consumers in rural areas. Section
1022(b)(2)(B) requires that the Bureau ``consult with the
appropriate prudential regulators or other Federal agencies prior to
proposing a rule and during the comment process regarding
consistency with prudential, market, or systemic objectives
administered by such agencies.'' The manner and extent to which
these provisions apply to interim final rules and to benefits,
costs, and impacts that are compelled by statutory changes rather
than discretionary Bureau action is unclear. Nevertheless, to inform
this rulemaking more fully, the Bureau performed the described
analyses and consultations.
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Although not required by the interim final rule, covered entities
may incur some costs in updating compliance manuals and related
materials to reflect the new numbering and other technical changes
reflected in the new Regulation E. The Bureau has worked to reduce any
such burden by preserving the existing numbering to the extent possible
and believes that such costs will likely be minimal. These changes
could be handled in the short term by providing a short, standalone
summary alerting users to the changes and in the long term could be
combined with other updates at the covered person's convenience. The
Bureau intends to continue investigating the possible costs to affected
entities of updating manuals and related materials to reflect these
changes and solicits comments on this and other issues discussed in
this section.
The interim final rule will have no unique impact on depository
institutions or credit unions with $10 billion or less in assets as
described in section 1026(a) of the Dodd-Frank Act. Also, the interim
final rule will have no unique impact on rural consumers.
In undertaking the process of recodifying Regulation E, as well as
regulations implementing thirteen other existing consumer financial
laws,\12\ the Bureau consulted the Federal Deposit Insurance
Corporation, the Office of the Comptroller of the Currency, the
National Credit Union Administration, the Board of Governors of the
Federal Reserve System, the Federal Trade Commission, and the
Department of Housing and Urban Development, including with respect to
consistency with any prudential, market, or systemic objectives that
may be administered by such agencies.\13\ The Bureau also has consulted
with the Office of Management and Budget for technical assistance. The
Bureau expects to have further consultations with the appropriate
Federal agencies during the comment period.
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\12\ The fourteen laws implemented by this and its companion
rulemakings are: the Consumer Leasing Act, the Electronic Fund
Transfer Act (except with respect to section 920 of that Act), the
Equal Credit Opportunity Act, the Fair Credit Reporting Act (except
with respect to sections 615(e) and 628 of that act), the Fair Debt
Collection Practices Act, Subsections (b) through (f) of section 43
of the Federal Deposit Insurance Act, sections 502 through 509 of
the Gramm-Leach-Bliley Act (except for section 505 as it applies to
section 501(b)), the Home Mortgage Disclosure Act, the Real Estate
Settlement Procedures Act, the S.A.F.E. Mortgage Licensing Act, the
Truth in Lending Act, the Truth in Savings Act, section 626 of the
Omnibus Appropriations Act, 2009, and the Interstate Land Sales Full
Disclosure Act.
\13\ In light of the technical but voluminous nature of this
recodification project, the Bureau focused the consultation process
on a representative sample of the recodified regulations, while
making information on the other regulations available. The Bureau
expects to conduct differently its future consultations regarding
substantive rulemakings.
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IV. Request for Comment
Although notice and comment rulemaking procedures are not required,
the Bureau invites comments on this notice. Commenters are specifically
encouraged to identify any technical issues raised by the rule. The
Bureau is also seeking comment in response to a notice published at 76
FR 75825 (Dec. 5, 2011) concerning its efforts to identify priorities
for streamlining regulations that it has inherited from other Federal
agencies to address provisions that are outdated, unduly burdensome, or
unnecessary.
V. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA), as amended by the Small
Business Regulatory Enforcement Fairness Act of 1996, requires each
agency to consider the potential impact of its regulations on small
entities, including small businesses, small governmental units, and
small not-for-profit organizations.\14\ The RFA generally requires an
agency to conduct an initial regulatory flexibility analysis (IRFA) and
a final regulatory flexibility analysis (FRFA) of any rule subject to
notice-and-comment rulemaking requirements, unless the agency certifies
that the rule will not have a significant economic impact on a
substantial number of small entities.\15\ The Bureau also is subject to
certain additional procedures under the RFA involving the convening of
a panel to consult with small business representatives prior to
proposing a rule for which an IRFA is required.\16\
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\14\ 5 U.S.C. 601 et seq.
\15\ 5 U.S.C. 603, 604.
\16\ 5 U.S.C. 609.
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The IRFA and FRFA requirements described above apply only where a
notice of proposed rulemaking is required,\17\ and the panel
requirement applies only when a rulemaking requires an IRFA.\18\ As
discussed above in part III, a notice of proposed rulemaking is not
required for this rulemaking.
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\17\ 5 U.S.C. 603(a), 604(a); 5 U.S.C. 553(b)(B).
\18\ 5 U.S.C. 609(b).
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In addition, as discussed above, this interim final rule has only a
minor impact on entities subject to Regulation E. The rule imposes no
new, substantive obligations on covered entities. Accordingly, the
undersigned certifies that this interim final rule will not have a
significant economic impact on a substantial number of small entities.
VI. Paperwork Reduction Act
The Bureau may not conduct or sponsor, and a respondent is not
required to respond to, an information collection unless it displays a
currently valid Office of Management and Budget (OMB) control number.
This rule contains information collection
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requirements under the Paperwork Reduction Act (PRA), which have been
previously approved by OMB under the following OMB control number
issued to the Board, and the PRA burden for which is unchanged by this
rule: OMB Control No(s). 7100-0200. There are no new information
collection requirements in this interim final rule. The Bureau's OMB
control number for this information collection is: 3170-0014.
List of Subjects in 12 CFR Part 1005
Banks, Banking, Consumer protection, Credit unions, Electronic fund
transfers, National banks, Reporting and recordkeeping requirements,
Savings Associations.
Authority and Issuance
For the reasons set forth above, the Bureau of Consumer Financial
Protection adds part 1005 to Chapter X in Title 12 of the Code of
Federal Regulations to read as follows:
PART 1005--ELECTRONIC FUND TRANSFERS (REGULATION E)
Sec.
1005.1 Authority and purpose.
1005.2 Definitions.
1005.3 Coverage.
1005.4 General disclosure requirements; jointly offered services.
1005.5 Issuance of access devices.
1005.6 Liability of consumer for unauthorized transfers.
1005.7 Initial disclosures.
1005.8 Change in terms notice; error resolution notice.
1005.9 Receipts at electronic terminals; periodic statements.
1005.10 Preauthorized transfers.
1005.11 Procedures for resolving errors.
1005.12 Relation to other laws.
1005.13 Administrative enforcement; record retention.
1005.14 Electronic fund transfer service provider not holding
consumer's account.
1005.15 Electronic fund transfer of government benefits.
1005.16 Disclosures at automated teller machines.
1005.17 Requirements for overdraft services.
1005.18 Requirements for financial institutions offering payroll
card accounts.
1005.20 Requirements for gift cards and gift certificates.
Appendix A to Part 1005--Model Disclosure Clauses and Forms
Appendix B to Part 1005--[Reserved]
Appendix C to Part 1005--Issuance of Official Interpretations
Supplement I to Part 1005--Official Interpretations
Authority: 12 U.S.C. 5512, 5581; 15 U.S.C. 1693b.
Sec. 1005.1 Authority and purpose.
(a) Authority. The regulation in this part, known as Regulation E,
is issued by the Bureau of Consumer Financial Protection (Bureau)
pursuant to the Electronic Fund Transfer Act (15 U.S.C. 1693 et seq.).
The information-collection requirements have been approved by the
Office of Management and Budget under 44 U.S.C. 3501 et seq. and have
been assigned OMB No. 3170-0014.
(b) Purpose. This part carries out the purposes of the Electronic
Fund Transfer Act, which establishes the basic rights, liabilities, and
responsibilities of consumers who use electronic fund transfer services
and of financial institutions that offer these services. The primary
objective of the Act and this part is the protection of individual
consumers engaging in electronic fund transfers.
Sec. 1005.2 Definitions.
For purposes of this part, the following definitions apply:
(a)(1) ``Access device'' means a card, code, or other means of
access to a consumer's account, or any combination thereof, that may be
used by the consumer to initiate electronic fund transfers.
(2) An access device becomes an ``accepted access device'' when the
consumer:
(i) Requests and receives, or signs, or uses (or authorizes another
to use) the access device to transfer money between accounts or to
obtain money, property, or services;
(ii) Requests validation of an access device issued on an
unsolicited basis; or
(iii) Receives an access device in renewal of, or in substitution
for, an accepted access device from either the financial institution
that initially issued the device or a successor.
(b)(1) ``Account'' means a demand deposit (checking), savings, or
other consumer asset account (other than an occasional or incidental
credit balance in a credit plan) held directly or indirectly by a
financial institution and established primarily for personal, family,
or household purposes.
(2) The term includes a ``payroll card account'' which is an
account that is directly or indirectly established through an employer
and to which electronic fund transfers of the consumer's wages, salary,
or other employee compensation (such as commissions), are made on a
recurring basis, whether the account is operated or managed by the
employer, a third-party payroll processor, a depository institution or
any other person. For rules governing payroll card accounts, see Sec.
1005.18.
(3) The term does not include an account held by a financial
institution under a bona fide trust agreement.
(c) ``Act'' means the Electronic Fund Transfer Act (Title IX of the
Consumer Credit Protection Act, 15 U.S.C. 1693 et seq.).
(d) ``Business day'' means any day on which the offices of the
consumer's financial institution are open to the public for carrying on
substantially all business functions.
(e) ``Consumer'' means a natural person.
(f) ``Credit'' means the right granted by a financial institution
to a consumer to defer payment of debt, incur debt and defer its
payment, or purchase property or services and defer payment therefor.
(g) ``Electronic fund transfer'' is defined in Sec. 1005.3.
(h) ``Electronic terminal'' means an electronic device, other than
a telephone operated by a consumer, through which a consumer may
initiate an electronic fund transfer. The term includes, but is not
limited to, point-of-sale terminals, automated teller machines (ATMs),
and cash dispensing machines.
(i) ``Financial institution'' means a bank, savings association,
credit union, or any other person that directly or indirectly holds an
account belonging to a consumer, or that issues an access device and
agrees with a consumer to provide electronic fund transfer services,
other than a person excluded from coverage of this part by section 1029
of the Consumer Financial Protection Act of 2010, Title X of the Dodd-
Frank Wall Street Reform and Consumer Protection Act, Public Law 111-
203, 124 Stat. 1376.
(j) ``Person'' means a natural person or an organization, including
a corporation, government agency, estate, trust, partnership,
proprietorship, cooperative, or association.
(k) ``Preauthorized electronic fund transfer'' means an electronic
fund transfer authorized in advance to recur at substantially regular
intervals.
(l) ``State'' means any state, territory, or possession of the
United States; the District of Columbia; the Commonwealth of Puerto
Rico; or any political subdivision of the thereof in this paragraph
(l).
(m) ``Unauthorized electronic fund transfer'' means an electronic
fund transfer from a consumer's account initiated by a person other
than the consumer without actual authority to initiate the transfer and
from which the consumer receives no benefit. The term does not include
an electronic fund transfer initiated:
[[Page 81024]]
(1) By a person who was furnished the access device to the
consumer's account by the consumer, unless the consumer has notified
the financial institution that transfers by that person are no longer
authorized;
(2) With fraudulent intent by the consumer or any person acting in
concert with the consumer; or
(3) By the financial institution or its employee.
Sec. 1005.3 Coverage.
(a) General. This part applies to any electronic fund transfer that
authorizes a financial institution to debit or credit a consumer's
account. Generally, this part applies to financial institutions. For
purposes of Sec. Sec. 1005.3(b)(2) and (3), 1005.10(b), (d), and (e),
1005.13, and 1005.20 this part applies to any person, other than a
person excluded from coverage of this part by section 1029 of the
Consumer Financial Protection Act of 2010, Title X of the Dodd-Frank
Wall Street Reform and Consumer Protection Act, Public Law 111-203, 124
Stat. 1376.
(b) Electronic fund transfer. (1) Definition. The term ``electronic
fund transfer'' means 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. The term includes,
but is not limited to:
(i) Point-of-sale transfers;
(ii) Automated teller machine transfers;
(iii) Direct deposits or withdrawals of funds;
(iv) Transfers initiated by telephone; and
(v) Transfers resulting from debit card transactions, whether or
not initiated through an electronic terminal.
(2) Electronic fund transfer using information from a check. (i)
This part applies where a check, draft, or similar paper instrument is
used as a source of information to initiate a one-time electronic fund
transfer from a consumer's account. The consumer must authorize the
transfer.
(ii) The person initiating an electronic fund transfer using the
consumer's check as a source of information for the transfer must
provide a notice that the transaction will or may be processed as an
electronic fund transfer, and obtain a consumer's authorization for
each transfer. A consumer authorizes a one-time electronic fund
transfer (in providing a check to a merchant or other payee for the
MICR encoding, that is, the routing number of the financial
institution, the consumer's account number and the serial number) when
the consumer receives notice and goes forward with the underlying
transaction. For point-of-sale transfers, the notice must be posted in
a prominent and conspicuous location, and a copy thereof, or a
substantially similar notice, must be provided to the consumer at the
time of the transaction.
(iii) A person may provide notices that are substantially similar
to those set forth in Appendix A-6 to comply with the requirements of
this paragraph (b)(2).
(3) Collection of returned item fees via electronic fund
transfer.(i) General. The person initiating an electronic fund transfer
to collect a fee for the return of an electronic fund transfer or a
check that is unpaid, including due to insufficient or uncollected
funds in the consumer's account, must obtain the consumer's
authorization for each transfer. A consumer authorizes a one-time
electronic fund transfer from his or her account to pay the fee for the
returned item or transfer if the person collecting the fee provides
notice to the consumer stating that the person may electronically
collect the fee, and the consumer goes forward with the underlying
transaction. The notice must state that the fee will be collected by
means of an electronic fund transfer from the consumer's account if the
payment is returned unpaid and must disclose the dollar amount of the
fee. If the fee may vary due to the amount of the transaction or due to
other factors, then, except as otherwise provided in paragraph
(b)(3)(ii) of this section, the person collecting the fee may disclose,
in place of the dollar amount of the fee, an explanation of how the fee
will be determined.
(ii) Point-of-sale transactions. If a fee for an electronic fund
transfer or check returned unpaid may be collected electronically in
connection with a point-of-sale transaction, the person initiating an
electronic fund transfer to collect the fee must post the notice
described in paragraph (b)(3)(i) of this section in a prominent and
conspicuous location. The person also must either provide the consumer
with a copy of the posted notice (or a substantially similar notice) at
the time of the transaction, or mail the copy (or a substantially
similar notice) to the consumer's address as soon as reasonably
practicable after the person initiates the electronic fund transfer to
collect the fee. If the amount of the fee may vary due to the amount of
the transaction or due to other factors, the posted notice may explain
how the fee will be determined, but the notice provided to the consumer
must state the dollar amount of the fee if the amount can be calculated
at the time the notice is provided or mailed to the consumer.
(c) Exclusions from coverage. The term ``electronic fund transfer''
does not include:
(1) Checks. Any transfer of funds originated by check, draft, or
similar paper instrument; or any payment made by check, draft, or
similar paper instrument at an electronic terminal.
(2) Check guarantee or authorization. Any transfer of funds that
guarantees payment or authorizes acceptance of a check, draft, or
similar paper instrument but that does not directly result in a debit
or credit to a consumer's account.
(3) Wire or other similar transfers. Any transfer of funds through
Fedwire or through a similar wire transfer system that is used
primarily for transfers between financial institutions or between
businesses.
(4) Securities and commodities transfers. Any transfer of funds the
primary purpose of which is the purchase or sale of a security or
commodity, if the security or commodity is:
(i) Regulated by the Securities and Exchange Commission or the
Commodity Futures Trading Commission;
(ii) Purchased or sold through a broker-dealer regulated by the
Securities and Exchange Commission or through a futures commission
merchant regulated by the Commodity Futures Trading Commission; or
(iii) Held in book-entry form by a Federal Reserve Bank or Federal
agency.
(5) Automatic transfers by account-holding institution. Any
transfer of funds under an agreement between a consumer and a financial
institution which provides that the institution will initiate
individual transfers without a specific request from the consumer:
(i) Between a consumer's accounts within the financial institution;
(ii) From a consumer's account to an account of a member of the
consumer's family held in the same financial institution; or
(iii) Between a consumer's account and an account of the financial
institution, except that these transfers remain subject to Sec.
1005.10(e) regarding compulsory use and sections 916 and 917 of the Act
regarding civil and criminal liability.
(6) Telephone-initiated transfers. Any transfer of funds that:
(i) Is initiated by a telephone communication between a consumer
and a financial institution making the transfer; and
(ii) Does not take place under a telephone bill-payment or other
written
[[Page 81025]]
plan in which periodic or recurring transfers are contemplated.
(7) Small institutions. Any preauthorized transfer to or from an
account if the assets of the account-holding financial institution were
$100 million or less on the preceding December 31. If assets of the
account-holding institution subsequently exceed $100 million, the
institution's exemption for preauthorized transfers terminates one year
from the end of the calendar year in which the assets exceed $100
million. Preauthorized transfers exempt under this paragraph (c)(7)
remain subject to Sec. 1005.10(e) regarding compulsory use and
sections 916 and 917 of the Act regarding civil and criminal liability.
Sec. 1005.4 General disclosure requirements; jointly offered
services.
(a)(1) Form of disclosures. Disclosures required under this part
shall be clear and readily understandable, in writing, and in a form
the consumer may keep, except as otherwise provided in this part. The
disclosures required by this part may be provided to the consumer in
electronic form, subject to compliance with the consumer-consent and
other applicable provisions of the Electronic Signatures in Global and
National Commerce Act (E-Sign Act) (15 U.S.C. 7001 et seq.). A
financial institution may use commonly accepted or readily
understandable abbreviations in complying with the disclosure
requirements of this part.
(2) Foreign language disclosures. Disclosures required under this
part may be made in a language other than English, provided that the
disclosures are made available in English upon the consumer's request.
(b) Additional information; disclosures required by other laws. A
financial institution may include additional information and may
combine disclosures required by other laws (such as the Truth in
Lending Act (15 U.S.C. 1601 et seq.) or the Truth in Savings Act (12
U.S.C. 4301 et seq.) with the disclosures required by this part.
(c) Multiple accounts and account holders.(1) Multiple accounts. A
financial institution may combine the required disclosures into a
single statement for a consumer who holds more than one account at the
institution.
(2) Multiple account holders. For joint accounts held by two or
more consumers, a financial institution need provide only one set of
the required disclosures and may provide them to any of the account
holders.
(d) Services offered jointly. Financial institutions that provide
electronic fund transfer services jointly may contract among themselves
to comply with the requirements that this part imposes on any or all of
them. An institution need make only the disclosures required by
Sec. Sec. 1005.7 and 1005.8 that are within its knowledge and within
the purview of its relationship with the consumer for whom it holds an
account.
Sec. 1005.5 Issuance of access devices.
(a) Solicited issuance. Except as provided in paragraph (b) of this
section, a financial institution may issue an access device to a
consumer only:
(1) In response to an oral or written request for the device; or
(2) As a renewal of, or in substitution for, an accepted access
device whether issued by the institution or a successor.
(b) Unsolicited issuance. A financial institution may distribute an
access device to a consumer on an unsolicited basis if the access
device is:
(1) Not validated, meaning that the institution has not yet
performed all the procedures that would enable a consumer to initiate
an electronic fund transfer using the access device;
(2) Accompanied by a clear explanation that the access device is
not validated and how the consumer may dispose of it if validation is
not desired;
(3) Accompanied by the disclosures required by Sec. 1005.7, of the
consumer's rights and liabilities that will apply if the access device
is validated; and
(4) Validated only in response to the consumer's oral or written
request for validation, after the institution has verified the
consumer's identity by a reasonable means.
Sec. 1005.6 Liability of consumer for unauthorized transfers.
(a) Conditions for liability. A consumer may be held liable, within
the limitations described in paragraph (b) of this section, for an
unauthorized electronic fund transfer involving the consumer's account
only if the financial institution has provided the disclosures required
by Sec. 1005.7(b)(1), (2), and (3). If the unauthorized transfer
involved an access device, it must be an accepted access device and the
financial institution must have provided a means to identify the
consumer to whom it was issued.
(b) Limitations on amount of liability. A consumer's liability for
an unauthorized electronic fund transfer or a series of related
unauthorized transfers shall be determined as follows:
(1) Timely notice given. If the consumer notifies the financial
institution within two business days after learning of the loss or
theft of the access device, the consumer's liability shall not exceed
the lesser of $50 or the amount of unauthorized transfers that occur
before notice to the financial institution.
(2) Timely notice not given. 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 consumer's liability shall not
exceed the lesser of $500 or the sum of:
(i) $50 or the amount of unauthorized transfers that occur within
the two business days, whichever is less; and
(ii) The amount of unauthorized transfers that occur after the
close of two business days and before notice to the institution,
provided the institution establishes that these transfers would not
have occurred had the consumer notified the institution within that
two-day period.
(3) Periodic statement; timely notice not given. A consumer must
report an unauthorized electronic fund transfer that appears on a
periodic statement within 60 days of the financial institution's
transmittal of the statement to avoid liability for subsequent
transfers. If the consumer fails to do so, the consumer's liability
shall not exceed the amount of the unauthorized transfers that occur
after the close of the 60 days and before notice to the institution,
and that the institution establishes would not have occurred had the
consumer notified the institution within the 60-day period. When an
access device is involved in the unauthorized transfer, the consumer
may be liable for other amounts set forth in paragraphs (b)(1) or
(b)(2) of this section, as applicable.
(4) Extension of time limits. If the consumer's delay in notifying
the financial institution was due to extenuating circumstances, the
institution shall extend the times specified above to a reasonable
period.
(5) Notice to financial institution. (i) Notice to a financial
institution is given when a consumer takes steps reasonably necessary
to provide the institution with the pertinent information, whether or
not a particular employee or agent of the institution actually receives
the information.
(ii) The consumer may notify the institution in person, by
telephone, or in writing.
(iii) Written notice is considered given at the time the consumer
mails the notice or delivers it for transmission to the institution by
any other usual means. Notice may be considered constructively given
when the institution becomes aware of
[[Page 81026]]
circumstances leading to the reasonable belief that an unauthorized
transfer to or from the consumer's account has been or may be made.
(6) Liability under state law or agreement. If state law or an
agreement between the consumer and the financial institution imposes
less liability than is provided by this section, the consumer's
liability shall not exceed the amount imposed under the state law or
agreement.
Sec. 1005.7 Initial disclosures.
(a) Timing of disclosures. A financial institution shall make the
disclosures required by this section at the time a consumer contracts
for an electronic fund transfer service or before the first electronic
fund transfer is made involving the consumer's account.
(b) Content of disclosures. A financial institution shall provide
the following disclosures, as applicable:
(1) Liability of consumer. A summary of the consumer's liability,
under Sec. 1005.6 or under state or other applicable law or agreement,
for unauthorized electronic fund transfers.
(2) Telephone number and address. The telephone number and address
of the person or office to be notified when the consumer believes that
an unauthorized electronic fund transfer has been or may be made.
(3) Business days. The financial institution's business days.
(4) Types of transfers; limitations. The type of electronic fund
transfers that the consumer may make and any limitations on the
frequency and dollar amount of transfers. Details of the limitations
need not be disclosed if confidentiality is essential to maintain the
security of the electronic fund transfer system.
(5) Fees. Any fees imposed by the financial institution for
electronic fund transfers or for the right to make transfers.
(6) Documentation. A summary of the consumer's right to receipts
and periodic statements, as provided in Sec. 1005.9 of this part, and
notices regarding preauthorized transfers as provided in Sec.
1005.10(a) and (d).
(7) Stop payment. A summary of the consumer's right to stop payment
of a preauthorized electronic fund transfer and the procedure for
placing a stop-payment order, as provided in Sec. 1005.10(c).
(8) Liability of institution. A summary of the financial
institution's liability to the consumer under section 910 of the Act
for failure to make or to stop certain transfers.
(9) Confidentiality. The circumstances under which, in the ordinary
course of business, the financial institution may provide information
concerning the consumer's account to third parties.
(10) Error resolution. A notice that is substantially similar to
Model Form A-3 as set out in Appendix A of this part concerning error
resolution.
(11) ATM fees. A notice that a fee may be imposed by an automated
teller machine operator as defined in Sec. 1005.16(a)(1), when the
consumer initiates an electronic fund transfer or makes a balance
inquiry, and by any network used to complete the transaction.
(c) Addition of electronic fund transfer services. If an electronic
fund transfer service is added to a consumer's account and is subject
to terms and conditions different from those described in the initial
disclosures, disclosures for the new service are required.
Sec. 1005.8 Change in terms notice; error resolution notice.
(a) Change in terms notice. (1) Prior notice required. A financial
institution shall mail or deliver a written notice to the consumer, at
least 21 days before the effective date, of any change in a term or
condition required to be disclosed under Sec. 1005.7(b) of this part
if the change would result in:
(i) Increased fees for the consumer;
(ii) Increased liability for the consumer;
(iii) Fewer types of available electronic fund transfers; or
(iv) Stricter limitations on the frequency or dollar amount of
transfers.
(2) Prior notice exception. A financial institution need not give
prior notice if an immediate change in terms or conditions is necessary
to maintain or restore the security of an account or an electronic fund
transfer system. If the institution makes such a change permanent and
disclosure would not jeopardize the security of the account or system,
the institution shall notify the consumer in writing on or with the
next regularly scheduled periodic statement or within 30 days of making
the change permanent.
(b) Error resolution notice. For accounts to or from which
electronic fund transfers can be made, a financial institution shall
mail or deliver to the consumer, at least once each calendar year, an
error resolution notice substantially similar to the model form set
forth in Appendix A of this part (Model Form A-3). Alternatively, an
institution may include an abbreviated notice substantially similar to
the model form error resolution notice set forth in Appendix A of this
part (Model Form A-3), on or with each periodic statement required by
Sec. 1005.9(b).
Sec. 1005.9 Receipts at electronic terminals; periodic statements.
(a) Receipts at electronic terminals--General. Except as provided
in paragraph (e) of this section, a financial institution shall make a
receipt available to a consumer at the time the consumer initiates an
electronic fund transfer at an electronic terminal. The receipt shall
set forth the following information, as applicable:
(1) Amount. The amount of the transfer. A transaction fee may be
included in this amount, provided the amount of the fee is disclosed on
the receipt and displayed on or at the terminal.
(2) Date. The date the consumer initiates the transfer.
(3) Type. The type of transfer and the type of the consumer's
account(s) to or from which funds are transferred. The type of account
may be omitted if the access device used is able to access only one
account at that terminal.
(4) Identification. A number or code that identifies the consumer's
account or accounts, or the access device used to initiate the
transfer. The number or code need not exceed four digits or letters to
comply with the requirements of this paragraph (a)(4).
(5) Terminal location. The location of the terminal where the
transfer is initiated, or an identification such as a code or terminal
number. Except in limited circumstances where all terminals are located
in the same city or state, if the location is disclosed, it shall
include the city and state or foreign country and one of the following:
(i) The street address; or
(ii) A generally accepted name for the specific location; or
(iii) The name of the owner or operator of the terminal if other
than the account-holding institution.
(6) Third party transfer. The name of any third party to or from
whom funds are transferred.
(b) Periodic statements. For an account to or from which electronic
fund transfers can be made, a financial institution shall send a
periodic statement for each monthly cycle in which an electronic fund
transfer has occurred; and shall send a periodic statement at least
quarterly if no transfer has occurred. The statement shall set forth
the following information, as applicable:
(1) Transaction information. For each electronic fund transfer
occurring during the cycle:
(i) The amount of the transfer;
(ii) The date the transfer was credited or debited to the
consumer's account;
[[Page 81027]]
(iii) The type of transfer and type of account to or from which
funds were transferred;
(iv) For a transfer initiated by the consumer at an electronic
terminal (except for a deposit of cash or a check, draft, or similar
paper instrument), the terminal location described in paragraph (a)(5)
of this section; and
(v) The name of any third party to or from whom funds were
transferred.
(2) Account number. The number of the account.
(3) Fees. The amount of any fees assessed against the account
during the statement period for electronic fund transfers, the right to
make transfers, or account maintenance.
(4) Account balances. The balance in the account at the beginning
and at the close of the statement period.
(5) Address and telephone number for inquiries. The address and
telephone number to be used for inquiries or notice of errors, preceded
by ``Direct inquiries to'' or similar language. The address and
telephone number provided on an error resolution notice under Sec.
1005.8(b) given on or with the statement satisfies this requirement.
(6) Telephone number for preauthorized transfers. A telephone
number the consumer may call to ascertain whether preauthorized
transfers to the consumer's account have occurred, if the financial
institution uses the telephone-notice option under Sec.
1005.10(a)(1)(iii).
(c) Exceptions to the periodic statement requirement for certain
accounts. (1) Preauthorized transfers to accounts. For accounts that
may be accessed only by preauthorized transfers to the account the
following rules apply:
(i) Passbook accounts. For passbook accounts, the financial
institution need not provide a periodic statement if the institution
updates the passbook upon presentation or enters on a separate document
the amount and date of each electronic fund transfer since the passbook
was last presented.
(ii) Other accounts. For accounts other than passbook accounts, the
financial institution must send a periodic statement at least
quarterly.
(2) Intra-institutional transfers. For an electronic fund transfer
initiated by the consumer between two accounts of the consumer in the
same institution, documenting the transfer on a periodic statement for
one of the two accounts satisfies the periodic statement requirement.
(3) Relationship between paragraphs (c)(1) and (2) of this section.
An account that is accessed by preauthorized transfers to the account
described in paragraph (c)(1) of this section and by intra-
institutional transfers described in paragraph (c)(2) of this section,
but by no other type of electronic fund transfers, qualifies for the
exceptions provided by paragraph (c)(1) of this section.
(d) Documentation for foreign-initiated transfers. The failure by a
financial institution to provide a terminal receipt for an electronic
fund transfer or to document the transfer on a periodic statement does
not violate this part if:
(1) The transfer is not initiated within a state; and
(2) The financial institution treats an inquiry for clarification
or documentation as a notice of error in accordance with Sec. 1005.11.
(e) Exception for receipts in small-value transfers. A financial
institution is not subject to the requirement to make available a
receipt under paragraph (a) of this section if the amount of the
transfer is $15 or less.
Sec. 1005.10 Preauthorized transfers.
(a) Preauthorized transfers to consumer's account. (1) Notice by
financial institution. When a person initiates preauthorized electronic
fund transfers to a consumer's account at least once every 60 days, the
account-holding financial institution shall provide notice to the
consumer by:
(i) Positive notice. Providing oral or written notice of the
transfer within two business days after the transfer occurs; or
(ii) Negative notice. Providing oral or written notice, within two
business days after the date on which the transfer was scheduled to
occur, that the transfer did not occur; or
(iii) Readily-available telephone line. Providing a readily
available telephone line that the consumer may call to determine
whether the transfer occurred and disclosing the telephone number on
the initial disclosure of account terms and on each periodic statement.
(2) Notice by payor. A financial institution need not provide
notice of a transfer if the payor gives the consumer positive notice
that the transfer has been initiated.
(3) Crediting. A financial institution that receives a
preauthorized transfer of the type described in paragraph (a)(1) of
this section shall credit the amount of the transfer as of the date the
funds for the transfer are received.
(b) Written authorization for preauthorized transfers from
consumer's account. Preauthorized electronic fund transfers from a
consumer's account may be authorized only by a writing signed or
similarly authenticated by the consumer. The person that obtains the
authorization shall provide a copy to the consumer.
(c) Consumer's right to stop payment. (1) Notice. A consumer may
stop payment of a preauthorized electronic fund transfer from the
consumer's account by notifying the financial institution orally or in
writing at least three business days before the scheduled date of the
transfer.
(2) Written confirmation. The financial institution may require the
consumer to give written confirmation of a stop-payment order within 14
days of an oral notification. An institution that requires written
confirmation shall inform the consumer of the requirement and provide
the address where confirmation must be sent when the consumer gives the
oral notification. An oral stop-payment order ceases to be binding
after 14 days if the consumer fails to provide the required written
confirmation.
(d) Notice of transfers varying in amount. (1) Notice. When a
preauthorized electronic fund transfer from the consumer's account will
vary in amount from the previous transfer under the same authorization
or from the preauthorized amount, the designated payee or the financial
institution shall send the consumer written notice of the amount and
date of the transfer at least 10 days before the scheduled date of
transfer.
(2) Range. The designated payee or the institution shall inform the
consumer of the right to receive notice of all varying transfers, but
may give the consumer the option of receiving notice only when a
transfer falls outside a specified range of amounts or only when a
transfer differs from the most recent transfer by more than an agreed-
upon amount.
(e) Compulsory use. (1) Credit. No financial institution or other
person may condition an extension of credit to a consumer on the
consumer's repayment by preauthorized electronic fund transfers, except
for credit extended under an overdraft credit plan or extended to
maintain a specified minimum balance in the consumer's account.
(2) Employment or government benefit. No financial institution or
other person may require a consumer to establish an account for receipt
of electronic fund transfers with a particular institution as a
condition of employment or receipt of a government benefit.
Sec. 1005.11 Procedures for resolving errors.
(a) Definition of error. (1) Types of transfers or inquiries
covered. The term ``error'' means:
[[Page 81028]]
(i) An unauthorized electronic fund transfer;
(ii) An incorrect electronic fund transfer to or from the
consumer's account;
(iii) The omission of an electronic fund transfer from a periodic
statement;
(iv) A computational or bookkeeping error made by the financial
institution relating to an electronic fund transfer;
(v) The consumer's receipt of an incorrect amount of money from an
electronic terminal;
(vi) An electronic fund transfer not identified in accordance with
Sec. 1005.9 or Sec. 1005.10(a); or
(vii) The consumer's request for documentation required by Sec.
1005.9 or Sec. 1005.10(a) or for additional information or
clarification concerning an electronic fund transfer, including a
request the consumer makes to determine whether an error exists under
paragraphs (a)(1)(i) through (vi) of this section.
(2) Types of inquiries not covered. The term ``error'' does not
include:
(i) A routine inquiry about the consumer's account balance;
(ii) A request for information for tax or other recordkeeping
purposes; or
(iii) A request for duplicate copies of documentation.
(b) Notice of error from consumer. (1) Timing; contents. A
financial institution shall comply with the requirements of this
section with respect to any oral or written notice of error from the
consumer that:
(i) Is received by the institution no later than 60 days after the
institution sends the periodic statement or provides the passbook
documentation, required by Sec. 1005.9, on which the alleged error is
first reflected;
(ii) Enables the institution to identify the consumer's name and
account number; and
(iii) Indicates why the consumer believes an error exists and
includes to the extent possible the type, date, and amount of the
error, except for requests described in paragraph (a)(1)(vii) of this
section.
(2) Written confirmation. A financial institution may require the
consumer to give written confirmation of an error within 10 business
days of an oral notice. An institution that requires written
confirmation shall inform the consumer of the requirement and provide
the address where confirmation must be sent when the consumer gives the
oral notification.
(3) Request for documentation or clarifications. When a notice of
error is based on documentation or clarification that the consumer
requested under paragraph (a)(1)(vii) of this section, the consumer's
notice of error is timely if received by the financial institution no
later than 60 days after the institution sends the information
requested.
(c) Time limits and extent of investigation. (1) Ten-day period. A
financial institution shall investigate promptly and, except as
otherwise provided in this paragraph (c), shall determine whether an
error occurred within 10 business days of receiving a notice of error.
The institution shall report the results to the consumer within three
business days after completing its investigation. The institution shall
correct the error within one business day after determining that an
error occurred.
(2) Forty-five day period. If the financial institution is unable
to complete its investigation within 10 business days, the institution
may take up to 45 days from receipt of a notice of error to investigate
and determine whether an error occurred, provided the institution does
the following:
(i) Provisionally credits the consumer's account in the amount of
the alleged error (including interest where applicable) within 10
business days of receiving the error notice. If the financial
institution has a reasonable basis for believing that an unauthorized
electronic fund transfer has occurred and the institution has satisfied
the requirements of Sec. 1005.6(a), the institution may withhold a
maximum of $50 from the amount credited. An institution need not
provisionally credit the consumer's account if:
(A) The institution requires but does not receive written
confirmation within 10 business days of an oral notice of error; or
(B) The alleged error involves an account that is subject to
Regulation T of the Board of Governors of the Federal Reserve System
(Securities Credit by Brokers and Dealers, 12 CFR part 220);
(ii) Informs the consumer, within two business days after the
provisional crediting, of the amount and date of the provisional
crediting and gives the consumer full use of the funds during the
investigation;
(iii) Corrects the error, if any, within one business day after
determining that an error occurred; and
(iv) Reports the results to the consumer within three business days
after completing its investigation (including, if applicable, notice
that a provisional credit has been made final).
(3) Extension of time periods. The time periods in paragraphs
(c)(1) and (c)(2) of this section are extended as follows:
(i) The applicable time is 20 business days in place of 10 business
days under paragraphs (c)(1) and (2) of this section if the notice of
error involves an electronic fund transfer to or from the account
within 30 days after the first deposit to the account was made.
(ii) The applicable time is 90 days in place of 45 days under
paragraph (c)(2) of this section, for completing an investigation, if a
notice of error involves an electronic fund transfer that:
(A) Was not initiated within a state;
(B) Resulted from a point-of-sale debit card transaction; or
(C) Occurred within 30 days after the first deposit to the account
was made.
(4) Investigation. With the exception of transfers covered by Sec.
1005.14 of this part, a financial institution's review of its own
records regarding an alleged error satisfies the requirements of this
section if:
(i) The alleged error concerns a transfer to or from a third party;
and
(ii) There is no agreement between the institution and the third
party for the type of electronic fund transfer involved.
(d) Procedures if financial institution determines no error or
different error occurred. In addition to following the procedures
specified in paragraph (c) of this section, the financial institution
shall follow the procedures set forth in this paragraph (d) if it
determines that no error occurred or that an error occurred in a manner
or amount different from that described by the consumer:
(1) Written explanation. The institution's report of the results of
its investigation shall include a written explanation of the
institution's findings and shall note the consumer's right to request
the documents that the institution relied on in making its
determination. Upon request, the institution shall promptly provide
copies of the documents.
(2) Debiting provisional credit. Upon debiting a provisionally
credited amount, the financial institution shall:
(i) Notify the consumer of the date and amount of the debiting;
(ii) Notify the consumer that the institution will honor checks,
drafts, or similar instruments payable to third parties and
preauthorized transfers from the consumer's account (without charge to
the consumer as a result of an overdraft) for five business days after
the notification. The institution shall honor items as specified in the
notice, but need honor only items that it would have paid if the
provisionally credited funds had not been debited.
(e) Reassertion of error. A financial institution that has fully
complied with the error resolution requirements has no further
responsibilities under this
[[Page 81029]]
section should the consumer later reassert the same error, except in
the case of an error asserted by the consumer following receipt of
information provided under paragraph (a)(1)(vii) of this section.
Sec. 1005.12 Relation to other laws.
(a) Relation to Truth in Lending. (1) The Electronic Fund Transfer
Act and this part govern:
(i) The addition to an accepted credit card, as defined in
Regulation Z (12 CFR 1026.12, comment 12-2), of the capability to
initiate electronic fund transfers;
(ii) The issuance of an access device that permits credit
extensions (under a preexisting agreement between a consumer and a
financial institution) only when the consumer's account is overdrawn or
to maintain a specified minimum balance in the consumer's account, or
under an overdraft service, as defined in Sec. 1005.17(a) of this
part;
(iii) The addition of an overdraft service, as defined in Sec.
1005.17(a), to an accepted access device; and
(iv) A consumer's liability for an unauthorized electronic fund
transfer and the investigation of errors involving an extension of
credit that occurs under an agreement between the consumer and a
financial institution to extend credit when the consumer's account is
overdrawn or to maintain a specified minimum balance in the consumer's
account, or under an overdraft service, as defined in Sec. 1005.17(a).
(2) The Truth in Lending Act and Regulation Z (12 CFR part 1026),
which prohibit the unsolicited issuance of credit cards, govern:
(i) The addition of a credit feature to an accepted access device;
and
(ii) Except as provided in paragraph (a)(1)(ii) of this section,
the issuance of a credit card that is also an access device.
(b) Preemption of inconsistent state laws. (1) Inconsistent
requirements. The Bureau shall determine, upon its own motion or upon
the request of a state, financial institution, or other interested
party, whether the Act and this part preempt state law relating to
electronic fund transfers, or dormancy, inactivity, or service fees, or
expiration dates in the case of gift certificates, store gift cards, or
general-use prepaid cards.
(2) Standards for determination. State law is inconsistent with the
requirements of the Act and this part if state law:
(i) Requires or permits a practice or act prohibited by the Federal
law;
(ii) Provides for consumer liability for unauthorized electronic
fund transfers that exceeds the limits imposed by the Federal law;
(iii) Allows longer time periods than the Federal law for
investigating and correcting alleged errors, or does not require the
financial institution to credit the consumer's account during an error
investigation in accordance with Sec. 1005.11(c)(2)(i) of this part;
or
(iv) Requires initial disclosures, periodic statements, or receipts
that are different in content from those required by the Federal law
except to the extent that the disclosures relate to consumer rights
granted by the state law and not by the Federal law.
(c) State exemptions (1) General rule. Any state may apply for an
exemption from the requirements of the Act or this part for any class
of electronic fund transfers within the state. The Bureau shall grant
an exemption if it determines that:
(i) Under state law the class of electronic fund transfers is
subject to requirements substantially similar to those imposed by the
Federal law; and
(ii) There is adequate provision for state enforcement.
(2) Exception. To assure that the Federal and state courts continue
to have concurrent jurisdiction, and to aid in implementing the Act:
(i) No exemption shall extend to the civil liability provisions of
section 916 of the Act; and
(ii) When the Bureau grants an exemption, the state law
requirements shall constitute the requirements of the Federal law for
purposes of section 916 of the Act, except for state law requirements
not imposed by the Federal law.
Sec. 1005.13 Administrative enforcement; record retention.
(a) Enforcement by Federal agencies. Compliance with this part is
enforced in accordance with section 918 of the Act.
(b) Record retention. (1) Any person subject to the Act and this
part shall retain evidence of compliance with the requirements imposed
by the Act and this part for a period of not less than two years from
the date disclosures are required to be made or action is required to
be taken.
(2) Any person subject to the Act and this part having actual
notice that it is the subject of an investigation or an enforcement
proceeding by its enforcement agency, or having been served with notice
of an action filed under sections 910, 916, or 917(a) of the Act, shall
retain the records that pertain to the investigation, action, or
proceeding until final disposition of the matter unless an earlier time
is allowed by court or agency order.
Sec. 1005.14 Electronic fund transfer service provider not holding
consumer's account.
(a) Provider of electronic fund transfer service. A person that
provides an electronic fund transfer service to a consumer but that
does not hold the consumer's account is subject to all requirements of
this part if the person:
(1) Issues a debit card (or other access device) that the consumer
can use to access the consumer's account held by a financial
institution; and
(2) Has no agreement with the account-holding institution regarding
such access.
(b) Compliance by service provider. In addition to the requirements
generally applicable under this part, the service provider shall comply
with the following special rules:
(1) Disclosures and documentation. The service provider shall give
the disclosures and documentation required by Sec. Sec. 1005.7,
1005.8, and 1005.9 of this part that are within the purview of its
relationship with the consumer. The service provider need not furnish
the periodic statement required by Sec. 1005.9(b) if the following
conditions are met:
(i) The debit card (or other access device) issued to the consumer
bears the service provider's name and an address or telephone number
for making inquiries or giving notice of error;
(ii) The consumer receives a notice concerning use of the debit
card that is substantially similar to the notice contained in Appendix
A of this part;
(iii) The consumer receives, on or with the receipts required by
Sec. 1005.9(a), the address and telephone number to be used for an
inquiry, to give notice of an error, or to report the loss or theft of
the debit card;
(iv) The service provider transmits to the account-holding
institution the information specified in Sec. 1005.9(b)(1), in the
format prescribed by the automated clearinghouse (ACH) system used to
clear the fund transfers;
(v) The service provider extends the time period for notice of loss
or theft of a debit card, set forth in Sec. 1005.6(b)(1) and (2), from
two business days to four business days after the consumer learns of
the loss or theft; and extends the time periods for reporting
unauthorized transfers or errors, set forth in Sec. Sec. 1005.6(b)(3)
and 1005.11(b)(1)(i), from 60 days to 90 days following the transmittal
of a periodic statement by the account-holding institution.
(2) Error resolution. (i) The service provider shall extend by a
reasonable time the period in which notice of an error must be
received, specified in Sec. 1005.11(b)(1)(i), if a delay resulted from
an initial attempt by the consumer
[[Page 81030]]
to notify the account-holding institution.
(ii) The service provider shall disclose to the consumer the date
on which it initiates a transfer to effect a provisional credit in
accordance with Sec. 1005.11(c)(2)(ii).
(iii) If the service provider determines an error occurred, it
shall transfer funds to or from the consumer's account, in the
appropriate amount and within the applicable time period, in accordance
with Sec. 1005.11(c)(2)(i).
(iv) If funds were provisionally credited and the service provider
determines no error occurred, it may reverse the credit. The service
provider shall notify the account-holding institution of the period
during which the account-holding institution must honor debits to the
account in accordance with Sec. 1005.11(d)(2)(ii). If an overdraft
results, the service provider shall promptly reimburse the account-
holding institution in the amount of the overdraft.
(c) Compliance by account-holding institution. The account-holding
institution need not comply with the requirements of the Act and this
part with respect to electronic fund transfers initiated through the
service provider except as follows:
(1) Documentation. The account-holding institution shall provide a
periodic statement that describes each electronic fund transfer
initiated by the consumer with the access device issued by the service
provider. The account-holding institution has no liability for the
failure to comply with this requirement if the service provider did not
provide the necessary information; and
(2) Error resolution. Upon request, the account-holding institution
shall provide information or copies of documents needed by the service
provider to investigate errors or to furnish copies of documents to the
consumer. The account-holding institution shall also honor debits to
the account in accordance with Sec. 1005.11(d)(2)(ii).
Sec. 1005.15 Electronic fund transfer of government benefits.
(a) Government agency subject to regulation. (1) A government
agency is deemed to be a financial institution for purposes of the Act
and this part if directly or indirectly it issues an access device to a
consumer for use in initiating an electronic fund transfer of
government benefits from an account, other than needs-tested benefits
in a program established under state or local law or administered by a
state or local agency. The agency shall comply with all applicable
requirements of the Act and this part, except as provided in this
section.
(2) For purposes of this section, the term ``account'' means an
account established by a government agency for distributing government
benefits to a consumer electronically, such as through automated teller
machines or point-of-sale terminals, but does not include an account
for distributing needs-tested benefits in a program established under
state or local law or administered by a state or local agency.
(b) Issuance of access devices. For purposes of this section, a
consumer is deemed to request an access device when the consumer
applies for government benefits that the agency disburses or will
disburse by means of an electronic fund transfer. The agency shall
verify the identity of the consumer receiving the device by reasonable
means before the device is activated.
(c) Alternative to periodic statement. A government agency need not
furnish the periodic statement required by Sec. 1005.9(b) if the
agency makes available to the consumer:
(1) The consumer's account balance, through a readily available
telephone line and at a terminal (such as by providing balance
information at a balance-inquiry terminal or providing it, routinely or
upon request, on a terminal receipt at the time of an electronic fund
transfer); and
(2) A written history of the consumer's account transactions that
is provided promptly in response to an oral or written request and that
covers at least 60 days preceding the date of a request by the
consumer.
(d) Modified requirements. A government agency that does not
furnish periodic statements, in accordance with paragraph (c) of this
section, shall comply with the following special rules:
(1) Initial disclosures. The agency shall modify the disclosures
under Sec. 1005.7(b) by disclosing:
(i) Account balance. The means by which the consumer may obtain
information concerning the account balance, including a telephone
number. The agency provides a notice substantially similar to the
notice contained in paragraph A-5 in appendix A of this part.
(ii) Written account history. A summary of the consumer's right to
receive a written account history upon request, in place of the
periodic statement required by Sec. 1005.7(b)(6), and the telephone
number to call to request an account history. This disclosure may be
made by providing a notice substantially similar to the notice
contained in paragraph A-5 in appendix A of this part.
(iii) Error resolution. A notice concerning error resolution that
is substantially similar to the notice contained in paragraph A-5 in
appendix A of this part, in place of the notice required by Sec.
1005.7(b)(10).
(2) Annual error resolution notice. The agency shall provide an
annual notice concerning error resolution that is substantially similar
to the notice contained in paragraph A-5 in appendix A, in place of the
notice required by Sec. 1005.8(b).
(3) Limitations on liability. For purposes of Sec. 1005.6(b)(3),
regarding a 60-day period for reporting any unauthorized transfer that
appears on a periodic statement, the 60-day period shall begin with
transmittal of a written account history or other account information
provided to the consumer under paragraph (c) of this section.
(4) Error resolution. The agency shall comply with the requirements
of Sec. 1005.11 of this part in response to an oral or written notice
of an error from the consumer that is received no later than 60 days
after the consumer obtains the written account history or other account
information, under paragraph (c) of this section, in which the error is
first reflected.
Sec. 1005.16 Disclosures at automated teller machines.
(a) Definition. ``Automated teller machine operator'' means any
person that operates an automated teller machine at which a consumer
initiates an electronic fund transfer or a balance inquiry and that
does not hold the account to or from which the transfer is made, or
about which an inquiry is made.
(b) General. An automated teller machine operator that imposes a
fee on a consumer for initiating an electronic fund transfer or a
balance inquiry shall:
(1) Provide notice that a fee will be imposed for providing
electronic fund transfer services or a balance inquiry; and
(2) Disclose the amount of the fee.
(c) Notice requirement. To meet the requirements of paragraph (b)
of this section, an automated teller machine operator must comply with
the following:
(1) On the machine. Post in a prominent and conspicuous location on
or at the automated teller machine a notice that:
(i) A fee will be imposed for providing electronic fund transfer
services or for a balance inquiry; or
(ii) A fee may be imposed for providing electronic fund transfer
[[Page 81031]]
services or for a balance inquiry, but the notice in this paragraph
(c)(1)(ii) may be substituted for the notice in paragraph (c)(1)(i) of
this section only if there are circumstances under which a fee will not
be imposed for such services; and
(2) Screen or paper notice. Provide the notice required by
paragraphs (b)(1) and (2) of this section either by showing it on the
screen of the automated teller machine or by providing it on paper,
before the consumer is committed to paying a fee.
(d) Imposition of fee. An automated teller machine operator may
impose a fee on a consumer for initiating an electronic fund transfer
or a balance inquiry only if
(1) The consumer is provided the notices required under paragraph
(c) of this section, and
(2) The consumer elects to continue the transaction or inquiry
after receiving such notices.
Sec. 1005.17 Requirements for overdraft services.
(a) Definition. For purposes of this section, the term ``overdraft
service'' means a service under which a financial institution assesses
a fee or charge on a consumer's account held by the institution for
paying a transaction (including a check or other item) when the
consumer has insufficient or unavailable funds in the account. The term
``overdraft service'' does not include any payment of overdrafts
pursuant to:
(1) A line of credit subject to Regulation Z (12 CFR part 1026),
including transfers from a credit card account, home equity line of
credit, or overdraft line of credit;
(2) A service that transfers funds from another account held
individually or jointly by a consumer, such as a savings account; or
(3) A line of credit or other transaction exempt from Regulation Z
(12 CFR part 1026) pursuant to 12 CFR 1026.3(d).
(b) Opt-in requirement. (1) General. Except as provided under
paragraph (c) of this section, a financial institution holding a
consumer's account shall not assess a fee or charge on a consumer's
account for paying an ATM or one-time debit card transaction pursuant
to the institution's overdraft service, unless the institution:
(i) Provides the consumer with a notice in writing, or if the
consumer agrees, electronically, segregated from all other information,
describing the institution's overdraft service;
(ii) Provides a reasonable opportunity for the consumer to
affirmatively consent, or opt in, to the service for ATM and one-time
debit card transactions;
(iii) Obtains the consumer's affirmative consent, or opt-in, to the
institution's payment of ATM or one-time debit card transactions; and
(iv) Provides the consumer with confirmation of the consumer's
consent in writing, or if the consumer agrees, electronically, which
includes a statement informing the consumer of the right to revoke such
consent.
(2) Conditioning payment of other overdrafts on consumer's
affirmative consent. A financial institution shall not:
(i) Condition the payment of any overdrafts for checks, ACH
transactions, and other types of transactions on the consumer
affirmatively consenting to the institution's payment of ATM and one-
time debit card transactions pursuant to the institution's overdraft
service; or
(ii) Decline to pay checks, ACH transactions, and other types of
transactions that overdraw the consumer's account because the consumer
has not affirmatively consented to the institution's overdraft service
for ATM and one-time debit card transactions.
(3) Same account terms, conditions, and features. A financial
institution shall provide to consumers who do not affirmatively consent
to the institution's overdraft service for ATM and one-time debit card
transactions the same account terms, conditions, and features that it
provides to consumers who affirmatively consent, except for the
overdraft service for ATM and one-time debit card transactions.
(c) Timing. (1) Existing account holders. For accounts opened prior
to July 1, 2010, the financial institution must not assess any fees or
charges on a consumer's account on or after August 15, 2010, for paying
an ATM or one-time debit card transaction pursuant to the overdraft
service, unless the institution has complied with Sec. 1005.17(b)(1)
and obtained the consumer's affirmative consent.
(2) New account holders. For accounts opened on or after July 1,
2010, the financial institution must comply with Sec. 1005.17(b)(1)
and obtain the consumer's affirmative consent before the institution
assesses any fee or charge on the consumer's account for paying an ATM
or one-time debit card transaction pursuant to the institution's
overdraft service.
(d) Content and format. The notice required by paragraph (b)(1)(i)
of this section shall be substantially similar to Model Form A-9 set
forth in Appendix A of this part, include all applicable items in this
paragraph, and may not contain any information not specified in or
otherwise permitted by this paragraph.
(1) Overdraft service. A brief description of the financial
institution's overdraft service and the types of transactions for which
a fee or charge for paying an overdraft may be imposed, including ATM
and one-time debit card transactions.
(2) Fees imposed. The dollar amount of any fees or charges assessed
by the financial institution for paying an ATM or one-time debit card
transaction pursuant to the institution's overdraft service, including
any daily or other overdraft fees. If the amount of the fee is
determined on the basis of the number of times the consumer has
overdrawn the account, the amount of the overdraft, or other factors,
the institution must disclose the maximum fee that may be imposed.
(3) Limits on fees charged. The maximum number of overdraft fees or
charges that may be assessed per day, or, if applicable, that there is
no limit.
(4) Disclosure of opt-in right. An explanation of the consumer's
right to affirmatively consent to the financial institution's payment
of overdrafts for ATM and one-time debit card transactions pursuant to
the institution's overdraft service, including the methods by which the
consumer may consent to the service; and
(5) Alternative plans for covering overdrafts. If the institution
offers a line of credit subject to Regulation Z (12 CFR part 1026) or a
service that transfers funds from another account of the consumer held
at the institution to cover overdrafts, the institution must state that
fact. An institution may, but is not required to, list additional
alternatives for the payment of overdrafts.
(6) Permitted modifications and additional content. If applicable,
the institution may modify the content required by Sec. 1005.17(d) to
indicate that the consumer has the right to opt into, or opt out of,
the payment of overdrafts under the institution's overdraft service for
other types of transactions, such as checks, ACH transactions, or
automatic bill payments; to provide a means for the consumer to
exercise this choice; and to disclose the associated returned item fee
and that additional merchant fees may apply. The institution may also
disclose the consumer's right to revoke consent. For notices provided
to consumers who have opened accounts prior to July 1, 2010, the
financial institution may describe the institution's overdraft service
with respect to ATM and one-time debit card
[[Page 81032]]
transactions with a statement such as ``After August 15, 2010, we will
not authorize and pay overdrafts for the following types of
transactions unless you ask us to (see below).''
(e) Joint relationships. If two or more consumers jointly hold an
account, the financial institution shall treat the affirmative consent
of any of the joint consumers as affirmative consent for that account.
Similarly, the financial institution shall treat a revocation of
affirmative consent by any of the joint consumers as revocation of
consent for that account.
(f) Continuing right to opt in or to revoke the opt-in. A consumer
may affirmatively consent to the financial institution's overdraft
service at any time in the manner described in the notice required by
paragraph (b)(1)(i) of this section. A consumer may also revoke consent
at any time in the manner made available to the consumer for providing
consent. A financial institution must implement a consumer's revocation
of consent as soon as reasonably practicable.
(g) Duration and revocation of opt-in. A consumer's affirmative
consent to the institution's overdraft service is effective until
revoked by the consumer, or unless the financial institution terminates
the service.
Sec. 1005.18 Requirements for financial institutions offering payroll
card accounts.
(a) Coverage. A financial institution shall comply with all
applicable requirements of the Act and this part with respect to
payroll card accounts except as provided in this section.
(b) Alternative to periodic statements. (1) A financial institution
need not furnish periodic statements required by Sec. 1005.9(b) if the
institution makes available to the consumer:
(i) The consumer's account balance, through a readily available
telephone line;
(ii) An electronic history of the consumer's account transactions,
such as through a Web site, that covers at least 60 days preceding the
date the consumer electronically accesses the account; and
(iii) A written history of the consumer's account transactions that
is provided promptly in response to an oral or written request and that
covers at least 60 days preceding the date the financial institution
receives the consumer's request.
(2) The history of account transactions provided under paragraphs
(b)(1)(ii) and (iii) of this section must include the information set
forth in Sec. 1005.9(b).
(c) Modified requirements. A financial institution that provides
information under paragraph (b) of this section, shall comply with the
following:
(1) Initial disclosures. The financial institution shall modify the
disclosures under Sec. 1005.7(b) by disclosing:
(i) Account information. A telephone number that the consumer may
call to obtain the account balance, the means by which the consumer can
obtain an electronic account history, such as the address of a Web
site, and a summary of the consumer's right to receive a written
account history upon request (in place of the summary of the right to
receive a periodic statement required by Sec. 1005.7(b)(6)), including
a telephone number to call to request a history. The disclosure
required by this paragraph (c)(1)(i) may be made by providing a notice
substantially similar to the notice contained in paragraph A-7(a) in
appendix A of this part.
(ii) Error resolution. A notice concerning error resolution that is
substantially similar to the notice contained in paragraph A-7(b) in
appendix A of this part, in place of the notice required by Sec.
1005.7(b)(10).
(2) Annual error resolution notice. The financial institution shall
provide an annual notice concerning error resolution that is
substantially similar to the notice contained in paragraph A-7(b) in
appendix A of this part, in place of the notice required by Sec.
1005.8(b). Alternatively, a financial institution may include on or
with each electronic and written history provided in accordance with
Sec. 1005.18(b)(1), a notice substantially similar to the abbreviated
notice for periodic statements contained in paragraph A-3(b) in
appendix A of this part, modified as necessary to reflect the error
resolution provisions set forth in this section.
(3) Limitations on liability. (i) For purposes of Sec.
1005.6(b)(3), the 60-day period for reporting any unauthorized transfer
shall begin on the earlier of:
(A) The date the consumer electronically accesses the consumer's
account under paragraph (b)(1)(ii) of this section, provided that the
electronic history made available to the consumer reflects the
transfer; or
(B) The date the financial institution sends a written history of
the consumer's account transactions requested by the consumer under
paragraph (b)(1)(iii) of this section in which the unauthorized
transfer is first reflected.
(ii) A financial institution may comply with paragraph (c)(3)(i) of
this section by limiting the consumer's liability for an unauthorized
transfer as provided under Sec. 1005.6(b)(3) for any transfer reported
by the consumer within 120 days after the transfer was credited or
debited to the consumer's account.
(4) Error resolution. (i) The financial institution shall comply
with the requirements of Sec. 1005.11 in response to an oral or
written notice of an error from the consumer that is received by the
earlier of:
(A) Sixty days after the date the consumer electronically accesses
the consumer's account under paragraph (b)(1)(ii) of this section,
provided that the electronic history made available to the consumer
reflects the alleged error; or
(B) Sixty days after the date the financial institution sends a
written history of the consumer's account transactions requested by the
consumer under paragraph (b)(1)(iii) of this section in which the
alleged error is first reflected.
(ii) In lieu of following the procedures in paragraph (c)(4)(i) of
this section, a financial institution complies with the requirements
for resolving errors in Sec. 1005.11 if it investigates any oral or
written notice of an error from the consumer that is received by the
institution within 120 days after the transfer allegedly in error was
credited or debited to the consumer's account.
Sec. 1005.20 Requirements for gift cards and gift certificates.
(a) Definitions. For purposes of this section, except as excluded
under paragraph (b), the following definitions apply:
(1) ``Gift certificate'' means a card, code, or other device that
is:
(i) Issued on a prepaid basis primarily for personal, family, or
household purposes to a consumer in a specified amount that may not be
increased or reloaded in exchange for payment; and
(ii) Redeemable upon presentation at a single merchant or an
affiliated group of merchants for goods or services.
(2) ``Store gift card'' means a card, code, or other device that
is:
(i) Issued on a prepaid basis primarily for personal, family, or
household purposes to a consumer in a specified amount, whether or not
that amount may be increased or reloaded, in exchange for payment; and
(ii) Redeemable upon presentation at a single merchant or an
affiliated group of merchants for goods or services.
(3) ``General-use prepaid card'' means a card, code, or other
device that is:
(i) Issued on a prepaid basis primarily for personal, family, or
household purposes to a consumer in a specified amount, whether or not
that amount may be increased or reloaded, in exchange for payment; and
[[Page 81033]]
(ii) Redeemable upon presentation at multiple, unaffiliated
merchants for goods or services, or usable at automated teller
machines.
(4) ``Loyalty, award, or promotional gift card'' means a card,
code, or other device that:
(i) Is issued on a prepaid basis primarily for personal, family, or
household purposes to a consumer in connection with a loyalty, award,
or promotional program;
(ii) Is redeemable upon presentation at one or more merchants for
goods or services, or usable at automated teller machines; and
(iii) Sets forth the following disclosures, as applicable:
(A) A statement indicating that the card, code, or other device is
issued for loyalty, award, or promotional purposes, which must be
included on the front of the card, code, or other device;
(B) The expiration date for the underlying funds, which must be
included on the front of the card, code, or other device;
(C) The amount of any fees that may be imposed in connection with
the card, code, or other device, and the conditions under which they
may be imposed, which must be provided on or with the card, code, or
other device; and
(D) A toll-free telephone number and, if one is maintained, a Web
site, that a consumer may use to obtain fee information, which must be
included on the card, code, or other device.
(5) Dormancy or inactivity fee. The terms ``dormancy fee'' and
``inactivity fee'' mean a fee for non-use of or inactivity on a gift
certificate, store gift card, or general-use prepaid card.
(6) Service fee. The term ``service fee'' means a periodic fee for
holding or use of a gift certificate, store gift card, or general-use
prepaid card. A periodic fee includes any fee that may be imposed on a
gift certificate, store gift card, or general-use prepaid card from
time to time for holding or using the certificate or card.
(7) Activity. The term ``activity'' means any action that results
in an increase or decrease of the funds underlying a certificate or
card, other than the imposition of a fee, or an adjustment due to an
error or a reversal of a prior transaction.
(b) Exclusions. The terms ``gift certificate,'' ``store gift
card,'' and ``general-use prepaid card'', as defined in paragraph (a)
of this section, do not include any card, code, or other device that
is:
(1) Useable solely for telephone services;
(2) Reloadable and not marketed or labeled as a gift card or gift
certificate. For purposes of this paragraph (b)(2), the term
``reloadable'' includes a temporary non-reloadable card issued solely
in connection with a reloadable card, code, or other device;
(3) A loyalty, award, or promotional gift card;
(4) Not marketed to the general public;
(5) Issued in paper form only; or
(6) Redeemable solely for admission to events or venues at a
particular location or group of affiliated locations, or to obtain
goods or services in conjunction with admission to such events or
venues, either at the event or venue or at specific locations
affiliated with and in geographic proximity to the event or venue.
(c) Form of disclosures (1) Clear and conspicuous. Disclosures made
under this section must be clear and conspicuous. The disclosures may
contain commonly accepted or readily understandable abbreviations or
symbols.
(2) Format. Disclosures made under this section generally must be
provided to the consumer in written or electronic form. Except for the
disclosures in paragraphs (c)(3) and (h)(2) of this section, written
and electronic disclosures made under this section must be in a
retainable form. Only disclosures provided under paragraphs (c)(3) and
(h)(2) may be given orally.
(3) Disclosures prior to purchase. Before a gift certificate, store
gift card, or general-use prepaid card is purchased, a person that
issues or sells such certificate or card must disclose to the consumer
the information required by paragraphs (d)(2), (e)(3), and (f)(1) of
this section. The fees and terms and conditions of expiration that are
required to be disclosed prior to purchase may not be changed after
purchase.
(4) Disclosures on the certificate or card. Disclosures required by
paragraphs (a)(4)(iii), (d)(2), (e)(3), and (f)(2) of this section must
be made on the certificate or card, or in the case of a loyalty, award,
or promotional gift card, on the card, code, or other device. A
disclosure made in an accompanying terms and conditions document, on
packaging surrounding a certificate or card, or on a sticker or other
label affixed to the certificate or card does not constitute a
disclosure on the certificate or card. For an electronic certificate or
card, disclosures must be provided electronically on the certificate or
card provided to the consumer. An issuer that provides a code or
confirmation to a consumer orally must provide to the consumer a
written or electronic copy of the code or confirmation promptly, and
the applicable disclosures must be provided on the written copy of the
code or confirmation.
(d) Prohibition on imposition of fees or charges. No person may
impose a dormancy, inactivity, or service fee with respect to a gift
certificate, store gift card, or general-use prepaid card, unless:
(1) There has been no activity with respect to the certificate or
card, in the one-year period ending on the date on which the fee is
imposed;
(2) The following are stated, as applicable, clearly and
conspicuously on the gift certificate, store gift card, or general-use
prepaid card:
(i) The amount of any dormancy, inactivity, or service fee that may
be charged;
(ii) How often such fee may be assessed; and
(iii) That such fee may be assessed for inactivity; and
(3) Not more than one dormancy, inactivity, or service fee is
imposed in any given calendar month.
(e) Prohibition on sale of gift certificates or cards with
expiration dates. No person may sell or issue a gift certificate, store
gift card, or general-use prepaid card with an expiration date, unless:
(1) The person has established policies and procedures to provide
consumers with a reasonable opportunity to purchase a certificate or
card with at least five years remaining until the certificate or card
expiration date;
(2) The expiration date for the underlying funds is at least the
later of:
(i) Five years after the date the gift certificate was initially
issued, or the date on which funds were last loaded to a store gift
card or general-use prepaid card; or
(ii) The certificate or card expiration date, if any;
(3) The following disclosures are provided on the certificate or
card, as applicable:
(i) The expiration date for the underlying funds or, if the
underlying funds do not expire, that fact;
(ii) A toll-free telephone number and, if one is maintained, a Web
site that a consumer may use to obtain a replacement certificate or
card after the certificate or card expires if the underlying funds may
be available; and
(iii) Except where a non-reloadable certificate or card bears an
expiration date that is at least seven years from the date of
manufacture, a statement, disclosed with equal prominence and in close
proximity to the certificate or card expiration date, that:
[[Page 81034]]
(A) The certificate or card expires, but the underlying funds
either do not expire or expire later than the certificate or card, and;
(B) The consumer may contact the issuer for a replacement card; and
(4) No fee or charge is imposed on the cardholder for replacing the
gift certificate, store gift card, or general-use prepaid card or for
providing the certificate or card holder with the remaining balance in
some other manner prior to the funds expiration date, unless such
certificate or card has been lost or stolen.
(f) Additional disclosure requirements for gift certificates or
cards. The following disclosures must be provided in connection with a
gift certificate, store gift card, or general-use prepaid card, as
applicable:
(1) Fee disclosures. For each type of fee that may be imposed in
connection with the certificate or card (other than a dormancy,
inactivity, or service fee subject to the disclosure requirements under
paragraph (d)(2) of this section), the following information must be
provided on or with the certificate or card:
(i) The type of fee;
(ii) The amount of the fee (or an explanation of how the fee will
be determined); and
(iii) The conditions under which the fee may be imposed.
(2) Telephone number for fee information. A toll-free telephone
number and, if one is maintained, a Web site, that a consumer may use
to obtain information about fees described in paragraphs (d)(2) and
(f)(1) of this section must be disclosed on the certificate or card.
(g) Compliance dates. (1) Effective date for gift certificates,
store gift cards, and general-use prepaid cards. Except as provided in
paragraph (h) of this section, the requirements of this section apply
to any gift certificate, store gift card, or general-use prepaid card
sold to a consumer on or after August 22, 2010, or provided to a
consumer as a replacement for such certificate or card.
(2) Effective date for loyalty, award, or promotional gift cards.
The requirements in paragraph (a)(4)(iii) of this section apply to any
card, code, or other device provided to a consumer in connection with a
loyalty, award, or promotional program if the period of eligibility for
such program began on or after August 22, 2010.
(h) Temporary exemption. (1) Delayed mandatory compliance date. For
any gift certificate, store gift card, or general-use prepaid card
produced prior to April 1, 2010, the mandatory compliance date of the
requirements of paragraphs (c)(3), (d)(2), (e)(1), (e)(3), and (f) of
this section is January 31, 2011, provided that an issuer of such
certificate or card:
(i) Complies with all other provisions of this section;
(ii) Does not impose an expiration date with respect to the funds
underlying such certificate or card;
(iii) At the consumer's request, replaces such certificate or card
if it has funds remaining at no cost to the consumer; and
(iv) Satisfies the requirements of paragraph (h)(2) of this
section.
(2) Additional disclosures. Issuers relying on the delayed
effective date in Sec. 1005.20(h)(1) must disclose through in-store
signage, messages during customer service calls, Web sites, and general
advertising, that:
(i) The underlying funds of such certificate or card do not expire;
(ii) Consumers holding such certificate or card have a right to a
free replacement certificate or card, which must be accompanied by the
packaging and materials typically associated with such certificate or
card; and
(iii) Any dormancy, inactivity, or service fee for such certificate
or card that might otherwise be charged will not be charged if such
fees do not comply with section 916 of the Act.
(3) Expiration of additional disclosure requirements. The
disclosures in paragraph (h)(2) of this section:
(i) Are not required to be provided on or after January 31, 2011,
with respect to in-store signage and general advertising.
(ii) Are not required to be provided on or after January 31, 2013,
with respect to messages during customer service calls and Web sites.
Appendix A to Part 1005--Model Disclosure Clauses and Forms
A-1--Model Clauses for Unsolicited Issuance (Sec. 1005.5(b)(2))
A-2--Model Clauses for Initial Disclosures (Sec. 1005.7(b))
A-3--Model Forms for Error Resolution Notice (Sec. Sec.
1005.7(b)(10) and 1005.8(b))
A-4--Model Form for Service-Providing Institutions (Sec.
1005.14(b)(1)(ii))
A-5--Model Forms for Government Agencies (Sec. 1005.15(d)(1) and
(2))
A-6--Model Clauses for Authorizing One-Time Electronic Fund
Transfers Using Information From a Check (Sec. 1005.3(b)(2))
A-7--Model Clauses for Financial Institutions Offering Payroll Card
Accounts (Sec. 1005.18(c))
A-8--Model Clause for Electronic Collection of Returned Item Fees
(Sec. 1005.3(b)(3))
A-9--Model Consent Form for Overdraft Services (Sec. 1005.17)
A-1--Model Clauses for Unsolicited Issuance (Sec. 1005.5(b)(2))
(a) Accounts using cards. You cannot use the enclosed card to
transfer money into or out of your account until we have validated
it. If you do not want to use the card, please (destroy it at once
by cutting it in half).
[Financial institution may add validation instructions here.]
(b) Accounts using codes. You cannot use the enclosed code to
transfer money into or out of your account until we have validated
it. If you do not want to use the code, please (destroy this notice
at once).
[Financial institution may add validation instructions here.]
A-2--Model Clauses for Initial Disclosures (Sec. 1005.7(b))
(a) Consumer Liability (Sec. 1005.7(b)(1)).
(Tell us AT ONCE if you believe your [card] [code] has been lost
or stolen, or if you believe that an electronic fund transfer has
been made without your permission using information from your check.
Telephoning is the best way of keeping your possible losses down.
You could lose all the money in your account (plus your maximum
overdraft line of credit). If you tell us within 2 business days
after you learn of the loss or theft of your [card] [code], you can
lose no more than $50 if someone used your [card][code] without your
permission.)
If you do NOT tell us within 2 business days after you learn of
the loss or theft of your [card] [code], and we can prove we could
have stopped someone from using your [card] [code] without your
permission if you had told us, you could lose as much as $500.
Also, if your statement shows transfers that you did not make,
including those made by card, code or other means, tell us at once.
If you do not tell us within 60 days after the statement was mailed
to you, you may not get back any money you lost after the 60 days if
we can prove that we could have stopped someone from taking the
money if you had told us in time. If a good reason (such as a long
trip or a hospital stay) kept you from telling us, we will extend
the time periods.
(b) Contact in event of unauthorized transfer (Sec.
1005.7(b)(2)). If you believe your [card] [code] has been lost or
stolen, call: [Telephone number] or write: [Name of person or office
to be notified] [Address].
You should also call the number or write to the address listed
above if you believe a transfer has been made using the information
from your check without your permission.
(c) Business days (Sec. 1005.7(b)(3)). For purposes of these
disclosures, our business days are (Monday through Friday) (Monday
through Saturday) (any day including Saturdays and Sundays).
Holidays are (not) included.
(d) Transfer types and limitations (Sec. 1005.7(b)(4)) (1)
Account access. You may use your [card][code] to:
(i) Withdraw cash from your [checking] [or] [savings] account.
(ii) Make deposits to your [checking] [or] [savings] account.
(iii) Transfer funds between your checking and savings accounts
whenever you request.
(iv) Pay for purchases at places that have agreed to accept the
[card] [code].
[[Page 81035]]
(v) Pay bills directly [by telephone] from your [checking] [or]
[savings] account in the amounts and on the days you request.
Some of these services may not be available at all terminals.
(2) Electronic check conversion. You may authorize a merchant or
other payee to make a one-time electronic payment from your checking
account using information from your check to:
(i) Pay for purchases.
(ii) Pay bills.
(3) Limitations on frequency of transfers.(i) You may make only
[insert number, e.g., 3] cash withdrawals from our terminals each
[insert time period, e.g., week].
(ii) You can use your telephone bill-payment service to pay
[insert number] bills each [insert time period] [telephone call].
(iii) You can use our point-of-sale transfer service for [insert
number] transactions each [insert time period].
(iv) For security reasons, there are limits on the number of
transfers you can make using our [terminals] [telephone bill-payment
service] [point-of-sale transfer service].
(4) Limitations on dollar amounts of transfers (i) You may
withdraw up to [insert dollar amount] from our terminals each
[insert time period] time you use the [card] [code].
(ii) You may buy up to [insert dollar amount] worth of goods or
services each [insert time period] time you use the [card] [code] in
our point-of-sale transfer service.
(e) Fees (Sec. 1005.7(b)(5)) (1) Per transfer charge. We will
charge you [insert dollar amount] for each transfer you make using
our [automated teller machines] [telephone bill-payment service]
[point-of-sale transfer service].
(2) Fixed charge. We will charge you [insert dollar amount] each
[insert time period] for our [automated teller machine service]
[telephone bill-payment service] [point-of-sale transfer service].
(3) Average or minimum balance charge. We will only charge you
for using our [automated teller machines] [telephone bill-payment
service] [point-of-sale transfer service] if the [average] [minimum]
balance in your [checking account] [savings account] [accounts]
falls below [insert dollar amount]. If it does, we will charge you
[insert dollar amount] each [transfer] [insert time period].
(f) Confidentiality (Sec. 1005.7(b)(9)). We will disclose
information to third parties about your account or the transfers you
make:
(i) Where it is necessary for completing transfers, or
(ii) In order to verify the existence and condition of your
account for a third party, such as a credit bureau or merchant, or
(iii) In order to comply with government agency or court orders,
or
(iv) If you give us your written permission.
(g) Documentation (Sec. 1005.7(b)(6)) (1) Terminal transfers.
You can get a receipt at the time you make any transfer to or from
your account using one of our [automated teller machines] [or]
[point-of-sale terminals].
(2) Preauthorized credits. If you have arranged to have direct
deposits made to your account at least once every 60 days from the
same person or company, (we will let you know if the deposit is
[not] made.) [the person or company making the deposit will tell you
every time they send us the money] [you can call us at (insert
telephone number) to find out whether or not the deposit has been
made].
(3) Periodic statements. You will get a [monthly] [quarterly]
account statement (unless there are no transfers in a particular
month. In any case you will get the statement at least quarterly).
(4) Passbook account where the only possible electronic fund
transfers are preauthorized credits. If you bring your passbook to
us, we will record any electronic deposits that were made to your
account since the last time you brought in your passbook.
(h) Preauthorized payments (Sec. 1005.7(b) (6), (7) and (8);
Sec. 1005.10(d)) (1) Right to stop payment and procedure for doing
so. If you have told us in advance to make regular payments out of
your account, you can stop any of these payments. Here's how:
Call us at [insert telephone number], or write us at [insert
address], in time for us to receive your request 3 business days or
more before the payment is scheduled to be made. If you call, we may
also require you to put your request in writing and get it to us
within 14 days after you call. (We will charge you [insert amount]
for each stop-payment order you give.)
(2) Notice of varying amounts. If these regular payments may
vary in amount, [we] [the person you are going to pay] will tell
you, 10 days before each payment, when it will be made and how much
it will be. (You may choose instead to get this notice only when the
payment would differ by more than a certain amount from the previous
payment, or when the amount would fall outside certain limits that
you set.)
(3) Liability for failure to stop payment of preauthorized
transfer. If you order us to stop one of these payments 3 business
days or more before the transfer is scheduled, and we do not do so,
we will be liable for your losses or damages.
(i) Financial institution's liability (Sec. 1005.7(b)(8)). If
we do not complete a transfer to or from your account on time or in
the correct amount according to our agreement with you, we will be
liable for your losses or damages. However, there are some
exceptions. We will not be liable, for instance:
(1) If, through no fault of ours, you do not have enough money
in your account to make the transfer.
(2) If the transfer would go over the credit limit on your
overdraft line.
(3) If the automated teller machine where you are making the
transfer does not have enough cash.
(4) If the [terminal] [system] was not working properly and you
knew about the breakdown when you started the transfer.
(5) If circumstances beyond our control (such as fire or flood)
prevent the transfer, despite reasonable precautions that we have
taken.
(6) There may be other exceptions stated in our agreement with
you.
(j) ATM fees (Sec. 1005.7(b)(11)). When you use an ATM not
owned by us, you may be charged a fee by the ATM operator [or any
network used] (and you may be charged a fee for a balance inquiry
even if you do not complete a fund transfer).
A-3--Model Forms for Error Resolution Notice (Sec. Sec. 1005.7(b)(10)
and 1005.8(b))
(a) Initial and annual error resolution notice (Sec. Sec.
1005.7(b)(10) and 1005.8(b)).
In Case of Errors or Questions About Your Electronic Transfers
Telephone us at [insert telephone number] Write us at [insert
address] [or email us at [insert email address]] as soon as you can,
if you think your statement or receipt is wrong or if you need more
information about a transfer listed on the statement or receipt. We
must hear from you no later than 60 days after we sent the FIRST
statement on which the problem or error appeared.
(1) Tell us your name and account number (if any).
(2) Describe the error or the transfer you are unsure about, and
explain as clearly as you can why you believe it is an error or why
you need more information.
(3) Tell us the dollar amount of the suspected error.
If you tell us orally, we may require that you send us your
complaint or question in writing within 10 business days.
We will determine whether an error occurred within 10 business
days after we hear from you and will correct any error promptly. If
we need more time, however, we may take up to 45 days to investigate
your complaint or question. If we decide to do this, we will credit
your account within 10 business days for the amount you think is in
error, so that you will have the use of the money during the time it
takes us to complete our investigation. If we ask you to put your
complaint or question in writing and we do not receive it within 10
business days, we may not credit your account.
For errors involving new accounts, point-of-sale, or foreign-
initiated transactions, we may take up to 90 days to investigate
your complaint or question. For new accounts, we may take up to 20
business days to credit your account for the amount you think is in
error.
We will tell you the results within three business days after
completing our investigation. If we decide that there was no error,
we will send you a written explanation. You may ask for copies of
the documents that we used in our investigation.
(b) Error resolution notice on periodic statements (Sec.
1005.8(b)).
In Case of Errors or Questions About Your Electronic Transfers
Telephone us at [insert telephone number] or Write us at [insert
address] as soon as you can, if you think your statement or receipt
is wrong or if you need more information about a transfer on the
statement or receipt. We must hear from you no later than 60 days
after we sent you the FIRST statement on which the error or problem
appeared.
(1) Tell us your name and account number (if any).
(2) Describe the error or the transfer you are unsure about, and
explain as clearly as you can why you believe it is an error or why
you need more information.
(3) Tell us the dollar amount of the suspected error.
[[Page 81036]]
We will investigate your complaint and will correct any error
promptly. If we take more than 10 business days to do this, we will
credit your account for the amount you think is in error, so that
you will have the use of the money during the time it takes us to
complete our investigation.
A-4--Model Form for Service-Providing Institutions (Sec.
1005.14(b)(1)(ii))
ALL QUESTIONS ABOUT TRANSACTIONS MADE WITH YOUR (NAME OF CARD)
CARD MUST BE DIRECTED TO US (NAME OF SERVICE PROVIDER), AND NOT TO
THE BANK OR OTHER FINANCIAL INSTITUTION WHERE YOU HAVE YOUR ACCOUNT.
We are responsible for the [name of service] service and for
resolving any errors in transactions made with your [name of card]
card.
We will not send you a periodic statement listing transactions
that you make using your [name of card] card. The transactions will
appear only on the statement issued by your bank or other financial
institution. SAVE THE RECEIPTS YOU ARE GIVEN WHEN YOU USE YOUR [NAME
OF CARD] CARD, AND CHECK THEM AGAINST THE ACCOUNT STATEMENT YOU
RECEIVE FROM YOUR BANK OR OTHER FINANCIAL INSTITUTION. If you have
any questions about one of these transactions, call or write us at
[telephone number and address] [the telephone number and address
indicated below].
IF YOUR [NAME OF CARD] CARD IS LOST OR STOLEN, NOTIFY US AT ONCE
by calling or writing to us at [telephone number and address].
A-5--Model Forms for Government Agencies (Sec. 1005.15(d)(1) and (2))
(a) Disclosure by government agencies of information about
obtaining account balances and account histories (Sec.
1005.15(d)(1)(i) and (ii)).
You may obtain information about the amount of benefits you have
remaining by calling [telephone number]. That information is also
available [on the receipt you get when you make a transfer with your
card at (an ATM)(a POS terminal)][when you make a balance inquiry at
an ATM][when you make a balance inquiry at specified locations].
You also have the right to receive a written summary of
transactions for the 60 days preceding your request by calling
[telephone number]. [Optional: Or you may request the summary by
contacting your caseworker.]
(b) Disclosure of error resolution procedures for government
agencies that do not provide periodic statements (Sec.
1005.15(d)(1)(iii) and (d)(2)).
In Case of Errors or Questions About Your Electronic Transfers
Telephone us at [telephone number] Write us at [insert address] [or
email us at [insert email address]] as soon as you can, if you think
an error has occurred in your [EBT][agency's name for program]
account. We must hear from you no later than 60 days after you learn
of the error. You will need to tell us:
Your name and [case] [file] number.
Why you believe there is an error, and the dollar
amount involved.
Approximately when the error took place.
If you tell us orally, we may require that you send us your
complaint or question in writing within 10 business days.
We will determine whether an error occurred within 10 business
days after we hear from you and will correct any error promptly. If
we need more time, however, we may take up to 45 days to investigate
your complaint or question. If we decide to do this, we will credit
your account within 10 business days for the amount you think is in
error, so that you will have the use of the money during the time it
takes us to complete our investigation. If we ask you to put your
complaint or question in writing and we do not receive it within 10
business days, we may not credit your account.
For errors involving new accounts, point-of-sale, or foreign-
initiated transactions, we may take up to 90 days to investigate
your complaint or question. For new accounts, we may take up to 20
business days to credit your account for the amount you think is in
error.
We will tell you the results within three business days after
completing our investigation. If we decide that there was no error,
we will send you a written explanation. You may ask for copies of
the documents that we used in our investigation.
If you need more information about our error resolution
procedures, call us at [telephone number][the telephone number shown
above].
A-6--Model Clauses for Authorizing One-Time Electronic Fund Transfers
Using Information From a Check (Sec. 1005.3(b)(2))
(a) Notice About Electronic Check Conversion.
When you provide a check as payment, you authorize us either to
use information from your check to make a one-time electronic fund
transfer from your account or to process the payment as a check
transaction.
(b) Alternative Notice About Electronic Check Conversion
(Optional).
When you provide a check as payment, you authorize us to use
information from your check to make a one-time electronic fund
transfer from your account. In certain circumstances, such as for
technical or processing reasons, we may process your payment as a
check transaction.
[Specify other circumstances (at payee's option).]
(c) Notice For Providing Additional Information About Electronic
Check Conversion.
When we use information from your check to make an electronic
fund transfer, funds may be withdrawn from your account as soon as
the same day [you make] [we receive] your payment[, and you will not
receive your check back from your financial institution].
A-7--Model Clauses for Financial Institutions Offering Payroll Card
Accounts (Sec. 1005.18(c))
(a) Disclosure by financial institutions of information about
obtaining account information for payroll card accounts. Sec.
1005.18(c)(1).
You may obtain information about the amount of money you have
remaining in your payroll card account by calling [telephone
number]. This information, along with a 60-day history of account
transactions, is also available online at [internet address].
You also have the right to obtain a 60-day written history of
account transactions by calling [telephone number], or by writing us
at [address].
(b) Disclosure of error-resolution procedures for financial
institutions that provide alternative means of obtaining payroll
card account information (Sec. 1005.18(c)(1)(ii) and (c)(2)).
In Case of Errors or Questions About Your Payroll Card Account
Telephone us at [telephone number] or Write us at [address] [or
email us at [email address]] as soon as you can, if you think an
error has occurred in your payroll card account. We must allow you
to report an error until 60 days after the earlier of the date you
electronically access your account, if the error could be viewed in
your electronic history, or the date we sent the FIRST written
history on which the error appeared. You may request a written
history of your transactions at any time by calling us at [telephone
number] or writing us at [address]. You will need to tell us:
Your name and [payroll card account] number.
Why you believe there is an error, and the dollar amount
involved.
Approximately when the error took place.
If you tell us orally, we may require that you send us your
complaint or question in writing within 10 business days.
We will determine whether an error occurred within 10 business
days after we hear from you and will correct any error promptly. If
we need more time, however, we may take up to 45 days to investigate
your complaint or question. If we decide to do this, we will credit
your account within 10 business days for the amount you think is in
error, so that you will have the money during the time it takes us
to complete our investigation. If we ask you to put your complaint
or question in writing and we do not receive it within 10 business
days, we may not credit your account.
For errors involving new accounts, point-of-sale, or foreign-
initiated transactions, we may take up to 90 days to investigate
your complaint or question. For new accounts, we may take up to 20
business days to credit your account for the amount you think is in
error.
We will tell you the results within three business days after
completing our investigation. If we decide that there was no error,
we will send you a written explanation.
You may ask for copies of the documents that we used in our
investigation.
If you need more information about our error-resolution
procedures, call us at [telephone number] [the telephone number
shown above] [or visit [internet address]].
A-8--Model Clause for Electronic Collection of Returned Item Fees
(Sec. 1005.3(b)(3))
If your payment is returned unpaid, you authorize [us/name of
person collecting the fee electronically] to make a one-time
electronic fund transfer from your account to collect a fee of [$--
------]. [If your payment
[[Page 81037]]
is returned unpaid, you authorize [us/name of person collecting the
fee electronically] to make a one-time electronic fund transfer from
your account to collect a fee. The fee will be determined [by]/[as
follows]: [--------].]
[GRAPHIC] [TIFF OMITTED] TR27DE11.000
Appendix B to Part 1005--[Reserved]
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.
Requests for Issuance of Official Interpretations
A request for an official interpretation shall be in writing and
addressed to the Bureau of Consumer Financial Protection, 1700 G
Street NW., Washington, DC 20006. The request shall contain a
complete statement of all relevant facts concerning the issue,
including copies of all pertinent documents.
Scope of Interpretations
No interpretations will be issued approving financial
institutions' forms or statements. This restriction does not apply
to forms or statements whose use is required or sanctioned by a
government agency.
Supplement I to Part 1005--Official Interpretations
Section 1005.2 Definitions
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
[[Page 81038]]
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.
2. Checks used to capture information. The term ``access
device'' does not include a check or draft used to capture the
Magnetic Ink Character Recognition (MICR) encoding to initiate a
one-time automated clearinghouse (ACH) debit. For example, if a
consumer authorizes a one-time ACH debit from the consumer's account
using a blank, partially completed, or fully completed and signed
check for the merchant to capture the routing, account, and serial
numbers to initiate the debit, the check is not an access device.
(Although the check is not an access device under Regulation E, the
transaction is nonetheless covered by the regulation. See comment
3(b)(1)-1.v.)
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 Sec.
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.
ii. A retail repurchase agreement (repo), which is a loan made
to a financial institution by a consumer that is collateralized by
government or government-insured securities.
2. Certain employment-related cards not covered. The term
``payroll card account'' does not include a card used solely to
disburse incentive-based payments (other than commissions which can
represent the primary means through which a consumer is paid), such
as bonuses, which are unlikely to be a consumer's primary source of
salary or other compensation. The term also does not include a card
used solely to make disbursements unrelated to compensation, such as
petty cash reimbursements or travel per diem payments. Similarly, a
payroll card account does not include a card that is used in
isolated instances to which an employer typically does not make
recurring payments, such as when providing final payments or in
emergency situations when other payment methods are unavailable.
However, all transactions involving the transfer of funds to or from
a payroll card account are covered by the regulation, even if a
particular transaction involves payment of a bonus, other incentive-
based payment, or reimbursement, or the transaction does not
represent a transfer of wages, salary, or other employee
compensation.
3. Examples of accounts not covered by Regulation E (12 CFR Part
1005) include:
i. Profit-sharing and pension accounts established under a trust
agreement, which are exempt under Sec. 1005.2(b)(2).
ii. Escrow accounts, such as those established to ensure payment
of items such as real estate taxes, insurance premiums, or
completion of repairs or improvements.
iii. Accounts for accumulating funds to purchase U.S. savings
bonds.
Paragraph 2(b)(2)
1. Bona fide trust agreements. The term ``bona fide trust
agreement'' is not defined by the Act or regulation; therefore,
financial institutions must look to state or other applicable law
for interpretation.
2. Custodial agreements. An account held under a custodial
agreement that qualifies as a trust under the Internal Revenue Code,
such as an individual retirement account, is considered to be held
under a trust agreement for purposes of Regulation E.
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.
2. Substantially all business functions. Substantially all
business functions include both the public and the back-office
operations of the institution. For example, if the offices of an
institution are open on Saturdays for handling some consumer
transactions (such as deposits, withdrawals, and other teller
transactions), but not for performing internal functions (such as
investigating account errors), then Saturday is not a business day
for that institution. In this case, Saturday does not count toward
the business-day standard set by the regulation for reporting lost
or stolen access devices, resolving errors, etc.
3. Short hours. A financial institution may determine, at its
election, whether an abbreviated day is a business day. For example,
if an institution engages in substantially all business functions
until noon on Saturdays instead of its usual 3 p.m. closing, it may
consider Saturday a business day.
4. Telephone line. If a financial institution makes a telephone
line available on Sundays for reporting the loss or theft of an
access device, but performs no other business functions, Sunday is
not a business day under the substantially all business functions
standard.
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.
2. POS terminals. A POS terminal that captures data
electronically, for debiting or crediting to a consumer's asset
account, is an electronic terminal for purposes of Regulation E even
if no access device is used to initiate the transaction. See Sec.
1005.9 for receipt requirements.
3. Teller-operated terminals. A terminal or other computer
equipment operated by an employee of a financial institution is not
an electronic terminal for purposes of the regulation. However,
transfers initiated at such terminals by means of a consumer's
access device (using the consumer's PIN, for example) are EFTs and
are subject to other requirements of the regulation. If an access
device is used only for identification purposes or for determining
the account balance, the transfers are not EFTs for purposes of the
regulation.
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. In contrast, if the consumer must take action
each month to initiate a payment (such as by entering instructions
on a touch-tone telephone or home computer), the payments are not
preauthorized EFTs.
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.
3. Access device obtained through robbery or fraud. An
unauthorized EFT includes a transfer initiated by a person who
obtained the access device from the consumer through fraud or
robbery.
4. Forced initiation. An EFT at an ATM is an unauthorized
transfer if the consumer has been induced by force to initiate the
transfer.
5. Reversal of direct deposits. The reversal of a direct deposit
made in error is not an unauthorized EFT when it involves:
i. A credit made to the wrong consumer's account;
ii. A duplicate credit made to a consumer's account; or
iii. A credit in the wrong amount (for example, when the amount
credited to the consumer's account differs from the amount in the
transmittal instructions).
Section 1005.3 Coverage
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);
ii. The consumer and a third party (for preauthorized debits or
credits, for example),
[[Page 81039]]
when the account-holding institution has received notice of the
agreement and the fund transfers have begun.
2. Automated clearing house (ACH) membership. The fact that
membership in an ACH requires a financial institution to accept EFTs
to accounts at the institution does not make every account of that
institution subject to the regulation.
3. Foreign applicability. Regulation E applies to all persons
(including branches and other offices of foreign banks located in
the United States) that offer EFT services to residents of any
state, including resident aliens. It covers any account located in
the United States through which EFTs are offered to a resident of a
state. This is the case whether or not a particular transfer takes
place in the United States and whether or not the financial
institution is chartered in the United States or a foreign country.
The regulation does not apply to a foreign branch of a U.S. bank
unless the EFT services are offered in connection with an account in
a state as defined in Sec. 1005.2(l).
3(b) Electronic Fund Transfer
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.
ii. A transfer sent via ACH. For example, social security
benefits under the U.S. Treasury's direct-deposit program are
covered, even if the listing of payees and payment amounts reaches
the account-holding institution by means of a computer printout from
a correspondent bank.
iii. A preauthorized transfer credited or debited to an account
in accordance with instructions contained on magnetic tape, even if
the financial institution holding the account sends or receives a
composite check.
iv. A transfer from the consumer's account resulting from a
debit-card transaction at a merchant location, even if no electronic
terminal is involved at the time of the transaction, if the
consumer's asset account is subsequently debited for the amount of
the transfer.
v. A transfer via ACH where a consumer has provided a check to
enable the merchant or other payee to capture the routing, account,
and serial numbers to initiate the transfer, whether the check is
blank, partially completed, or fully completed and signed; whether
the check is presented at POS or is mailed to a merchant or other
payee or lockbox and later converted to an EFT; or whether the check
is retained by the consumer, the merchant or other payee, or the
payee's financial institution.
vi. A payment made by a bill payer under a bill-payment service
available to a consumer via computer or other electronic means,
unless the terms of the bill-payment service explicitly state that
all payments, or all payments to a particular payee or payees, will
be solely by check, draft, or similar paper instrument drawn on the
consumer's account, and the payee or payees that will be paid in
this manner are identified to the consumer.
2. Fund transfers not covered. The term ``electronic fund
transfer'' does not include:
i. A payment that does not debit or credit a consumer asset
account, such as a payroll allotment to a creditor to repay a credit
extension (which is deducted from salary).
ii. A payment made in currency by a consumer to another person
at an electronic terminal.
iii. A preauthorized check drawn by the financial institution on
the consumer's account (such as an interest or other recurring
payment to the consumer or another party), even if the check is
computer-generated.
iv. Transactions arising from the electronic collection,
presentment, or return of checks through the check collection
system, such as through transmission of electronic check images.
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.
2. Authorization to process a transaction as an EFT or as a
check. In order to process a transaction as an EFT, or alternatively
as a check, the payee must obtain the consumer's authorization to do
so. A payee may, at its option, specify the circumstances under
which a check may not be converted to an EFT. See model clauses in
Appendix A-6.
3. Notice for each transfer. Generally, a notice to authorize an
electronic check conversion transaction must be provided for each
transaction. For example, a consumer must receive a notice that the
transaction will be processed as an EFT for each transaction at POS
or each time a consumer mails a check in an accounts receivable
(ARC) transaction to pay a bill, such as a utility bill, if the
payee intends to convert a check received as payment. Similarly, the
consumer must receive notice if the payee intends to collect a
service fee for insufficient or uncollected funds via an EFT for
each transaction whether at POS or if the consumer mails a check to
pay a bill. The notice about when funds may be debited from a
consumer's account and the non-return of consumer checks by the
consumer's financial institution must also be provided for each
transaction. However, if in an ARC transaction, a payee provides a
coupon book to a consumer, for example, for mortgage loan payments,
and the payment dates and amounts are set out in the coupon book,
the payee may provide a single notice on the coupon book stating all
of the required disclosures under paragraph (b)(2) of this section
in order to obtain authorization for each conversion of a check and
any debits via EFT to the consumer's account to collect any service
fees imposed by the payee for insufficient or uncollected funds in
the consumer's account. The notice must be placed on a conspicuous
location of the coupon book that a consumer can retain--for example,
on the first page, or inside the front cover.
4. Multiple payments/multiple consumers. If a merchant or other
payee will use information from a consumer's check to initiate an
EFT from the consumer's account, notice to a consumer listed on the
billing account that a check provided as payment during a single
billing cycle or after receiving an invoice or statement will be
processed as a one-time EFT or as a check transaction constitutes
notice for all checks provided in payment for the billing cycle or
the invoice for which notice has been provided, whether the check(s)
is submitted by the consumer or someone else. The notice applies to
all checks provided in payment for the billing cycle or invoice
until the provision of notice on or with the next invoice or
statement. Thus, if a merchant or other payee receives a check as
payment for the consumer listed on the billing account after
providing notice that the check will be processed as a one-time EFT,
the authorization from that consumer constitutes authorization to
convert any other checks provided for that invoice or statement.
Other notices required under this paragraph (b)(2) (for example, to
collect a service fee for insufficient or uncollected funds via an
EFT) provided to the consumer listed on the billing account also
constitutes notice to any other consumer who may provide a check for
the billing cycle or invoice.
5. Additional disclosures about ECK transactions at POS. When a
payee initiates an EFT at POS using information from the consumer's
check, and returns the check to the consumer at POS, the payee need
not provide a notice to the consumer that the check will not be
returned by the consumer's financial institution.
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.
2. Accounts receivable transactions. In an ARC transaction where
a consumer sends in a payment for amounts owed (or makes an in-
person payment at a biller's physical location, such as when a
consumer makes a loan payment at a bank branch or places a payment
in a drop box), a person seeking to electronically collect a fee for
items returned unpaid must obtain the consumer's authorization to
collect the fee in this manner. A consumer authorizes a person to
electronically collect a returned item fee when the consumer
receives notice, typically on an invoice or statement, that the
person may collect the fee through an EFT to the
[[Page 81040]]
consumer's account, and the consumer goes forward with the
underlying transaction by providing payment. The notice must also
state the dollar amount of the fee. However, an explanation of how
that fee will be determined may be provided in place of the dollar
amount of the fee if the fee may vary due to the amount of the
transaction or due to other factors, such as the number of days the
underlying transaction is left outstanding. For example, if a state
law permits a maximum fee of $30 or 10% of the underlying
transaction, whichever is greater, the person collecting the fee may
explain how the fee is determined, rather than state a specific
dollar amount for the fee.
3. Disclosure of dollar amount of fee for POS transactions. The
notice provided to the consumer in connection with a POS transaction
under Sec. 1005.3(b)(3)(ii) must state the amount of the fee for a
returned item if the dollar amount of the fee can be calculated at
the time the notice is provided or mailed. For example, if notice is
provided to the consumer at the time of the transaction, if the
applicable state law sets a maximum fee that may be collected for a
returned item based on the amount of the underlying transaction
(such as where the amount of the fee is expressed as a percentage of
the underlying transaction), the person collecting the fee must
state the actual dollar amount of the fee on the notice provided to
the consumer. Alternatively, if the amount of the fee to be
collected cannot be calculated at the time of the transaction (for
example, where the amount of the fee will depend on the number of
days a debt continues to be owed), the person collecting the fee may
provide a description of how the fee will be determined on both the
posted notice as well as on the notice provided at the time of the
transaction. However, if the person collecting the fee elects to
send the consumer notice after the person has initiated an EFT to
collect the fee, that notice must state the amount of the fee to be
collected.
4. Third party providing notice. The person initiating an EFT to
a consumer's account to electronically collect a fee for an item
returned unpaid may obtain the authorization and provide the notices
required under Sec. 1005.3(b)(3) through third parties, such as
merchants.
3(c) Exclusions From Coverage
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.
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.
3(c)(3) Wire or Other Similar Transfers
1. Fedwire and ACH. If a financial institution makes a fund
transfer to a consumer's account after receiving funds through
Fedwire or a similar network, the transfer by ACH is covered by the
regulation even though the Fedwire or network transfer is exempt.
2. Article 4A. Financial institutions that offer telephone-
initiated Fedwire payments are subject to the requirements of UCC
section 4A-202, which encourages verification of Fedwire payment
orders pursuant to a security procedure established by agreement
between the consumer and the receiving bank. These transfers are not
subject to Regulation E and the agreement is not considered a
telephone plan if the service is offered separately from a telephone
bill-payment or other prearranged plan subject to Regulation E.
Regulation J of the Board of Governors of the Federal Reserve System
(12 CFR part 210) specifies the rules applicable to funds handled by
Federal Reserve Banks. To ensure that the rules for all fund
transfers through Fedwire are consistent, the Board of Governors
used its preemptive authority under UCC section 4A-107 to determine
that subpart B of the Board's Regulation J, including the provisions
of Article 4A, applies to all fund transfers through Fedwire, even
if a portion of the fund transfer is governed by the EFTA. The
portion of the fund transfer that is governed by the EFTA is not
governed by subpart B of the Board's Regulation J.
3. Similar fund transfer systems. Fund transfer systems that are
similar to Fedwire include the Clearing House Interbank Payments
System (CHIPS), Society for Worldwide Interbank Financial
Telecommunication (SWIFT), Telex, and transfers made on the books of
correspondent banks.
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.
3. Examples of nonexempt transfers. The exemption does not apply
to a transfer involving:
i. A debit card or other access device that accesses a
securities or commodities account such as a money market mutual fund
and that the consumer uses for purchasing goods or services or for
obtaining cash.
ii. A payment of interest or dividends into the consumer's
account (for example, from a brokerage firm or from a Federal
Reserve Bank for government securities).
3(c)(5) Automatic Transfers by Account-Holding Institution
1. Automatic transfers exempted. The exemption applies to:
i. Electronic debits or credits to consumer accounts for check
charges, stop-payment charges, non-sufficient funds (NSF) charges,
overdraft charges, provisional credits, error adjustments, and
similar items that are initiated automatically on the occurrence of
certain events.
ii. Debits to consumer accounts for group insurance available
only through the financial institution and payable only by means of
an aggregate payment from the institution to the insurer.
iii. EFTs between a thrift institution and its paired commercial
bank in the state of Rhode Island, which are deemed under state law
to be intra-institutional.
iv. Automatic transfers between a consumer's accounts within the
same financial institution, even if the account holders on the two
accounts are not identical.
2. Automatic transfers not exempted. Transfers between accounts
of the consumer at affiliated institutions (such as between a bank
and its subsidiary or within a holding company) are not intra-
institutional transfers, and thus do not qualify for the exemption.
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:
i. A hold-harmless agreement on a signature card that protects
the institution if the consumer requests a transfer.
ii. A legend on a signature card, periodic statement, or
passbook that limits the number of telephone-initiated transfers the
consumer can make from a savings account because of reserve
requirements under Regulation D of the Board of Governors of the
Federal Reserve System (12 CFR part 204).
iii. An agreement permitting the consumer to approve by
telephone the rollover of funds at the maturity of an instrument.
2. Examples of covered transfers. When a written plan or
agreement has been entered into, a transfer initiated by a telephone
call from a consumer is covered even though:
i. An employee of the financial institution completes the
transfer manually (for example, by means of a debit memo or deposit
slip).
ii. The consumer is required to make a separate request for each
transfer.
iii. The consumer uses the plan infrequently.
iv. The consumer initiates the transfer via a facsimile machine.
v. The consumer initiates the transfer using a financial
institution's audio-response or voice-response telephone system.
[[Page 81041]]
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 Sec. 1005.10(e), and are therefore exempt from UCC
Article 4A.
Section 1005.4 General Disclosure Requirements; Jointly Offered
Services
4(a) Form of Disclosures
1. General. Although no particular rules govern type size,
number of pages, or the relative conspicuousness of various terms,
the disclosures must be in a clear and readily understandable
written form that the consumer may retain. Numbers or codes are
considered readily understandable if explained elsewhere on the
disclosure form.
2. Foreign language disclosures. Disclosures may be made in
languages other than English, provided they are available in English
upon request.
Section 1005.5 Issuance of Access Devices
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.
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)
1. One-for-one rule. In issuing a renewal or substitute access
device, only one renewal or substitute device may replace a
previously issued device. For example, only one new card and PIN may
replace a card and PIN previously issued. A financial institution
may provide additional devices at the time it issues the renewal or
substitute access device, however, provided the institution complies
with Sec. 1005.5(b). See comment 5(b)-5. If the replacement device
or the additional device permits either fewer or additional types of
electronic fund transfer services, a change-in-terms notice or new
disclosures are required.
2. Renewal or substitution by a successor institution. A
successor institution is an entity that replaces the original
financial institution (for example, following a corporate merger or
acquisition) or that acquires accounts or assumes the operation of
an EFT system.
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.
2. PINs. A financial institution may impose no liability on a
consumer for unauthorized transfers involving an unsolicited access
device until the device becomes an ``accepted access device'' under
the regulation. A card and PIN combination may be treated as an
accepted access device once the consumer has used it to make a
transfer.
3. Functions of PIN. If an institution issues a PIN at the
consumer's request, the issuance may constitute both a way of
validating the debit card and the means to identify the consumer
(required as a condition of imposing liability for unauthorized
transfers).
4. Verification of identity. To verify the consumer's identity,
a financial institution may use any reasonable means, such as a
photograph, fingerprint, personal visit, signature comparison, or
personal information about the consumer. However, even if reasonable
means were used, if an institution fails to verify correctly the
consumer's identity and an imposter succeeds in having the device
validated, the consumer is not liable for any unauthorized transfers
from the account.
5. Additional access devices in a renewal or substitution. A
financial institution may issue more than one access device in
connection with the renewal or substitution of a previously issued
accepted access device, provided that any additional access device
(beyond the device replacing the accepted access device) is not
validated at the time it is issued, and the institution complies
with the other requirements of Sec. 1005.5(b). The institution may,
if it chooses, set up the validation procedure such that both the
device replacing the previously issued device and the additional
device are not validated at the time they are issued, and validation
will apply to both devices. If the institution sets up the
validation procedure in this way, the institution should provide a
clear and readily understandable disclosure to the consumer that
both devices are unvalidated and that validation will apply to both
devices.
Section 1005.6 Liability of Consumer for Unauthorized Transfers
6(a) Conditions for Liability
1. Means of identification. A financial institution may use
various means for identifying the consumer to whom the access device
is issued, including but not limited to:
i. Electronic or mechanical confirmation (such as a PIN).
ii. Comparison of the consumer's signature, fingerprint, or
photograph.
2. Multiple users. When more than one access device is issued
for an account, the financial institution may, but need not, provide
a separate means to identify each user of the account.
6(b) Limitations on Amount of Liability
1. Application of liability provisions. There are three possible
tiers of consumer liability for unauthorized EFTs depending on the
situation. A consumer may be liable for: (1) up to $50; (2) up to
$500; or (3) an unlimited amount depending on when the unauthorized
EFT occurs. More than one tier may apply to a given situation
because each corresponds to a different (sometimes overlapping) time
period or set of conditions.
2. Consumer negligence. Negligence by the consumer cannot be
used as the basis for imposing greater liability than is permissible
under Regulation E. Thus, consumer behavior that may constitute
negligence under state law, such as writing the PIN on a debit card
or on a piece of paper kept with the card, does not affect the
consumer's liability for unauthorized transfers. (However, refer to
comment 2(m)-2 regarding termination of the authority of given by
the consumer to another person.)
3. Limits on liability. The extent of the consumer's liability
is determined solely by the consumer's promptness in reporting the
loss or theft of an access device. Similarly, no agreement between
the consumer and an institution may impose greater liability on the
consumer for an unauthorized transfer than the limits provided in
Regulation E.
6(b)(1) Timely Notice Given
1. $50 limit applies. The basic liability limit is $50. For
example, the consumer's card is lost or stolen on Monday and the
consumer learns of the loss or theft on Wednesday. If the consumer
notifies the financial institution within two business days of
learning of the loss or theft (by midnight Friday), the consumer's
liability is limited to $50 or the amount of the unauthorized
transfers that occurred before notification, whichever is less.
2. Knowledge of loss or theft of access device. The fact that a
consumer has received a periodic statement that reflects
unauthorized transfers may be a factor in determining whether the
consumer had knowledge of the loss or theft, but cannot be deemed to
represent conclusive evidence that the consumer had such knowledge.
3. Two business day rule. The two business day period does not
include the day the consumer learns of the loss or theft or any day
that is not a business day. The rule is calculated based on two 24-
hour periods, without regard to the financial institution's business
hours or the time of day that the consumer learns of the loss or
theft. For example, a consumer learns of the loss or theft at 6 p.m.
on Friday. Assuming that Saturday is a business day and Sunday is
not, the two business day period begins on Saturday and expires at
11:59 p.m. on Monday, not at the end of the financial institution's
business day on Monday.
6(b)(2) Timely Notice Not Given
1. $500 limit applies. The second tier of liability is $500. For
example, the consumer's card is stolen on Monday and the consumer
learns of the theft that same day. The consumer reports the theft on
Friday. The $500 limit applies because the consumer failed to notify
the financial institution
[[Page 81042]]
within two business days of learning of the theft (which would have
been by midnight Wednesday). How much the consumer is actually
liable for, however, depends on when the unauthorized transfers take
place. In this example, assume a $100 unauthorized transfer was made
on Tuesday and a $600 unauthorized transfer on Thursday. Because the
consumer is liable for the amount of the loss that occurs within the
first two business days (but no more than $50), plus the amount of
the unauthorized transfers that occurs after the first two business
days and before the consumer gives notice, the consumer's total
liability is $500 ($50 of the $100 transfer plus $450 of the $600
transfer, in this example). But if $600 was taken on Tuesday and
$100 on Thursday, the consumer's maximum liability would be $150
($50 of the $600 plus $100).
6(b)(3) Periodic Statement; Timely Notice Not Given
1. Unlimited liability applies. The standard of unlimited
liability applies if unauthorized transfers appear on a periodic
statement, and may apply in conjunction with the first two tiers of
liability. If a periodic statement shows an unauthorized transfer
made with a lost or stolen debit card, the consumer must notify the
financial institution within 60 calendar days after the periodic
statement was sent; otherwise, the consumer faces unlimited
liability for all unauthorized transfers made after the 60-day
period. The consumer's liability for unauthorized transfers before
the statement is sent, and up to 60 days following, is determined
based on the first two tiers of liability: up to $50 if the consumer
notifies the financial institution within two business days of
learning of the loss or theft of the card and up to $500 if the
consumer notifies the institution after two business days of
learning of the loss or theft.
2. Transfers not involving access device. The first two tiers of
liability do not apply to unauthorized transfers from a consumer's
account made without an access device. If, however, the consumer
fails to report such unauthorized transfers within 60 calendar days
of the financial institution's transmittal of the periodic
statement, the consumer may be liable for any transfers occurring
after the close of the 60 days and before notice is given to the
institution. For example, a consumer's account is electronically
debited for $200 without the consumer's authorization and by means
other than the consumer's access device. If the consumer notifies
the institution within 60 days of the transmittal of the periodic
statement that shows the unauthorized transfer, the consumer has no
liability. However, if in addition to the $200, the consumer's
account is debited for a $400 unauthorized transfer on the 61st day
and the consumer fails to notify the institution of the first
unauthorized transfer until the 62nd day, the consumer may be liable
for the full $400.
6(b)(4) Extension of Time Limits
1. Extenuating circumstances. Examples of circumstances that
require extension of the notification periods under this section
include the consumer's extended travel or hospitalization.
6(b)(5) Notice to Financial Institution
1. Receipt of notice. A financial institution is considered to
have received notice for purposes of limiting the consumer's
liability if notice is given in a reasonable manner, even if the
consumer notifies the institution but uses an address or telephone
number other than the one specified by the institution.
2. Notice by third party. Notice to a financial institution by a
person acting on the consumer's behalf is considered valid under
this section. For example, if a consumer is hospitalized and unable
to report the loss or theft of an access device, notice is
considered given when someone acting on the consumer's behalf
notifies the bank of the loss or theft. A financial institution may
require appropriate documentation from the person representing the
consumer to establish that the person is acting on the consumer's
behalf.
3. Content of notice. Notice to a financial institution is
considered given when a consumer takes reasonable steps to provide
the institution with the pertinent account information. Even when
the consumer is unable to provide the account number or the card
number in reporting a lost or stolen access device or an
unauthorized transfer, the notice effectively limits the consumer's
liability if the consumer otherwise identifies sufficiently the
account in question. For example, the consumer may identify the
account by the name on the account and the type of account in
question.
Section 1005.7 Initial Disclosures
7(a) Timing of Disclosures
1. Early disclosures. Disclosures given by a financial
institution earlier than the regulation requires (for example, when
the consumer opens a checking account) need not be repeated when the
consumer later enters into an agreement with a third party to
initiate preauthorized transfers to or from the consumer's account,
unless the terms and conditions differ from those that the
institution previously disclosed. This interpretation also applies
to any notice provided about one-time EFTs from a consumer's account
initiated using information from the consumer's check. On the other
hand, if an agreement for EFT services to be provided by an account-
holding institution is directly between the consumer and the
account-holding institution, disclosures must be given in close
proximity to the event requiring disclosure, for example, when the
consumer contracts for a new service.
2. Lack of advance notice of a transfer. Where a consumer
authorizes a third party to debit or credit the consumer's account,
an account-holding institution that has not received advance notice
of the transfer or transfers must provide the required disclosures
as soon as reasonably possible after the first debit or credit is
made, unless the institution has previously given the disclosures.
3. Addition of new accounts. If a consumer opens a new account
permitting EFTs at a financial institution, and the consumer already
has received Regulation E disclosures for another account at that
institution, the institution need only disclose terms and conditions
that differ from those previously given.
4. Addition of service in interchange systems. If a financial
institution joins an interchange or shared network system (which
provides access to terminals operated by other institutions),
disclosures are required for additional EFT services not previously
available to consumers if the terms and conditions differ from those
previously disclosed.
5. Disclosures covering all EFT services offered. An institution
may provide disclosures covering all EFT services that it offers,
even if some consumers have not arranged to use all services.
7(b) Content of Disclosures
7(b)(1) Liability of Consumer
1. No liability imposed by financial institution. If a financial
institution chooses to impose zero liability for unauthorized EFTs,
it need not provide the liability disclosures. If the institution
later decides to impose liability, however, it must first provide
the disclosures.
2. Preauthorized transfers. If the only EFTs from an account are
preauthorized transfers, liability could arise if the consumer fails
to report unauthorized transfers reflected on a periodic statement.
To impose such liability on the consumer, the institution must have
disclosed the potential liability and the telephone number and
address for reporting unauthorized transfers.
3. Additional information. At the institution's option, the
summary of the consumer's liability may include advice on promptly
reporting unauthorized transfers or the loss or theft of the access
device.
7(b)(2) Telephone Number and Address
1. Disclosure of telephone numbers. An institution may use the
same or different telephone numbers in the disclosures for the
purpose of:
i. Reporting the loss or theft of an access device or possible
unauthorized transfers;
ii. Inquiring about the receipt of a preauthorized credit;
iii. Stopping payment of a preauthorized debit;
iv. Giving notice of an error.
2. Location of telephone number. The telephone number need not
be incorporated into the text of the disclosure; for example, the
institution may instead insert a reference to a telephone number
that is readily available to the consumer, such as ``Call your
branch office. The number is shown on your periodic statement.''
However, an institution must provide a specific telephone number and
address, on or with the disclosure statement, for reporting a lost
or stolen access device or a possible unauthorized transfer.
7(b)(4) Types of Transfers; Limitations
1. Security limitations. Information about limitations on the
frequency and dollar amount of transfers generally must be disclosed
in detail, even if related to security aspects of the system. If the
confidentiality of certain details is essential to the security of
an account or system, these details may be
[[Page 81043]]
withheld (but the fact that limitations exist must still be
disclosed). For example, an institution limits cash ATM withdrawals
to $100 per day. The institution may disclose that daily withdrawal
limitations apply and need not disclose that the limitations may not
always be in force (such as during periods when its ATMs are off-
line).
2. Restrictions on certain deposit accounts. A limitation on
account activity that restricts the consumer's ability to make EFTs
must be disclosed even if the restriction also applies to transfers
made by non-electronic means. For example, Regulation D of the Board
of Governors of the Federal Reserve System (12 CFR Part 204)
restricts the number of payments to third parties that may be made
from a money market deposit account; an institution that does not
execute fund transfers in excess of those limits must disclose the
restriction as a limitation on the frequency of EFTs.
3. Preauthorized transfers. Financial institutions are not
required to list preauthorized transfers among the types of
transfers that a consumer can make.
4. One-time EFTs initiated using information from a check.
Financial institutions must disclose the fact that one-time EFTs
initiated using information from a consumer's check are among the
types of transfers that a consumer can make. See Appendix A-2.
7(b)(5) Fees
1. Disclosure of EFT fees. An institution is required to
disclose all fees for EFTs or the right to make them. Others fees
(for example, minimum-balance fees, stop-payment fees, or account
overdrafts) may, but need not, be disclosed. But see Regulation DD,
12 CFR Part 1030. An institution is not required to disclose fees
for inquiries made at an ATM since no transfer of funds is involved.
2. Fees also applicable to non-EFT. A per-item fee for EFTs must
be disclosed even if the same fee is imposed on non-electronic
transfers. If a per-item fee is imposed only under certain
conditions, such as when the transactions in the cycle exceed a
certain number, those conditions must be disclosed. Itemization of
the various fees may be provided on the disclosure statement or on
an accompanying document that is referenced in the statement.
3. Interchange system fees. Fees paid by the account-holding
institution to the operator of a shared or interchange ATM system
need not be disclosed, unless they are imposed on the consumer by
the account-holding institution. Fees for use of an ATM that are
debited directly from the consumer's account by an institution other
than the account-holding institution (for example, fees included in
the transfer amount) need not be disclosed. See Sec. 1005.7(b)(11)
for the general notice requirement regarding fees that may be
imposed by ATM operators and by a network used to complete the
transfer.
7(b)(9) Confidentiality
1. Information provided to third parties. An institution must
describe the circumstances under which any information relating to
an account to or from which EFTs are permitted will be made
available to third parties, not just information concerning those
EFTs. The term ``third parties'' includes affiliates such as other
subsidiaries of the same holding company.
7(b)(10) Error Resolution
1. Substantially similar. The error resolution notice must be
substantially similar to the model form in Appendix A of part 1005.
An institution may use different wording so long as the substance of
the notice remains the same, may delete inapplicable provisions (for
example, the requirement for written confirmation of an oral
notification), and may substitute substantive state law requirements
affording greater consumer protection than Regulation E.
2. Extended time-period for certain transactions. To take
advantage of the longer time periods for resolving errors under
Sec. 1005.11(c)(3) (for new accounts as defined in Regulation CC of
the Board of Governors of the Federal Reserve System (12 CFR part
229), transfers initiated outside the United States, or transfers
resulting from POS debit-card transactions), a financial institution
must have disclosed these longer time periods. Similarly, an
institution that relies on the exception from provisional crediting
in Sec. 1005.11(c)(2) for accounts subject to Regulation T of the
Board of Governors of the Federal Reserve System (12 CFR part 220)
must have disclosed accordingly.
7(c) Addition of Electronic Fund Transfer Services
1. Addition of electronic check conversion services. One-time
EFTs initiated using information from a consumer's check are a new
type of transfer requiring new disclosures, as applicable. See
Appendix A-2.
Section 1005.8 Change-in-Terms Notice; Error Resolution Notice
8(a) Change-in-Terms Notice
1. Form of notice. No specific form or wording is required for a
change-in-terms notice. The notice may appear on a periodic
statement, or may be given by sending a copy of a revised disclosure
statement, provided attention is directed to the change (for
example, in a cover letter referencing the changed term).
2. Changes not requiring notice. The following changes do not
require disclosure:
i. Closing some of an institution's ATMs;
ii. Cancellation of an access device.
3. Limitations on transfers. When the initial disclosures omit
details about limitations because secrecy is essential to the
security of the account or system, a subsequent increase in those
limitations need not be disclosed if secrecy is still essential. If,
however, an institution had no limits in place when the initial
disclosures were given and now wishes to impose limits for the first
time, it must disclose at least the fact that limits have been
adopted. See also Sec. 1005.7(b)(4) and the related commentary.
4. Change in telephone number or address. When a financial
institution changes the telephone number or address used for
reporting possible unauthorized transfers, a change-in-terms notice
is required only if the institution will impose liability on the
consumer for unauthorized transfers under Sec. 1005.6. See also
Sec. 1005.6(a) and the related commentary.
8(b) Error Resolution Notice
1. Change between annual and periodic notice. If an institution
switches from an annual to a periodic notice, or vice versa, the
first notice under the new method must be sent no later than 12
months after the last notice sent under the old method.
2. Exception for new accounts. For new accounts, disclosure of
the longer error resolution time periods under Sec. 1005.11(c)(3)
is not required in the annual error resolution notice or in the
notice that may be provided with each periodic statement as an
alternative to the annual notice.
Section 1005.9 Receipts at Electronic Terminals; Periodic Statements
9(a) Receipts at Electronic Terminals
1. Receipts furnished only on request. The regulation requires
that a receipt be ``made available.'' A financial institution may
program its electronic terminals to provide a receipt only to
consumers who elect to receive one.
2. Third party providing receipt. An account-holding institution
may make terminal receipts available through third parties such as
merchants or other financial institutions.
3. Inclusion of promotional material. A financial institution
may include promotional material on receipts if the required
information is set forth clearly (for example, by separating it from
the promotional material). In addition, a consumer may not be
required to surrender the receipt or that portion containing the
required disclosures in order to take advantage of a promotion.
4. Transfer not completed. The receipt requirement does not
apply to a transfer that is initiated but not completed (for
example, if the ATM is out of currency or the consumer decides not
to complete the transfer).
5. Receipts not furnished due to inadvertent error. If a receipt
is not provided to the consumer because of a bona fide unintentional
error, such as when a terminal runs out of paper or the mechanism
jams, no violation results if the financial institution maintains
procedures reasonably adapted to avoid such occurrences.
6. Multiple transfers. If the consumer makes multiple transfers
at the same time, the financial institution may document them on a
single or on separate receipts.
9(a)(1) Amount
1. Disclosure of transaction fee. The required display of a fee
amount on or at the terminal may be accomplished by displaying the
fee on a sign at the terminal or on the terminal screen for a
reasonable duration. Displaying the fee on a screen provides
adequate notice, as long as a consumer is given the option to cancel
the transaction after receiving notice of a fee. See Sec. 1005.16
for the notice requirements applicable to ATM operators that impose
a fee for providing EFT services.
[[Page 81044]]
2. Relationship between Sec. 1005.9(a)(1) and Sec. 1005.16.
The requirements of Sec. Sec. 1005.9(a)(1) and 1005.16 are similar
but not identical.
i. Section 1005.9(a)(1) requires that if the amount of the
transfer as shown on the receipt will include the fee, then the fee
must be disclosed either on a sign on or at the terminal, or on the
terminal screen. Section 1005.16 requires disclosure both on a sign
on or at the terminal (in a prominent and conspicuous location) and
on the terminal screen. Section 1005.16 permits disclosure on a
paper notice as an alternative to the on-screen disclosure.
ii. The disclosure of the fee on the receipt under Sec.
1005.9(a)(1) cannot be used to comply with the alternative paper
disclosure procedure under Sec. 1005.16, if the receipt is provided
at the completion of the transaction because, pursuant to the
statute, the paper notice must be provided before the consumer is
committed to paying the fee.
iii. Section 1005.9(a)(1) applies to any type of electronic
terminal as defined in Regulation E (for example, to POS terminals
as well as to ATMs), while Sec. 1005.16 applies only to ATMs.
9(a)(2) Date
1. Calendar date. The receipt must disclose the calendar date on
which the consumer uses the electronic terminal. An accounting or
business date may be disclosed in addition if the dates are clearly
distinguished.
9(a)(3) Type
1. Identifying transfer and account. Examples identifying the
type of transfer and the type of the consumer's account include
``withdrawal from checking,'' ``transfer from savings to checking,''
or ``payment from savings.''
2. Exception. Identification of an account is not required when
the consumer can access only one asset account at a particular time
or terminal, even if the access device can normally be used to
access more than one account. For example, the consumer may be able
to access only one particular account at terminals not operated by
the account-holding institution, or may be able to access only one
particular account when the terminal is off-line. The exception is
available even if, in addition to accessing one asset account, the
consumer also can access a credit line.
3. Access to multiple accounts. If the consumer can use an
access device to make transfers to or from different accounts of the
same type, the terminal receipt must specify which account was
accessed, such as ``withdrawal from checking I'' or ``withdrawal
from checking II.'' If only one account besides the primary checking
account can be debited, the receipt can identify the account as
``withdrawal from other account.''
4. Generic descriptions. Generic descriptions may be used for
accounts that are similar in function, such as share draft or NOW
accounts and checking accounts. In a shared system, for example,
when a credit union member initiates transfers to or from a share
draft account at a terminal owned or operated by a bank, the receipt
may identify a withdrawal from the account as a ``withdrawal from
checking.''
5. Point-of-sale transactions. There is no prescribed
terminology for identifying a transfer at a merchant's POS terminal.
A transfer may be identified, for example, as a purchase, a sale of
goods or services, or a payment to a third party. When a consumer
obtains cash from a POS terminal in addition to purchasing goods, or
obtains cash only, the documentation need not differentiate the
transaction from one involving the purchase of goods.
9(a)(5) Terminal Location
1. Options for identifying terminal. The institution may provide
either:
i. The city, state or foreign country, and the information in
Sec. 1005.9(a)(5) (i), (ii), or (iii), or
ii. A number or a code identifying the terminal. If the
institution chooses the second option, the code or terminal number
identifying the terminal where the transfer is initiated may be
given as part of a transaction code.
2. Omission of city name. The city may be omitted if the
generally accepted name (such as a branch name) contains the city
name.
3. Omission of a state. A state may be omitted from the location
information on the receipt if:
i. All the terminals owned or operated by the financial
institution providing the statement (or by the system in which it
participates) are located in that state, or
ii. All transfers occur at terminals located within 50 miles of
the financial institution's main office.
4. Omission of a city and state. A city and state may be omitted
if all the terminals owned or operated by the financial institution
providing the statement (or by the system in which it participates)
are located in the same city.
Paragraph 9(a)(5)(i)
1. Street address. The address should include number and street
(or intersection); the number (or intersecting street) may be
omitted if the street alone uniquely identifies the terminal
location.
Paragraph 9(a)(5)(ii)
1. Generally accepted name. Examples of a generally accepted
name for a specific location include a branch of the financial
institution, a shopping center, or an airport.
Paragraph 9(a)(5)(iii)
1. Name of owner or operator of terminal. Examples of an owner
or operator of a terminal are a financial institution or a retail
merchant.
9(a)(6) Third Party Transfer
1. Omission of third-party name. The receipt need not disclose
the third-party name if the name is provided by the consumer in a
form that is not machine readable (for example, if the consumer
indicates the payee by depositing a payment stub into the ATM). If,
on the other hand, the consumer keys in the identity of the payee,
the receipt must identify the payee by name or by using a code that
is explained elsewhere on the receipt.
2. Receipt as proof of payment. Documentation required under the
regulation constitutes prima facie proof of a payment to another
person, except in the case of a terminal receipt documenting a
deposit.
9(b) Periodic Statements
1. Periodic cycles. Periodic statements may be sent on a cycle
that is shorter than monthly. The statements must correspond to
periodic cycles that are reasonably equal, that is, do not vary by
more than four days from the regular cycle. The requirement of
reasonably equal cycles does not apply when an institution changes
cycles for operational or other reasons, such as to establish a new
statement day or date.
2. Interim statements. Generally, a financial institution must
provide periodic statements for each monthly cycle in which an EFT
occurs, and at least quarterly if a transfer has not occurred. Where
EFTs occur between regularly-scheduled cycles, interim statements
must be provided. For example, if an institution issues quarterly
statements at the end of March, June, September and December, and
the consumer initiates an EFT in February, an interim statement for
February must be provided. If an interim statement contains interest
or rate information, the institution must comply with Regulation DD,
12 CFR 1030.6.
3. Inactive accounts. A financial institution need not send
statements to consumers whose accounts are inactive as defined by
the institution.
4. Statement pickup. A financial institution may permit, but may
not require, consumers to pick up their periodic statements at the
financial institution.
5. Periodic statements limited to EFT activity. A financial
institution that uses a passbook as the primary means for displaying
account activity, but also allows the account to be debited
electronically, may provide a periodic statement requirement that
reflects only the EFTs and other required disclosures (such as
charges, account balances, and address and telephone number for
inquiries). See Sec. 1005.9(c)(1)(i) for the exception applicable
to preauthorized transfers for passbook accounts.
6. Codes and accompanying documents. To meet the documentation
requirements for periodic statements, a financial institution may:
i. Include copies of terminal receipts to reflect transfers
initiated by the consumer at electronic terminals;
ii. Enclose posting memos, deposit slips, and other documents
that, together with the statement, disclose all the required
information;
iii. Use codes for names of third parties or terminal locations
and explain the information to which the codes relate on an
accompanying document.
9(b)(1) Transaction Information
1. Information obtained from others. While financial
institutions must maintain reasonable procedures to ensure the
integrity of data obtained from another institution, a merchant, or
other third parties, verification of each transfer that appears on
the periodic statement is not required.
[[Page 81045]]
Paragraph 9(b)(1)(i)
1. Incorrect deposit amount. If a financial institution
determines that the amount actually deposited at an ATM is different
from the amount entered by the consumer, the institution need not
immediately notify the consumer of the discrepancy. The periodic
statement reflecting the deposit may show either the correct amount
of the deposit or the amount entered by the consumer along with the
institution's adjustment.
Paragraph 9(b)(1)(iii)
1. Type of transfer. There is no prescribed terminology for
describing a type of transfer. Placement of the amount of the
transfer in the debit or the credit column is sufficient if other
information on the statement, such as a terminal location or third-
party name, enables the consumer to identify the type of transfer.
Paragraph 9(b)(1)(iv)
1. Nonproprietary terminal in network. An institution need not
reflect on the periodic statement the street addresses,
identification codes, or terminal numbers for transfers initiated in
a shared or interchange system at a terminal operated by an
institution other than the account-holding institution. The
statement must, however, specify the entity that owns or operates
the terminal, plus the city and state.
Paragraph 9(b)(1)(v)
1. Recurring payments by government agency. The third-party name
for recurring payments from Federal, state, or local governments
need not list the particular agency. For example, ``U.S. gov't'' or
``N.Y. sal'' will suffice.
2. Consumer as third-party payee. If a consumer makes an
electronic fund transfer to another consumer, the financial
institution must identify the recipient by name (not just by an
account number, for example).
3. Terminal location/third party. A single entry may be used to
identify both the terminal location and the name of the third party
to or from whom funds are transferred. For example, if a consumer
purchases goods from a merchant, the name of the party to whom funds
are transferred (the merchant) and the location of the terminal
where the transfer is initiated will be satisfied by a disclosure
such as ``XYZ Store, Anytown, Ohio.''
4. Account-holding institution as third party. Transfers to the
account-holding institution (by ATM, for example) must show the
institution as the recipient, unless other information on the
statement (such as, ``loan payment from checking'') clearly
indicates that the payment was to the account-holding institution.
5. Consistency in third-party identity. The periodic statement
must disclose a third-party name as it appeared on the receipt,
whether it was, for example, the ``dba'' (doing business as) name of
the third party or the parent corporation's name.
6. Third-party identity on deposits at electronic terminal. A
financial institution need not identify third parties whose names
appear on checks, drafts, or similar paper instruments deposited to
the consumer's account at an electronic terminal.
9(b)(3) Fees
1. Disclosure of fees. The fees disclosed may include fees for
EFTs and for other non-electronic services, and both fixed fees and
per-item fees; they may be given as a total or may be itemized in
part or in full.
2. Fees in interchange system. An account-holding institution
must disclose any fees it imposes on the consumer for EFTs,
including fees for ATM transactions in an interchange or shared ATM
system. Fees for use of an ATM imposed on the consumer by an
institution other than the account-holding institution and included
in the amount of the transfer by the terminal-operating institution
need not be separately disclosed on the periodic statement.
3. Finance charges. The requirement to disclose any fees
assessed against the account does not include a finance charge
imposed on the account during the statement period.
9(b)(4) Account Balances
1. Opening and closing balances. The opening and closing
balances must reflect both EFTs and other account activity.
9(b)(5) Address and Telephone Number for Inquiries
1. Telephone number. A single telephone number, preceded by the
``direct inquiries to'' language, will satisfy the requirements of
Sec. Sec. 1005.9(b)(5) and (6).
9(b)(6) Telephone Number for Preauthorized Transfers
1. Telephone number. See comment 9(b)(5)-1.
9(c) Exceptions to the Periodic Statement Requirements for Certain
Accounts
1. Transfers between accounts. The regulation provides an
exception from the periodic statement requirement for certain intra-
institutional transfers between a consumer's accounts. The financial
institution must still comply with the applicable periodic statement
requirements for any other EFTs to or from the account. For example,
a Regulation E statement must be provided quarterly for an account
that also receives payroll deposits electronically, or for any month
in which an account is also accessed by a withdrawal at an ATM.
9(c)(1) Preauthorized Transfers to Accounts
1. Accounts that may be accessed only by preauthorized transfers
to the account. The exception for ``accounts that may be accessed
only by preauthorized transfers to the account'' includes accounts
that can be accessed by means other than EFTs, such as checks. If,
however, an account may be accessed by any EFT other than
preauthorized credits to the account, such as preauthorized debits
or ATM transactions, the account does not qualify for the exception.
2. Reversal of direct deposits. For direct-deposit-only
accounts, a financial institution must send a periodic statement at
least quarterly. A reversal of a direct deposit to correct an error
does not trigger the monthly statement requirement when the error
represented a credit to the wrong consumer's account, a duplicate
credit, or a credit in the wrong amount. See also comment 2(m)-5.
9(d) Documentation for Foreign-Initiated Transfers
1. Foreign-initiated transfers. An institution must make a good
faith effort to provide all required information for foreign-
initiated transfers. For example, even if the institution is not
able to provide a specific terminal location, it should identify the
country and city in which the transfer was initiated.
Section 1005.10 Preauthorized Transfers
10(a) Preauthorized Transfers to Consumer's Account
10(a)(1) Notice by Financial Institution
1. Content. No specific language is required for notice
regarding receipt of a preauthorized transfer. Identifying the
deposit is sufficient; however, simply providing the current account
balance is not.
2. Notice of credit. A financial institution may use different
methods of notice for various types or series of preauthorized
transfers, and the institution need not offer consumers a choice of
notice methods.
3. Positive notice. A periodic statement sent within two
business days of the scheduled transfer, showing the transfer, can
serve as notice of receipt.
4. Negative notice. The absence of a deposit entry (on a
periodic statement sent within two business days of the scheduled
transfer date) will serve as negative notice.
5. Telephone notice. If a financial institution uses the
telephone notice option, the institution should be able in most
instances to verify during a consumer's initial call whether a
transfer was received. The institution must respond within two
business days to any inquiry not answered immediately.
6. Phone number for passbook accounts. The financial institution
may use any reasonable means necessary to provide the telephone
number to consumers with passbook accounts that can only be accessed
by preauthorized credits and that do not receive periodic
statements. For example, it may print the telephone number in the
passbook, or include the number with the annual error resolution
notice.
7. Telephone line availability. To satisfy the readily-available
standard, the financial institution must provide enough telephone
lines so that consumers get a reasonably prompt response. The
institution need only provide telephone service during normal
business hours. Within its primary service area, an institution must
provide a local or toll-free telephone number. It need not provide a
toll-free number or accept collect long-distance calls from outside
the area where it normally conducts business.
10(b) Written Authorization for Preauthorized Transfers From
Consumer's Account
1. Preexisting authorizations. The financial institution need
not require a new authorization before changing from paper-based to
electronic debiting when the existing authorization does not specify
that debiting is to occur electronically or specifies that the
debiting will occur by paper means. A new authorization also is not
required
[[Page 81046]]
when a successor institution begins collecting payments.
2. Authorization obtained by third party. The account-holding
financial institution does not violate the regulation when a third-
party payee fails to obtain the authorization in writing or fails to
give a copy to the consumer; rather, it is the third-party payee
that is in violation of the regulation.
3. Written authorization for preauthorized transfers. The
requirement that preauthorized EFTs be authorized by the consumer
``only by a writing'' cannot be met by a payee's signing a written
authorization on the consumer's behalf with only an oral
authorization from the consumer.
4. Use of a confirmation form. A financial institution or
designated payee may comply with the requirements of this section in
various ways. For example, a payee may provide the consumer with two
copies of a preauthorization form, and ask the consumer to sign and
return one and to retain the second copy.
5. Similarly authenticated. The similarly authenticated standard
permits signed, written authorizations to be provided
electronically. The writing and signature requirements of this
section are satisfied by complying with the Electronic Signatures in
Global and National Commerce Act, 15 U.S.C. 7001 et seq., which
defines electronic records and electronic signatures. Examples of
electronic signatures include, but are not limited to, digital
signatures and security codes. A security code need not originate
with the account-holding institution. The authorization process
should evidence the consumer's identity and assent to the
authorization. The person that obtains the authorization must
provide a copy of the terms of the authorization to the consumer
either electronically or in paper form. Only the consumer may
authorize the transfer and not, for example, a third-party merchant
on behalf of the consumer.
6. Requirements of an authorization. An authorization is valid
if it is readily identifiable as such and the terms of the
preauthorized transfer are clear and readily understandable.
7. Bona fide error. Consumers sometimes authorize third-party
payees, by telephone or online, to submit recurring charges against
a credit card account. If the consumer indicates use of a credit
card account when in fact a debit card is being used, the payee does
not violate the requirement to obtain a written authorization if the
failure to obtain written authorization was not intentional and
resulted from a bona fide error, and if the payee maintains
procedures reasonably adapted to avoid any such error. Procedures
reasonably adapted to avoid error will depend upon the
circumstances. Generally, requesting the consumer to specify whether
the card to be used for the authorization is a debit (or check) card
or a credit card is a reasonable procedure. Where the consumer has
indicated that the card is a credit card (or that the card is not a
debit or check card), the payee may rely on the consumer's statement
without seeking further information about the type of card. If the
payee believes, at the time of the authorization, that a credit card
is involved, and later finds that the card used is a debit card (for
example, because the consumer later brings the matter to the payee's
attention), the payee must obtain a written and signed or (where
appropriate) a similarly authenticated authorization as soon as
reasonably possible, or cease debiting the consumer's account.
10(c) Consumer's Right to Stop Payment
1. Stop-payment order. The financial institution must honor an
oral stop-payment order made at least three business days before a
scheduled debit. If the debit item is resubmitted, the institution
must continue to honor the stop-payment order (for example, by
suspending all subsequent payments to the payee-originator until the
consumer notifies the institution that payments should resume).
2. Revocation of authorization. Once a financial institution has
been notified that the consumer's authorization is no longer valid,
it must block all future payments for the particular debit
transmitted by the designated payee-originator. But see comment
10(c)-3. The institution may not wait for the payee-originator to
terminate the automatic debits. The institution may confirm that the
consumer has informed the payee-originator of the revocation (for
example, by requiring a copy of the consumer's revocation as written
confirmation to be provided within 14 days of an oral notification).
If the institution does not receive the required written
confirmation within the 14-day period, it may honor subsequent
debits to the account.
3. Alternative procedure for processing a stop-payment request.
If an institution does not have the capability to block a
preauthorized debit from being posted to the consumer's account--as
in the case of a preauthorized debit made through a debit card
network or other system, for example--the institution may instead
comply with the stop-payment requirements by using a third party to
block the transfer(s), as long as the consumer's account is not
debited for the payment.
10(d) Notice of Transfers Varying in Amount
10(d)(1) Notice
1. Preexisting authorizations. A financial institution holding
the consumer's account does not violate the regulation if the
designated payee fails to provide notice of varying amounts.
10(d)(2) Range
1. Range. A financial institution or designated payee that
elects to offer the consumer a specified range of amounts for
debiting (in lieu of providing the notice of transfers varying in
amount) must provide an acceptable range that could be anticipated
by the consumer. For example, if the transfer is for payment of a
gas bill, an appropriate range might be based on the highest bill in
winter and the lowest bill in summer.
2. Transfers to an account of the consumer held at another
institution. A financial institution need not provide a consumer the
option of receiving notice with each varying transfer, and may
instead provide notice only when a debit to an account of the
consumer falls outside a specified range or differs by more than a
specified amount from the most recent transfer, if the funds are
transferred and credited to an account of the consumer held at
another financial institution. The specified range or amount,
however, must be one that reasonably could be anticipated by the
consumer, and the institution must notify the consumer of the range
or amount at the time the consumer provides authorization for the
preauthorized transfers. For example, if the transfer is for payment
of interest for a fixed-rate certificate of deposit account, an
appropriate range might be based on a month containing 28 days and a
month containing 31 days.
10(e) Compulsory Use
10(e)(1) Credit
1. Loan payments. Creditors may not require repayment of loans
by electronic means on a preauthorized, recurring basis. A creditor
may offer a program with a reduced annual percentage rate or other
cost-related incentive for an automatic repayment feature, provided
the program with the automatic payment feature is not the only loan
program offered by the creditor for the type of credit involved.
Examples include:
i. Mortgages with graduated payments in which a pledged savings
account is automatically debited during an initial period to
supplement the monthly payments made by the borrower.
ii. Mortgage plans calling for preauthorized biweekly payments
that are debited electronically to the consumer's account and
produce a lower total finance charge.
2. Overdraft. A financial institution may require the automatic
repayment of an overdraft credit plan even if the overdraft
extension is charged to an open-end account that may be accessed by
the consumer in ways other than by overdrafts.
10(e)(2) Employment or Government Benefit
1. Payroll. An employer (including a financial institution) may
not require its employees to receive their salary by direct deposit
to any particular institution. An employer may require direct
deposit of salary by electronic means if employees are allowed to
choose the institution that will receive the direct deposit.
Alternatively, an employer may give employees the choice of having
their salary deposited at a particular institution (designated by
the employer) or receiving their salary by another means, such as by
check or cash.
Section 1005.11 Procedures for Resolving Errors
11(a) Definition of Error
1. Terminal location. With regard to deposits at an ATM, a
consumer's request for the terminal location or other information
triggers the error resolution procedures, but the financial
institution need only provide the ATM location if it has captured
that information.
2. Verifying an account debit or credit. If the consumer
contacts the financial institution to ascertain whether a payment
(for example, in a home-banking or bill-payment program) or any
other type of EFT
[[Page 81047]]
was debited to the account, or whether a deposit made via ATM,
preauthorized transfer, or any other type of EFT was credited to the
account, without asserting an error, the error resolution procedures
do not apply.
3. Loss or theft of access device. A financial institution is
required to comply with the error resolution procedures when a
consumer reports the loss or theft of an access device if the
consumer also alleges possible unauthorized use as a consequence of
the loss or theft.
4. Error asserted after account closed. The financial
institution must comply with the error resolution procedures when a
consumer properly asserts an error, even if the account has been
closed.
5. Request for documentation or information. A request for
documentation or other information must be treated as an error
unless it is clear that the consumer is requesting a duplicate copy
for tax or other record-keeping purposes.
6. Terminal receipts for transfers of $15 or less. The fact that
an institution does not make a terminal receipt available for a
transfer of $15 or less in accordance with Sec. 1005.9(e) is not an
error for purposes of Sec. 1005.11(a)(1)(vi) or (vii).
11(b) Notice of Error From Consumer
11(b)(1) Timing; Contents
1. Content of error notice. The notice of error is effective
even if it does not contain the consumer's account number, so long
as the financial institution is able to identify the account in
question. For example, the consumer could provide a Social Security
number or other unique means of identification.
2. Investigation pending receipt of information. While a
financial institution may request a written, signed statement from
the consumer relating to a notice of error, it may not delay
initiating or completing an investigation pending receipt of the
statement.
3. Statement held for consumer. When a consumer has arranged for
periodic statements to be held until picked up, the statement for a
particular cycle is deemed to have been transmitted on the date the
financial institution first makes the statement available to the
consumer.
4. Failure to provide statement. When a financial institution
fails to provide the consumer with a periodic statement, a request
for a copy is governed by this section if the consumer gives notice
within 60 days from the date on which the statement should have been
transmitted.
5. Discovery of error by institution. The error resolution
procedures of this section apply when a notice of error is received
from the consumer, and not when the financial institution itself
discovers and corrects an error.
6. Notice at particular phone number or address. A financial
institution may require the consumer to give notice only at the
telephone number or address disclosed by the institution, provided
the institution maintains reasonable procedures to refer the
consumer to the specified telephone number or address if the
consumer attempts to give notice to the institution in a different
manner.
7. Effect of late notice. An institution is not required to
comply with the requirements of this section for any notice of error
from the consumer that is received by the institution later than 60
days from the date on which the periodic statement first reflecting
the error is sent. Where the consumer's assertion of error involves
an unauthorized EFT, however, the institution must comply with Sec.
1005.6 before it may impose any liability on the consumer.
11(b)(2) Written Confirmation
1. Written confirmation-of-error notice. If the consumer sends a
written confirmation of error to the wrong address, the financial
institution must process the confirmation through normal procedures.
But the institution need not provisionally credit the consumer's
account if the written confirmation is delayed beyond 10 business
days in getting to the right place because it was sent to the wrong
address.
11(c) Time Limits and Extent of Investigation
1. Notice to consumer. Unless otherwise indicated in this
section, the financial institution may provide the required notices
to the consumer either orally or in writing.
2. Written confirmation of oral notice. A financial institution
must begin its investigation promptly upon receipt of an oral
notice. It may not delay until it has received a written
confirmation.
3. Charges for error resolution. If a billing error occurred,
whether as alleged or in a different amount or manner, the financial
institution may not impose a charge related to any aspect of the
error-resolution process (including charges for documentation or
investigation). Since the Act grants the consumer error-resolution
rights, the institution should avoid any chilling effect on the
good-faith assertion of errors that might result if charges are
assessed when no billing error has occurred.
4. Correction without investigation. A financial institution may
make, without investigation, a final correction to a consumer's
account in the amount or manner alleged by the consumer to be in
error, but must comply with all other applicable requirements of
Sec. 1005.11.
5. Correction notice. A financial institution may include the
notice of correction on a periodic statement that is mailed or
delivered within the 10-business-day or 45-calendar-day time limits
and that clearly identifies the correction to the consumer's
account. The institution must determine whether such a mailing will
be prompt enough to satisfy the requirements of this section, taking
into account the specific facts involved.
6. Correction of an error. If the financial institution
determines an error occurred, within either the 10-day or 45-day
period, it must correct the error (subject to the liability
provisions of Sec. Sec. 1005.6(a) and (b)) including, where
applicable, the crediting of interest and the refunding of any fees
imposed by the institution. In a combined credit/EFT transaction,
for example, the institution must refund any finance charges
incurred as a result of the error. The institution need not refund
fees that would have been imposed whether or not the error occurred.
7. Extent of required investigation. A financial institution
complies with its duty to investigate, correct, and report its
determination regarding an error described in Sec.
1005.11(a)(1)(vii) by transmitting the requested information,
clarification, or documentation within the time limits set forth in
Sec. 1005.11(c). If the institution has provisionally credited the
consumer's account in accordance with Sec. 1005.11(c)(2), it may
debit the amount upon transmitting the requested information,
clarification, or documentation.
Paragraph 11(c)(2)(i)
1. Compliance with all requirements. Financial institutions
exempted from provisionally crediting a consumer's account under
Sec. Sec. 1005.11(c)(2)(i)(A) and (B) must still comply with all
other requirements of Sec. 1005.11.
11(c)(3) Extension of Time Periods
1. POS debit card transactions. The extended deadlines for
investigating errors resulting from POS debit card transactions
apply to all debit card transactions, including those for cash only,
at merchants' POS terminals, and also including mail and telephone
orders. The deadlines do not apply to transactions at an ATM,
however, even though the ATM may be in a merchant location.
11(c)(4) Investigation
1. Third parties. When information or documentation requested by
the consumer is in the possession of a third party with whom the
financial institution does not have an agreement, the institution
satisfies the error resolution requirement by so advising the
consumer within the specified time period.
2. Scope of investigation. When an alleged error involves a
payment to a third party under the financial institution's telephone
bill-payment plan, a review of the institution's own records is
sufficient, assuming no agreement exists between the institution and
the third party concerning the bill-payment service.
3. POS transfers. When a consumer alleges an error involving a
transfer to a merchant via a POS terminal, the institution must
verify the information previously transmitted when executing the
transfer. For example, the financial institution may request a copy
of the sales receipt to verify that the amount of the transfer
correctly corresponds to the amount of the consumer's purchase.
4. Agreement. An agreement that a third party will honor an
access device is an agreement for purposes of this paragraph. A
financial institution does not have an agreement for purposes of
Sec. 1005.11(c)(4)(ii) solely because it participates in
transactions that occur under the Federal recurring payments
programs, or that are cleared through an ACH or similar arrangement
for the clearing and settlement of fund transfers generally, or
because the institution agrees to be bound by the rules of such an
arrangement.
5. No EFT agreement. When there is no agreement between the
institution and the third party for the type of EFT involved, the
financial institution must review any relevant information within
the institution's
[[Page 81048]]
own records for the particular account to resolve the consumer's
claim. The extent of the investigation required may vary depending
on the facts and circumstances. However, a financial institution may
not limit its investigation solely to the payment instructions where
additional information within its own records pertaining to the
particular account in question could help to resolve a consumer's
claim. Information that may be reviewed as part of an investigation
might include:
i. The ACH transaction records for the transfer;
ii. The transaction history of the particular account for a
reasonable period of time immediately preceding the allegation of
error;
iii. Whether the check number of the transaction in question is
notably out-of-sequence;
iv. The location of either the transaction or the payee in
question relative to the consumer's place of residence and habitual
transaction area;
v. Information relative to the account in question within the
control of the institution's third-party service providers if the
financial institution reasonably believes that it may have records
or other information that could be dispositive; or
vi. Any other information appropriate to resolve the claim.
11(d) Procedures if Financial Institution Determines No Error or
Different Error Occurred
1. Error different from that alleged. When a financial
institution determines that an error occurred in a manner or amount
different from that described by the consumer, it must comply with
the requirements of both Sec. Sec. 1005.11(c) and (d), as relevant.
The institution may give the notice of correction and the
explanation separately or in a combined form.
11(d)(1) Written Explanation
1. Request for documentation. When a consumer requests copies of
documents, the financial institution must provide the copies in an
understandable form. If an institution relied on magnetic tape, it
must convert the applicable data into readable form, for example, by
printing it and explaining any codes.
11(d)(2) Debiting Provisional Credit
1. Alternative procedure for debiting of credited funds. The
financial institution may comply with the requirements of this
section by notifying the consumer that the consumer's account will
be debited five business days from the transmittal of the
notification, specifying the calendar date on which the debiting
will occur.
2. Fees for overdrafts. The financial institution may not impose
fees for items it is required to honor under Sec. 1005.11. It may,
however, impose any normal transaction or item fee that is unrelated
to an overdraft resulting from the debiting. If the account is still
overdrawn after five business days, the institution may impose the
fees or finance charges to which it is entitled, if any, under an
overdraft credit plan.
11(e) Reassertion of Error
1. Withdrawal of error; right to reassert. The financial
institution has no further error resolution responsibilities if the
consumer voluntarily withdraws the notice alleging an error. A
consumer who has withdrawn an allegation of error has the right to
reassert the allegation unless the financial institution had already
complied with all of the error resolution requirements before the
allegation was withdrawn. The consumer must do so, however, within
the original 60-day period.
Section 1005.12 Relation to Other Laws
12(a) Relation to Truth in Lending
1. Determining applicable regulation. i. For transactions
involving access devices that also function as credit cards, whether
Regulation E or Regulation Z (12 CFR part 1026) applies depends on
the nature of the transaction. For example, if the transaction
solely involves an extension of credit, and does not include a debit
to a checking account (or other consumer asset account), the
liability limitations and error resolution requirements of
Regulation Z apply. If the transaction debits a checking account
only (with no credit extended), the provisions of Regulation E
apply. If the transaction debits a checking account but also draws
on an overdraft line of credit attached to the account, Regulation
E's liability limitations apply, in addition to Sec. Sec.
1026.13(d) and (g) of Regulation Z (which apply because of the
extension of credit associated with the overdraft feature on the
checking account). If a consumer's access device is also a credit
card and the device is used to make unauthorized withdrawals from a
checking account, but also is used to obtain unauthorized cash
advances directly from a line of credit that is separate from the
checking account, both Regulation E and Regulation Z apply.
ii. The following examples illustrate these principles:
A. A consumer has a card that can be used either as a credit
card or a debit card. When used as a debit card, the card draws on
the consumer's checking account. When used as a credit card, the
card draws only on a separate line of credit. If the card is stolen
and used as a credit card to make purchases or to get cash advances
at an ATM from the line of credit, the liability limits and error
resolution provisions of Regulation Z apply; Regulation E does not
apply.
B. In the same situation, if the card is stolen and is used as a
debit card to make purchases or to get cash withdrawals at an ATM
from the checking account, the liability limits and error resolution
provisions of Regulation E apply; Regulation Z does not apply.
C. In the same situation, assume the card is stolen and used
both as a debit card and as a credit card; for example, the thief
makes some purchases using the card as a debit card, and other
purchases using the card as a credit card. Here, the liability
limits and error resolution provisions of Regulation E apply to the
unauthorized transactions in which the card was used as a debit
card, and the corresponding provisions of Regulation Z apply to the
unauthorized transactions in which the card was used as a credit
card.
D. Assume a somewhat different type of card, one that draws on
the consumer's checking account and can also draw on an overdraft
line of credit attached to the checking account. There is no
separate line of credit, only the overdraft line, associated with
the card. In this situation, if the card is stolen and used, the
liability limits and the error resolution provisions of Regulation E
apply. In addition, if the use of the card has resulted in accessing
the overdraft line of credit, the error resolution provisions of
Sec. Sec. 1026.13(d) and (g) of Regulation Z also apply, but not
the other error resolution provisions of Regulation Z.
2. Issuance rules. For access devices that also constitute
credit cards, the issuance rules of Regulation E apply if the only
credit feature is a preexisting credit line attached to the asset
account to cover overdrafts (or to maintain a specified minimum
balance) or an overdraft service, as defined in Sec. 1005.17(a).
Regulation Z (12 CFR part 1026) rules apply if there is another type
of credit feature; for example, one permitting direct extensions of
credit that do not involve the asset account.
3. Overdraft service. The addition of an overdraft service, as
that term is defined in Sec. 1005.17(a), to an accepted access
device does not constitute the addition of a credit feature subject
to Regulation Z. Instead, the provisions of Regulation E apply,
including the liability limitations (Sec. 1005.6) and the
requirement to obtain consumer consent to the service before any
fees or charges for paying an overdraft may be assessed on the
account (Sec. 1005.17).
12(b) Preemption of Inconsistent State Laws
1. Specific determinations. The regulation prescribes standards
for determining whether state laws that govern EFTs, and state laws
regarding gift certificates, store gift cards, or general-use
prepaid cards that govern dormancy, inactivity, or service fees, or
expiration dates, are preempted by the Act and the regulation. A
state law that is inconsistent may be preempted even if the Bureau
has not issued a determination. However, nothing in Sec. 1005.12(b)
provides a financial institution with immunity for violations of
state law if the institution chooses not to make state disclosures
and the Bureau later determines that the state law is not preempted.
2. Preemption determination. The Bureau recognizes state law
preemption determinations made by the Board of Governors of the
Federal Reserve System prior to July 21, 2011, until and unless the
Bureau makes and publishes any contrary determination. The Board of
Governors determined that certain provisions in the state law of
Michigan are preempted by the Federal law, effective March 30, 1981:
i. Definition of unauthorized use. Section 5(4) is preempted to
the extent that it relates to the section of state law governing
consumer liability for unauthorized use of an access device.
ii. Consumer liability for unauthorized use of an account.
Section 14 is inconsistent with Sec. 1005.6 and is less protective
of the consumer than the Federal law. The state law places liability
on the consumer for the unauthorized use of an account in cases
[[Page 81049]]
involving the consumer's negligence. Under the Federal law, a
consumer's liability for unauthorized use is not related to the
consumer's negligence and depends instead on the consumer's
promptness in reporting the loss or theft of the access device.
iii. Error resolution. Section 15 is preempted because it is
inconsistent with Sec. 1005.11 and is less protective of the
consumer than the Federal law. The state law allows financial
institutions up to 70 days to resolve errors, whereas the Federal
law generally requires errors to be resolved within 45 days.
iv. Receipts and periodic statements. Sections 17 and 18 are
preempted because they are inconsistent with Sec. 1005.9. The state
provisions require a different disclosure of information than does
the Federal law. The receipt provision is also preempted because it
allows the consumer to be charged for receiving a receipt if a
machine cannot furnish one at the time of a transfer.
Section 1005.13 Administrative Enforcement; Record Retention
13(b) Record Retention
1. Requirements. A financial institution need not retain records
that it has given disclosures and documentation to each consumer; it
need only retain evidence demonstrating that its procedures
reasonably ensure the consumers' receipt of required disclosures and
documentation.
Section 1005.14 Electronic Fund Transfer Service Provider Not Holding
Consumer's Account
14(a) Electronic Fund Transfer Service Providers Subject to
Regulation
1. Applicability. This section applies only when a service
provider issues an access device to a consumer for initiating
transfers to or from the consumer's account at a financial
institution and the two entities have no agreement regarding this
EFT service. If the service provider does not issue an access device
to the consumer for accessing an account held by another
institution, it does not qualify for the treatment accorded by Sec.
1005.14. For example, this section does not apply to an institution
that initiates preauthorized payroll deposits to consumer accounts
on behalf of an employer. By contrast, Sec. 1005.14 can apply to an
institution that issues a code for initiating telephone transfers to
be carried out through the ACH from a consumer's account at another
institution. This is the case even if the consumer has accounts at
both institutions.
2. ACH agreements. The ACH rules generally do not constitute an
agreement for purposes of this section. However, an ACH agreement
under which members specifically agree to honor each other's debit
cards is an ``agreement,'' and thus this section does not apply.
14(b) Compliance by Electronic Fund Transfer Service Provider
1. Liability. The service provider is liable for unauthorized
EFTs that exceed limits on the consumer's liability under Sec.
1005.6.
14(b)(1) Disclosures and Documentation
1. Periodic statements from electronic fund transfer service
provider. A service provider that meets the conditions set forth in
this paragraph does not have to issue periodic statements. A service
provider that does not meet the conditions need only include on
periodic statements information about transfers initiated with the
access device it has issued.
14(b)(2) Error Resolution
1. Error resolution. When a consumer notifies the service
provider of an error, the EFT service provider must investigate and
resolve the error in compliance with Sec. 1005.11 as modified by
Sec. 1005.14(b)(2). If an error occurred, any fees or charges
imposed as a result of the error, either by the service provider or
by the account-holding institution (for example, overdraft or
dishonor fees) must be reimbursed to the consumer by the service
provider.
14(c) Compliance by Account-Holding Institution
14(c)(1) Documentation
1. Periodic statements from account-holding institution. The
periodic statement provided by the account-holding institution need
only contain the information required by Sec. 1005.9(b)(1).
Section 1005.16 Disclosures at Automated Teller Machines
16(b) General
Paragraph 16(b)(1)
1. Specific notices. An ATM operator that imposes a fee for a
specific type of transaction--such as for a cash withdrawal, but not
for a balance inquiry, or for some cash withdrawals, but not for
others (such as where the card was issued by a foreign bank or by a
card issuer that has entered into a special contractual relationship
with the ATM operator regarding surcharges)--may provide a notice on
or at the ATM that a fee will be imposed or a notice that a fee may
be imposed for providing EFT services or may specify the type of EFT
for which a fee is imposed. If, however, a fee will be imposed in
all instances, the notice must state that a fee will be imposed.
Section 1005.17 Requirements for Overdraft Services
17(a) Definition
1. Exempt securities- and commodities-related lines of credit.
The definition of ``overdraft service'' does not include the payment
of transactions in a securities or commodities account pursuant to
which credit is extended by a broker-dealer registered with the
Securities and Exchange Commission or the Commodity Futures Trading
Commission.
17(b) Opt-In Requirement
1. Scope. i. Account-holding institutions. Section 1005.17(b)
applies to ATM and one-time debit card transactions made with a
debit card issued by or on behalf of the account-holding
institution. Section 1005.17(b) does not apply to ATM and one-time
debit card transactions made with a debit card issued by or through
a third party unless the debit card is issued on behalf of the
account-holding institution.
ii. Coding of transactions. A financial institution complies
with the rule if it adapts its systems to identify debit card
transactions as either one-time or recurring. If it does so, the
financial institution may rely on the transaction's coding by
merchants, other institutions, and other third parties as a one-time
or a preauthorized or recurring debit card transaction.
iii. One-time debit card transactions. The opt-in applies to any
one-time debit card transaction, whether the card is used, for
example, at a point-of-sale, in an online transaction, or in a
telephone transaction.
iv. Application of fee prohibition. The prohibition on assessing
overdraft fees under Sec. 1005.17(b)(1) applies to all
institutions. For example, the prohibition applies to an institution
that has a policy and practice of declining to authorize and pay any
ATM or one-time debit card transactions when the institution has a
reasonable belief at the time of the authorization request that the
consumer does not have sufficient funds available to cover the
transaction. However, the institution is not required to comply with
Sec. Sec. 1005.17(b)(1)(i)-(iv), including the notice and opt-in
requirements, if it does not assess overdraft fees for paying ATM or
one-time debit card transactions that overdraw the consumer's
account. Assume an institution does not provide an opt-in notice,
but authorizes an ATM or one-time debit card transaction on the
reasonable belief that the consumer has sufficient funds in the
account to cover the transaction. If, at settlement, the consumer
has insufficient funds in the account (for example, due to
intervening transactions that post to the consumer's account), the
institution is not permitted to assess an overdraft fee or charge
for paying that transaction.
2. No affirmative consent. A financial institution may pay
overdrafts for ATM and one-time debit card transactions even if a
consumer has not affirmatively consented or opted in to the
institution's overdraft service. If the institution pays such an
overdraft without the consumer's affirmative consent, however, it
may not impose a fee or charge for doing so. These provisions do not
limit the institution's ability to debit the consumer's account for
the amount overdrawn if the institution is permitted to do so under
applicable law.
3. Overdraft transactions not required to be authorized or paid.
Section 1005.17 does not require a financial institution to
authorize or pay an overdraft on an ATM or one-time debit card
transaction even if the consumer has affirmatively consented to an
institution's overdraft service for such transactions.
4. Reasonable opportunity to provide affirmative consent. A
financial institution provides a consumer with a reasonable
opportunity to provide affirmative consent when, among other things,
it provides reasonable methods by which the consumer may
affirmatively consent. A financial institution provides such
reasonable methods, if:
[[Page 81050]]
i. By mail. The institution provides a form for the consumer to
fill out and mail to affirmatively consent to the service.
ii. By telephone. The institution provides a readily-available
telephone line that consumers may call to provide affirmative
consent.
iii. By electronic means. The institution provides an electronic
means for the consumer to affirmatively consent. For example, the
institution could provide a form that can be accessed and processed
at its Web site, where the consumer may click on a check box to
provide consent and confirm that choice by clicking on a button that
affirms the consumer's consent.
iv. In person. The institution provides a form for the consumer
to complete and present at a branch or office to affirmatively
consent to the service.
5. Implementing opt-in at account-opening. A financial
institution may provide notice regarding the institution's overdraft
service prior to or at account-opening. A financial institution may
require a consumer, as a necessary step to opening an account, to
choose whether or not to opt into the payment of ATM or one-time
debit card transactions pursuant to the institution's overdraft
service. For example, the institution could require the consumer, at
account opening, to sign a signature line or check a box on a form
(consistent with comment 17(b)-6) indicating whether or not the
consumer affirmatively consents at account opening. If the consumer
does not check any box or provide a signature, the institution must
assume that the consumer does not opt in. Or, the institution could
require the consumer to choose between an account that does not
permit the payment of ATM or one-time debit card transactions
pursuant to the institution's overdraft service and an account that
permits the payment of such overdrafts, provided that the accounts
comply with Sec. 1005.17(b)(2) and Sec. 1005.17(b)(3).
6. Affirmative consent required. A consumer's affirmative
consent, or opt-in, to a financial institution's overdraft service
must be obtained separately from other consents or acknowledgements
obtained by the institution, including a consent to receive
disclosures electronically. An institution may obtain a consumer's
affirmative consent by providing a blank signature line or check box
that the consumer could sign or select to affirmatively consent,
provided that the signature line or check box is used solely for
purposes of evidencing the consumer's choice whether or not to opt
into the overdraft service and not for other purposes. An
institution does not obtain a consumer's affirmative consent by
including preprinted language about the overdraft service in an
account disclosure provided with a signature card or contract that
the consumer must sign to open the account and that acknowledges the
consumer's acceptance of the account terms. Nor does an institution
obtain a consumer's affirmative consent by providing a signature
card that contains a pre-selected check box indicating that the
consumer is requesting the service.
7. Confirmation. A financial institution may comply with the
requirement in Sec. 1005.17(b)(1)(iv) to provide confirmation of
the consumer's affirmative consent by mailing or delivering to the
consumer a copy of the consumer's completed opt-in notice, or by
mailing or delivering a letter or notice to the consumer
acknowledging that the consumer has elected to opt into the
institution's service. The confirmation, which must be provided in
writing, or electronically if the consumer agrees, must include a
statement informing the consumer of the right to revoke the opt-in
at any time. See Sec. 1005.17(d)(6), which permits institutions to
include the revocation statement on the initial opt-in notice. An
institution complies with the confirmation requirement if it has
adopted reasonable procedures designed to ensure that overdraft fees
are assessed only in connection with transactions paid after the
confirmation has been mailed or delivered to the consumer.
8. Outstanding Negative Balance. If a fee or charge is based on
the amount of the outstanding negative balance, an institution is
prohibited from assessing any such fee if the negative balance is
solely attributable to an ATM or one-time debit card transaction,
unless the consumer has opted into the institution's overdraft
service for ATM or one-time debit card transactions. However, the
rule does not prohibit an institution from assessing such a fee if
the negative balance is attributable in whole or in part to a check,
ACH, or other type of transaction not subject to the prohibition on
assessing overdraft fees in Sec. 1005.17(b)(1).
9. Daily or Sustained Overdraft, Negative Balance, or Similar
Fee or Charge i. Daily or sustained overdraft, negative balance, or
similar fees or charges. If a consumer has not opted into the
institution's overdraft service for ATM or one-time debit card
transactions, the fee prohibition in Sec. 1005.17(b)(1) applies to
all overdraft fees or charges for paying those transactions,
including but not limited to daily or sustained overdraft, negative
balance, or similar fees or charges. Thus, where a consumer's
negative balance is solely attributable to an ATM or one-time debit
card transaction, the rule prohibits the assessment of such fees
unless the consumer has opted in. However, the rule does not
prohibit an institution from assessing daily or sustained overdraft,
negative balance, or similar fees or charges if a negative balance
is attributable in whole or in part to a check, ACH, or other type
of transaction not subject to the fee prohibition. When the negative
balance is attributable in part to an ATM or one-time debit card
transaction, and in part to a check, ACH, or other type of
transaction not subject to the fee prohibition, the date on which
such a fee may be assessed is based on the date on which the check,
ACH, or other type of transaction is paid into overdraft.
ii. Examples. The following examples illustrate how an
institution complies with the fee prohibition. For each example,
assume the following: (a) The consumer has not opted into the
payment of ATM or one-time debit card overdrafts; (b) these
transactions are paid into overdraft because the amount of the
transaction at settlement exceeded the amount authorized or the
amount was not submitted for authorization; (c) under the account
agreement, the institution may charge a per-item fee of $20 for each
overdraft, and a one-time sustained overdraft fee of $20 on the
fifth consecutive day the consumer's account remains overdrawn; (d)
the institution posts ATM and debit card transactions before other
transactions; and (e) the institution allocates deposits to account
debits in the same order in which it posts debits.
A. Assume that a consumer has a $50 account balance on March 1.
That day, the institution posts a one-time debit card transaction of
$60 and a check transaction of $40. The institution charges an
overdraft fee of $20 for the check overdraft but cannot assess an
overdraft fee for the debit card transaction. At the end of the day,
the consumer has an account balance of negative $70. The consumer
does not make any deposits to the account, and no other transactions
occur between March 2 and March 6. Because the consumer's negative
balance is attributable in part to the $40 check (and associated
overdraft fee), the institution may charge a sustained overdraft fee
on March 6 in connection with the check.
B. Same facts as in A., except that on March 3, the consumer
deposits $40 in the account. The institution allocates the $40 to
the debit card transaction first, consistent with its posting order
policy. At the end of the day on March 3, the consumer has an
account balance of negative $30, which is attributable to the check
transaction (and associated overdraft fee). The consumer does not
make any further deposits to the account, and no other transactions
occur between March 4 and March 6. Because the remaining negative
balance is attributable to the March 1 check transaction, the
institution may charge a sustained overdraft fee on March 6 in
connection with the check.
C. Assume that a consumer has a $50 account balance on March 1.
That day, the institution posts a one-time debit card transaction of
$60. At the end of that day, the consumer has an account balance of
negative $10. The institution may not assess an overdraft fee for
the debit card transaction. On March 3, the institution pays a check
transaction of $100 and charges an overdraft fee of $20. At the end
of that day, the consumer has an account balance of negative $130.
The consumer does not make any deposits to the account, and no other
transactions occur between March 4 and March 8. Because the
consumer's negative balance is attributable in part to the check,
the institution may assess a $20 sustained overdraft fee. However,
because the check was paid on March 3, the institution must use
March 3 as the start date for determining the date on which the
sustained overdraft fee may be assessed. Thus, the institution may
charge a $20 sustained overdraft fee on March 8.
iii. Alternative approach. For a consumer who does not opt into
the institution's overdraft service for ATM and one-time debit card
transactions, an institution may also comply with the fee
prohibition in Sec. 1005.17(b)(1) by not assessing daily or
sustained overdraft, negative balance, or similar fees or charges
unless a consumer's negative balance is attributable solely to
[[Page 81051]]
check, ACH or other types of transactions not subject to the fee
prohibition while that negative balance remains outstanding. In such
case, the institution would not have to determine how to allocate
subsequent deposits that reduce but do not eliminate the negative
balance. For example, if a consumer has a negative balance of $30,
of which $10 is attributable to a one-time debit card transaction,
an institution complies with the fee prohibition if it does not
assess a sustained overdraft fee while that negative balance remains
outstanding.
17(b)(2) Conditioning Payment of Other Overdrafts on Consumer's
Affirmative Consent
1. Application of the same criteria. The prohibitions on
conditioning in Sec. 1005.17(b)(2) generally require an institution
to apply the same criteria for deciding when to pay overdrafts for
checks, ACH transactions, and other types of transactions, whether
or not the consumer has affirmatively consented to the institution's
overdraft service with respect to ATM and one-time debit card
overdrafts. For example, if an institution's internal criteria would
lead the institution to pay a check overdraft if the consumer had
affirmatively consented to the institution's overdraft service for
ATM and one-time debit card transactions, it must also apply the
same criteria in a consistent manner in determining whether to pay
the check overdraft if the consumer has not opted in.
2. No requirement to pay overdrafts on checks, ACH transactions,
or other types of transactions. The prohibition on conditioning in
Sec. 1005.17(b)(2) does not require an institution to pay
overdrafts on checks, ACH transactions, or other types of
transactions in all circumstances. Rather, the rule simply prohibits
institutions from considering the consumer's decision not to opt in
when deciding whether to pay overdrafts for checks, ACH
transactions, or other types of transactions.
17(b)(3) Same Account Terms, Conditions, and Features
1. Variations in terms, conditions, or features. A financial
institution may not vary the terms, conditions, or features of an
account provided to a consumer who does not affirmatively consent to
the payment of ATM or one-time debit card transactions pursuant to
the institution's overdraft service. This includes, but is not
limited to:
i. Interest rates paid and fees assessed;
ii. The type of ATM or debit card provided to the consumer. For
instance, an institution may not provide consumers who do not opt in
a PIN-only card while providing a debit card with both PIN and
signature-debit functionality to consumers who opt in;
iii. Minimum balance requirements; or
iv. Account features such as online bill payment services.
2. Limited-feature bank accounts. Section 1005.17(b)(3) does not
prohibit institutions from offering deposit account products with
limited features, provided that a consumer is not required to open
such an account because the consumer did not opt in. For example,
Sec. 1005.17(b)(3) does not prohibit an institution from offering a
checking account designed to comply with state basic banking laws,
or designed for consumers who are not eligible for a checking
account because of their credit or checking account history, which
may include features limiting the payment of overdrafts. However, a
consumer who applies, and is otherwise eligible, for a full-service
or other particular deposit account product may not be provided
instead with the account with more limited features because the
consumer has declined to opt in.
17(c) Timing
1. Permitted fees or charges. Fees or charges for ATM and one-
time debit card overdrafts may be assessed only for overdrafts paid
on or after the date the financial institution receives the
consumer's affirmative consent to the institution's overdraft
service. See also comment 17(b)-7.
17(d) Content and Format
1. Overdraft service. The description of the institution's
overdraft service should indicate that the consumer has the right to
affirmatively consent, or opt into payment of overdrafts for ATM and
one-time debit card transactions. The description should also
disclose the institution's policies regarding the payment of
overdrafts for other transactions, including checks, ACH
transactions, and automatic bill payments, provided that this
content is not more prominent than the description of the consumer's
right to opt into payment of overdrafts for ATM and one-time debit
card transactions. As applicable, the institution also should
indicate that it pays overdrafts at its discretion, and should
briefly explain that if the institution does not authorize and pay
an overdraft, it may decline the transaction.
2. Maximum fee. If the amount of a fee may vary from transaction
to transaction, the financial institution may indicate that the
consumer may be assessed a fee ``up to'' the maximum fee. The
financial institution must disclose all applicable overdraft fees,
including but not limited to:
i. Per item or per transaction fees;
ii. Daily overdraft fees;
iii. Sustained overdraft fees, where fees are assessed when the
consumer has not repaid the amount of the overdraft after some
period of time (for example, if an account remains overdrawn for
five or more business days); or
iv. Negative balance fees.
3. Opt-in methods. The opt-in notice must include the methods by
which the consumer may consent to the overdraft service for ATM and
one-time debit card transactions. Institutions may tailor Model Form
A-9 to the methods offered to consumers for affirmatively consenting
to the service. For example, an institution need not provide the
tear-off portion of Model Form A-9 if it is only permitting
consumers to opt-in telephonically or electronically. Institutions
may, but are not required, to provide a signature line or check box
where the consumer can indicate that he or she declines to opt in.
4. Identification of consumer's account. An institution may use
any reasonable method to identify the account for which the consumer
submits the opt-in notice. For example, the institution may include
a line for a printed name and an account number, as shown in Model
Form A-9. Or, the institution may print a bar code or use other
tracking information. See also comment 17(b)-6, which describes how
an institution obtains a consumer's affirmative consent.
5. Alternative plans for covering overdrafts. If the institution
offers both a line of credit subject to Regulation Z (12 CFR part
1026) and a service that transfers funds from another account of the
consumer held at the institution to cover overdrafts, the
institution must state in its opt-in notice that both alternative
plans are offered. For example, the notice might state ``We also
offer overdraft protection plans, such as a link to a savings
account or to an overdraft line of credit, which may be less
expensive than our standard overdraft practices.'' If the
institution offers one, but not the other, it must state in its opt-
in notice the alternative plan that it offers. If the institution
does not offer either plan, it should omit the reference to the
alternative plans.
17(f) Continuing Right To Opt-In or To Revoke the Opt-In
1. Fees or charges for overdrafts incurred prior to revocation.
Section 1005.17(f)(1) provides that a consumer may revoke his or her
prior consent at any time. If a consumer does so, this provision
does not require the financial institution to waive or reverse any
overdraft fees assessed on the consumer's account prior to the
institution's implementation of the consumer's revocation request.
17(g) Duration of Opt-In
1. Termination of overdraft service. A financial institution
may, for example, terminate the overdraft service when the consumer
makes excessive use of the service.
Section 1005.18 Requirements for Financial Institutions Offering
Payroll Card Accounts
18(a) Coverage
1. Issuance of access device. Consistent with Sec. 1005.5(a), a
financial institution may issue an access device only in response to
an oral or written request for the device, or as a renewal or
substitute for an accepted access device. A consumer is deemed to
request an access device for a payroll card account when the
consumer chooses to receive salary or other compensation through a
payroll card account.
2. Application to employers and service providers. Typically,
employers and third-party service providers do not meet the
definition of a ``financial institution'' subject to the regulation
because they neither hold payroll card accounts nor issue payroll
cards and agree with consumers to provide EFT services in connection
with payroll card accounts. However, to the extent an employer or a
service provider undertakes either of these functions, it would be
deemed a financial institution under the regulation.
18(b) Alternative to Periodic Statements
1. Posted transactions. A history of transactions provided under
Sec. Sec. 1005.18(b)(1)(ii) and (iii) shall reflect
[[Page 81052]]
transfers once they have been posted to the account. Thus, an
institution does not need to include transactions that have been
authorized, but that have not yet posted to the account.
2. Electronic history. The electronic history required under
Sec. 1005.18(b)(1)(ii) must be provided in a form that the consumer
may keep, as required under Sec. 1005.4(a)(1). Financial
institutions may satisfy this requirement if they make the
electronic history available in a format that is capable of being
retained. For example, an institution satisfies the requirement if
it provides a history at a Web site in a format that is capable of
being printed or stored electronically using a web browser.
18(c) Modified Requirements
1. Error resolution safe harbor provision. Institutions that
choose to investigate notices of error provided up to 120 days from
the date a transaction has posted to a consumer's account may still
disclose the error resolution time period required by the regulation
(as set forth in the Model Form in Appendix A-7). Specifically, an
institution may disclose to payroll card account holders that the
institution will investigate any notice of error provided within 60
days of the consumer electronically accessing an account or
receiving a written history upon request that reflects the error,
even if, for some or all transactions, the institution investigates
any notice of error provided up to 120 days from the date that the
transaction alleged to be in error has posted to the consumer's
account. Similarly, an institution's summary of the consumer's
liability (as required under Sec. 1005.7(b)(1)) may disclose that
liability is based on the consumer providing notice of error within
60 days of the consumer electronically accessing an account or
receiving a written history reflecting the error, even if, for some
or all transactions, the institution allows a consumer to assert a
notice of error up to 120 days from the date of posting of the
alleged error.
2. Electronic access. A consumer is deemed to have accessed a
payroll card account electronically when the consumer enters a user
identification code or password or otherwise complies with a
security procedure used by an institution to verify the consumer's
identity. An institution is not required to determine whether a
consumer has in fact accessed information about specific
transactions to trigger the beginning of the 60-day periods for
liability limits and error resolution under Sec. Sec. 1005.6 and
1005.11.
3. Untimely notice of error. An institution that provides a
transaction history under Sec. 1005.18(b)(1) is not required to
comply with the requirements of Sec. 1005.11 for any notice of
error from the consumer pertaining to a transfer that occurred more
than 60 days prior to the earlier of the date the consumer
electronically accesses the account or the date the financial
institution sends a written history upon the consumer's request.
(Alternatively, as provided in Sec. 1005.18(c)(4)(ii), an
institution need not comply with the requirements of Sec. 1005.11
with respect to any notice of error received from the consumer more
than 120 days after the date of posting of the transfer allegedly in
error.) Where the consumer's assertion of error involves an
unauthorized EFT, however, the institution must comply with Sec.
1005.6 before it may impose any liability on the consumer.
Section 1005.20 Requirements for Gift Cards and Gift Certificates
20(a) Definitions
1. Form of card, code, or device. Section 1005.20 applies to any
card, code, or other device that meets one of the definitions in
Sec. Sec. 1005.20(a)(1) through (a)(3) (and is not otherwise
excluded by Sec. 1005.20(b)), even if it is not issued in card
form. Section 1005.20 applies, for example, to an account number or
bar code that can be used to access underlying funds. Similarly,
Sec. 1005.20 applies to a device with a chip or other embedded
mechanism that links the device to stored funds, such as a mobile
phone or sticker containing a contactless chip that enables the
consumer to access the stored funds. A card, code, or other device
that meets the definition in Sec. Sec. 1005.20(a)(1) through (a)(3)
includes an electronic promise (see comment 20(a)-2) as well as a
promise that is not electronic. See, however, Sec. 1005.20(b)(5).
In addition, Sec. 1005.20 applies if a merchant issues a code that
entitles a consumer to redeem the code for goods or services,
regardless of the medium in which the code is issued (see, however,
Sec. 1005.20(b)(5)), and whether or not it may be redeemed
electronically or in the merchant's store. Thus, for example, if a
merchant emails a code that a consumer may redeem in a specified
amount either online or in the merchant's store, that code is
covered under Sec. 1005.20, unless one of the exclusions in Sec.
1005.20(b) apply.
2. Electronic promise. The term ``electronic promise'' as used
in EFTA sections 915(a)(2)(B), (a)(2)(C), and (a)(2)(D) means a
person's commitment or obligation communicated or stored in
electronic form made to a consumer to provide payment for goods or
services for transactions initiated by the consumer. The electronic
promise is itself represented by a card, code or other device that
is issued or honored by the person, reflecting the person's
commitment or obligation to pay. For example, if a merchant issues a
code that can be given as a gift and that entitles the recipient to
redeem the code in an online transaction for goods or services, that
code represents an electronic promise by the merchant and is a card,
code, or other device covered by Sec. 1005.20.
3. Cards, codes, or other devices redeemable for specific goods
or services. Certain cards, codes, or other devices may be
redeemable upon presentation for a specific good or service, or
``experience,'' such as a spa treatment, hotel stay, or airline
flight. In other cases, a card, code, or other device may entitle
the consumer to a certain percentage off the purchase of a good or
service, such as 20% off of any purchase in a store. Such cards,
codes, or other devices generally are not subject to the
requirements of this section because they are not issued to a
consumer ``in a specified amount'' as required under the definitions
of ``gift certificate,'' ``store gift card,'' or ``general-use
prepaid card.'' However, if the card, code, or other device is
issued in a specified or denominated amount that can be applied
toward the purchase of a specific good or service, such as a
certificate or card redeemable for a spa treatment up to $50, the
card, code, or other device is subject to this section, unless one
of the exceptions in Sec. 1005.20(b) apply. See, e.g., Sec.
1005.20(b)(3). Similarly, if the card, code, or other device states
a specific monetary value, such as ``a $50 value,'' the card, code,
or other device is subject to this section, unless an exclusion in
Sec. 1005.20(b) applies.
4. Issued primarily for personal, family, or household purposes.
Section 1005.20 only applies to cards, codes, or other devices that
are sold or issued to a consumer primarily for personal, family, or
household purposes. A card, code, or other device initially
purchased by a business is subject to this section if the card,
code, or other device is purchased for redistribution or resale to
consumers primarily for personal, family, or household purposes.
Moreover, the fact that a card, code, or other device may be
primarily funded by a business, for example, in the case of certain
rewards or incentive cards, does not mean the card, code, or other
device is outside the scope of Sec. 1005.20, if the card, code, or
other device will be provided to a consumer primarily for personal,
family, or household purposes. But see Sec. 1005.20(b)(3). Whether
a card, code, or other device is issued to a consumer primarily for
personal, family, or household purposes will depend on the facts and
circumstances. For example, if a program manager purchases store
gift cards directly from an issuing merchant and sells those cards
through the program manager's retail outlets, such gift cards are
subject to the requirements of Sec. 1005.20 because the store gift
cards are sold to consumers primarily for personal, family, or
household purposes. In contrast, a card, code, or other device
generally would not be issued to consumers primarily for personal,
family, or household purposes, and therefore would fall outside the
scope of Sec. 1005.20, if the purchaser of the card, code, or
device is contractually prohibited from reselling or redistributing
the card, code, or device to consumers primarily for personal,
family, or household purposes, and reasonable policies and
procedures are maintained to avoid such sale or distribution for
such purposes. However, if an entity that has purchased cards,
codes, or other devices for business purposes sells or distributes
such cards, codes, or other devices to consumers primarily for
personal, family, or household purposes, that entity does not comply
with Sec. 1005.20 if it has not otherwise met the substantive and
disclosure requirements of the rule or unless an exclusion in Sec.
1005.20(b) applies.
5. Examples of cards, codes, or other devices issued for
business purposes. Examples of cards, codes, or other devices that
are issued and used for business purposes and therefore excluded
from the definitions of ``gift certificate,'' ``store gift card,''
or ``general-use prepaid card'' include:
i. Cards, codes, or other devices to reimburse employees for
travel or moving expenses.
[[Page 81053]]
ii. Cards, codes, or other devices for employees to use to
purchase office supplies and other business-related items.
20(a)(2) Store Gift Card
1. Relationship between ``gift certificate'' and ``store gift
card.'' The term ``store gift card'' in Sec. 1005.20(a)(2) includes
``gift certificate'' as defined in Sec. 1005.20(a)(1). For example,
a numeric or alphanumeric code representing a specified dollar
amount or value that is electronically sent to a consumer as a gift
which can be redeemed or exchanged by the recipient to obtain goods
or services may be both a ``gift certificate'' and a ``store gift
card'' if the specified amount or value cannot be increased.
2. Affiliated group of merchants. The term ``affiliated group of
merchants'' means two or more affiliated merchants or other persons
that are related by common ownership or common corporate control
(see, e.g., 12 CFR 227.3(b) and 12 CFR 223.2) and that share the
same name, mark, or logo. For example, the term includes franchisees
that are subject to a common set of corporate policies or practices
under the terms of their franchise licenses. The term also applies
to two or more merchants or other persons that agree among
themselves, by contract or otherwise, to redeem cards, codes, or
other devices bearing the same name, mark, or logo (other than the
mark, logo, or brand of a payment network), for the purchase of
goods or services solely at such merchants or persons. For example,
assume a movie theatre chain and a restaurant chain jointly agree to
issue cards that share the same ``Flix and Food'' logo that can be
redeemed solely towards the purchase of movie tickets or concessions
at any of the participating movie theatres, or towards the purchase
of food or beverages at any of the participating restaurants. For
purposes of Sec. 1005.20, the movie theatre chain and the
restaurant chain would be considered to be an affiliated group of
merchants, and the cards are considered to be ``store gift cards.''
However, merchants or other persons are not considered to be
affiliated merely because they agree to accept a card that bears the
mark, logo, or brand of a payment network.
3. Mall gift cards. See comment 20(a)(3)-2.
20(a)(3) General-Use Prepaid Card
1. Redeemable upon presentation at multiple, unaffiliated
merchants. A card, code, or other device is redeemable upon
presentation at multiple, unaffiliated merchants if, for example,
such merchants agree to honor the card, code, or device if it bears
the mark, logo, or brand of a payment network, pursuant to the rules
of the payment network.
2. Mall gift cards. Mall gift cards that are intended to be used
or redeemed for goods or services at participating retailers within
a shopping mall may be considered store gift cards or general-use
prepaid cards depending on the merchants with which the cards may be
redeemed. For example, if a mall card may only be redeemed at
merchants within the mall itself, the card is more likely to be
redeemable at an affiliated group of merchants and considered a
store gift card. However, certain mall cards also carry the brand of
a payment network and can be used at any retailer that accepts that
card brand, including retailers located outside of the mall. Such
cards are considered general-use prepaid cards.
20(a)(4) Loyalty, Award, or Promotional Gift Card
1. Examples of loyalty, award, or promotional programs. Examples
of loyalty, award, or promotional programs under Sec. 1005.20(a)(4)
include, but are not limited to:
i. Consumer retention programs operated or administered by a
merchant or other person that provide to consumers cards or coupons
redeemable for or towards goods or services or other monetary value
as a reward for purchases made or for visits to the participating
merchant.
ii. Sales promotions operated or administered by a merchant or
product manufacturer that provide coupons or discounts redeemable
for or towards goods or services or other monetary value.
iii. Rebate programs operated or administered by a merchant or
product manufacturer that provide cards redeemable for or towards
goods or services or other monetary value to consumers in connection
with the consumer's purchase of a product or service and the
consumer's completion of the rebate submission process.
iv. Sweepstakes or contests that distribute cards redeemable for
or towards goods or services or other monetary value to consumers as
an invitation to enter into the promotion for a chance to win a
prize.
v. Referral programs that provide cards redeemable for or
towards goods or services or other monetary value to consumers in
exchange for referring other potential consumers to a merchant.
vi. Incentive programs through which an employer provides cards
redeemable for or towards goods or services or other monetary value
to employees, for example, to recognize job performance, such as
increased sales, or to encourage employee wellness and safety.
vii. Charitable or community relations programs through which a
company provides cards redeemable for or towards goods or services
or other monetary value to a charity or community group for their
fundraising purposes, for example, as a reward for a donation or as
a prize in a charitable event.
2. Issued for loyalty, award, or promotional purposes. To
indicate that a card, code, or other device is issued for loyalty,
award, or promotional purposes as required by Sec.
1005.20(a)(4)(iii), it is sufficient for the card, code, or other
device to state on the front, for example, ``Reward'' or
``Promotional.''
3. Reference to toll-free number and Web site. If a card, code,
or other device issued in connection with a loyalty, award, or
promotional program does not have any fees, the disclosure under
Sec. 1005.20(a)(4)(iii)(D) is not required on the card, code, or
other device.
20(a)(6) Service Fee
1. Service fees. Under Sec. 1005.20(a)(6), a service fee
includes a periodic fee for holding or use of a gift certificate,
store gift card, or general-use prepaid card. A periodic fee
includes any fee that may be imposed on a gift certificate, store
gift card, or general-use prepaid card from time to time for holding
or using the certificate or card, such as a monthly maintenance fee,
a transaction fee, an ATM fee, a reload fee, a foreign currency
transaction fee, or a balance inquiry fee, whether or not the fee is
waived for a certain period of time or is only imposed after a
certain period of time. A service fee does not include a one-time
fee or a fee that is unlikely to be imposed more than once while the
underlying funds are still valid, such as an initial issuance fee, a
cash-out fee, a supplemental card fee, or a lost or stolen
certificate or card replacement fee.
20(a)(7) Activity
1. Activity. Under Sec. 1005.20(a)(7), any action that results
in an increase or decrease of the funds underlying a gift
certificate, store gift card, or general-use prepaid card, other
than the imposition of a fee, or an adjustment due to an error or a
reversal of a prior transaction, constitutes activity for purposes
of Sec. 1005.20. For example, the purchase and activation of a
certificate or card, the use of the certificate or card to purchase
a good or service, or the reloading of funds onto a store gift card
or general-use prepaid card constitutes activity. However, the
imposition of a fee, the replacement of an expired, lost, or stolen
certificate or card, and a balance inquiry do not constitute
activity. In addition, if a consumer attempts to engage in a
transaction with a gift certificate, store gift card, or general-use
prepaid card, but the transaction cannot be completed due to
technical or other reasons, such attempt does not constitute
activity. Furthermore, if the funds underlying a gift certificate,
store gift card, or general-use prepaid card are adjusted because
there was an error or the consumer has returned a previously
purchased good, the adjustment also does not constitute activity
with respect to the certificate or card.
20(b) Exclusions
1. Application of exclusion. A card, code, or other device is
excluded from the definition of ``gift certificate,'' ``store gift
card,'' or ``general-use prepaid card'' if it meets any of the
exclusions in Sec. 1005.20(b). An excluded card, code, or other
device generally is not subject to any of the requirements of this
section. See, however, Sec. 1005.20(a)(4)(iii), requiring certain
disclosures for loyalty, award, or promotional gift cards.
2. Eligibility for multiple exclusions. A card, code, or other
device may qualify for one or more exclusions. For example, a
corporation may give its employees a gift card that is marketed
solely to businesses for incentive-related purposes, such as to
reward job performance or promote employee safety. In this case, the
card may qualify for the exclusion for loyalty, award, or
promotional gift cards under Sec. 1005.20(b)(3), or for the
exclusion for cards, codes, or other devices not marketed to the
general public under Sec. 1005.20(b)(4). In addition, as long as
any one of the exclusions applies, a card, code, or other device is
not covered by Sec. 1005.20,
[[Page 81054]]
even if other exclusions do not apply. In the above example, the
corporation may give its employees a type of gift card that can also
be purchased by a consumer directly from a merchant. Under these
circumstances, while the card does not qualify for the exclusion for
cards, codes, or other devices not marketed to the general public
under Sec. 1005.20(b)(4) because the card can also be obtained
through retail channels, it is nevertheless exempt from the
substantive requirements of Sec. 1005.20 because it is a loyalty,
award, or promotional gift card. See, however, Sec.
1005.20(a)(4)(iii), requiring certain disclosures for loyalty,
award, or promotional gift cards. Similarly, a person may market a
reloadable card to teenagers for occasional expenses that enables
parents to monitor spending. Although the card does not qualify for
the exclusion for cards, codes, or other devices not marketed to the
general public under Sec. 1005.20(b)(4), it may nevertheless be
exempt from the requirements of Sec. 1005.20 under Sec.
1005.20(b)(2) if it is reloadable and not marketed or labeled as a
gift card or gift certificate.
Paragraph 20(b)(1)
1. Examples of excluded products. The exclusion for products
usable solely for telephone services applies to prepaid cards for
long-distance telephone service, prepaid cards for wireless
telephone service and prepaid cards for other services that function
similar to telephone services, such as prepaid cards for voice over
Internet protocol (VoIP) access time.
Paragraph 20(b)(2)
1. Reloadable. A card, code, or other device is ``reloadable''
if the terms and conditions of the agreement permit funds to be
added to the card, code, or other device after the initial purchase
or issuance. A card, code, or other device is not ``reloadable''
merely because the issuer or processor is technically able to add
functionality that would otherwise enable the card, code, or other
device to be reloaded.
2. Marketed or labeled as a gift card or gift certificate. The
term ``marketed or labeled as a gift card or gift certificate''
means directly or indirectly offering, advertising, or otherwise
suggesting the potential use of a card, code or other device, as a
gift for another person. Whether the exclusion applies generally
does not depend on the type of entity that makes the promotional
message. For example, a card may be marketed or labeled as a gift
card or gift certificate if anyone (other than the purchaser of the
card), including the issuer, the retailer, the program manager that
may distribute the card, or the payment network on which a card is
used, promotes the use of the card as a gift card or gift
certificate. A card, code, or other device, including a general-
purpose reloadable card, is marketed or labeled as a gift card or
gift certificate even if it is only occasionally marketed as a gift
card or gift certificate. For example, a network-branded general
purpose reloadable card would be marketed or labeled as a gift card
or gift certificate if the issuer principally advertises the card as
a less costly alternative to a bank account but promotes the card in
a television, radio, newspaper, or Internet advertisement, or on
signage as ``the perfect gift'' during the holiday season. However,
the mere mention of the availability of gift cards or gift
certificates in an advertisement or on a sign that also indicates
the availability of other excluded prepaid cards does not by itself
cause the excluded prepaid cards to be marketed as a gift card or a
gift certificate. For example, the posting of a sign in a store that
refers to the availability of gift cards does not by itself
constitute the marketing of otherwise excluded prepaid cards that
may also be sold in the store as gift cards or gift certificates,
provided that a consumer acting reasonably under the circumstances
would not be led to believe that the sign applies to all prepaid
cards sold in the store. See, however, comment 20(b)(2)-4.ii.
3. Examples of marketed or labeled as a gift card or gift
certificate. i. Examples of marketed or labeled as a gift card or
gift certificate include:
A. Using the word ``gift'' or ``present'' on a card,
certificate, or accompanying material, including documentation,
packaging and promotional displays.
B. Representing or suggesting that a certificate or card can be
given to another person, for example, as a ``token of appreciation''
or a ``stocking stuffer,'' or displaying a congratulatory message on
the card, certificate or accompanying material.
C. Incorporating gift-giving or celebratory imagery or motifs,
such as a bow, ribbon, wrapped present, candle, or congratulatory
message, on a card, certificate, accompanying documentation, or
promotional material.
ii. The term does not include:
A. Representing that a card or certificate can be used as a
substitute for a checking, savings, or deposit account.
B. Representing that a card or certificate can be used to pay
for a consumer's health-related expenses--for example, a card tied
to a health savings account.
C. Representing that a card or certificate can be used as a
substitute for traveler's checks or cash.
D. Representing that a card or certificate can be used as a
budgetary tool, for example, by teenagers, or to cover emergency
expenses.
4. Reasonable policies and procedures to avoid marketing as a
gift card. The exclusion for a card, code, or other device that is
reloadable and not marketed or labeled as a gift card or gift
certificate in Sec. 1005.20(b)(2) applies if a reloadable card,
code, or other device is not marketed or labeled as a gift card or
gift certificate and if persons subject to the rule, including
issuers, program managers, and retailers, maintain policies and
procedures reasonably designed to avoid such marketing. Such
policies and procedures may include contractual provisions
prohibiting a reloadable card, code, or other device from being
marketed or labeled as a gift card or gift certificate,
merchandising guidelines or plans regarding how the product must be
displayed in a retail outlet, and controls to regularly monitor or
otherwise verify that the card, code or other device is not being
marketed as a gift card. Whether a reloadable card, code, or other
device has been marketed as a gift card or gift certificate will
depend on the facts and circumstances, including whether a
reasonable consumer would be led to believe that the card, code, or
other device is a gift card or gift certificate. The following
examples illustrate the application of Sec. 1005.20(b)(2):
i. An issuer or program manager of prepaid cards agrees to sell
general-purpose reloadable cards through a retailer. The contract
between the issuer or program manager and the retailer establishes
the terms and conditions under which the cards may be sold and
marketed at the retailer. The terms and conditions prohibit the
general-purpose reloadable cards from being marketed as a gift card
or gift certificate, and require policies and procedures to
regularly monitor or otherwise verify that the cards are not being
marketed as such. The issuer or program manager sets up one
promotional display at the retailer for gift cards and another
physically separated display for excluded products under Sec.
1005.20(b), including general-purpose reloadable cards and wireless
telephone cards, such that a reasonable consumer would not believe
that the excluded cards are gift cards. The exclusion in Sec.
1005.20(b)(2) applies because policies and procedures reasonably
designed to avoid the marketing of the general-purpose reloadable
cards as gift cards or gift certificates are maintained, even if a
retail clerk inadvertently stocks or a consumer inadvertently places
a general-purpose reloadable card on the gift card display.
ii. Same facts as in i., except that the issuer or program
manager sets up a single promotional display at the retailer on
which a variety of prepaid cards are sold, including store gift
cards and general-purpose reloadable cards. A sign stating ``Gift
Cards'' appears prominently at the top of the display. The exclusion
in Sec. 1005.20(b)(2) does not apply with respect to the general-
purpose reloadable cards because policies and procedures reasonably
designed to avoid the marketing of excluded cards as gift cards or
gift certificates are not maintained.
iii. Same facts as in i., except that the issuer or program
manager sets up a single promotional multi-sided display at the
retailer on which a variety of prepaid card products, including
store gift cards and general-purpose reloadable cards are sold. Gift
cards are segregated from excluded cards, with gift cards on one
side of the display and excluded cards on a different side of a
display. Signs of equal prominence at the top of each side of the
display clearly differentiate between gift cards and the other types
of prepaid cards that are available for sale. The retailer does not
use any more conspicuous signage suggesting the general availability
of gift cards, such as a large sign stating ``Gift Cards'' at the
top of the display or located near the display. The exclusion in
Sec. 1005.20(b)(2) applies because policies and procedures
reasonably designed to avoid the marketing of the general-purpose
reloadable cards as gift cards or gift certificates are maintained,
even if a retail clerk inadvertently stocks or a consumer
inadvertently places a general-purpose reloadable card on the gift
card display.
iv. Same facts as in i., except that the retailer sells a
variety of prepaid card
[[Page 81055]]
products, including store gift cards and general-purpose reloadable
cards, arranged side-by-side in the same checkout lane. The retailer
does not affirmatively indicate or represent that gift cards are
available, such as by displaying any signage or other indicia at the
checkout lane suggesting the general availability of gift cards. The
exclusion in Sec. 1005.20(b)(2) applies because policies and
procedures reasonably designed to avoid marketing the general-
purpose reloadable cards as gift cards or gift certificates are
maintained.
5. Online sales of prepaid cards. Some Web sites may prominently
advertise or promote the availability of gift cards or gift
certificates in a manner that suggests to a consumer that the Web
site exclusively sells gift cards or gift certificates. For example,
a Web site may display a banner advertisement or a graphic on the
home page that prominently states ``Gift Cards,'' ``Gift Giving,''
or similar language without mention of other available products, or
use a web address that includes only a reference to gift cards or
gift certificates in the address. In such a case, a consumer acting
reasonably under the circumstances could be led to believe that all
prepaid products sold on the Web site are gift cards or gift
certificates. Under these facts, the Web site has marketed all such
products, including general-purpose reloadable cards, as gift cards
or gift certificates, and the exclusion in Sec. 1005.20(b)(2) does
not apply.
6. Temporary non-reloadable cards issued in connection with a
general-purpose reloadable card. Certain general-purpose reloadable
cards that are typically marketed as an account substitute initially
may be sold or issued in the form of a temporary non-reloadable
card. After the card is purchased, the cardholder is typically
required to call the issuer to register the card and to provide
identifying information in order to obtain a reloadable replacement
card. In most cases, the temporary non-reloadable card can be used
for purchases until the replacement reloadable card arrives and is
activated by the cardholder. Because the temporary non-reloadable
card may only be obtained in connection with the general-purpose
reloadable card, the exclusion in Sec. 1005.20(b)(2) applies so
long as the card is not marketed as a gift card or gift certificate.
Paragraph 20(b)(4)
1. Marketed to the general public. A card, code, or other device
is marketed to the general public if the potential use of the card,
code, or other device is directly or indirectly offered, advertised,
or otherwise promoted to the general public. A card, code, or other
device may be marketed to the general public through any advertising
medium, including television, radio, newspaper, the Internet, or
signage. However, the posting of a company policy that funds may be
disbursed by prepaid card (such as a sign posted at a cash register
or customer service center stating that store credit will be issued
by prepaid card) does not constitute the marketing of a card, code,
or other device to the general public. In addition, the method of
distribution by itself is not dispositive in determining whether a
card, code, or other device is marketed to the general public.
Factors that may be considered in determining whether the exclusion
applies to a particular card, code, or other device include the
means or channel through which the card, code, or device may be
obtained by a consumer, the subset of consumers that are eligible to
obtain the card, code, or device, and whether the availability of
the card, code, or device is advertised or otherwise promoted in the
marketplace.
2. Examples. The following examples illustrate the application
of the exclusion in Sec. 1005.20(b)(4):
i. A merchant sells its gift cards at a discount to a business
which may give them to employees or loyal consumers as incentives or
rewards. In determining whether the gift card falls within the
exclusion in Sec. 1005.20(b)(4), the merchant must consider whether
the card is of a type that is advertised or made available to
consumers generally or can be obtained elsewhere. If the card can
also be purchased through retail channels, the exclusion in Sec.
1005.20(b)(4) does not apply, even if the consumer obtained the card
from the business as an incentive or reward. See, however, Sec.
1005.20(b)(3).
ii. A national retail chain decides to market its gift cards
only to members of its frequent buyer program. Similarly, a bank may
decide to sell gift cards only to its customers. If a member of the
general public may become a member of the program or a customer of
the bank, the card does not fall within the exclusion in Sec.
1005.20(b)(4) because the general public has the ability to obtain
the cards. See, however, Sec. 1005.20(b)(3).
iii. A card issuer advertises a reloadable card to teenagers and
their parents promoting the card for use by teenagers for occasional
expenses, schoolbooks and emergencies and by parents to monitor
spending. Because the card is marketed to and may be sold to any
member of the general public, the exclusion in Sec. 1005.20(b)(4)
does not apply. See, however, Sec. 1005.20(b)(2).
iv. An insurance company settles a policyholder's claim and
distributes the insurance proceeds to the consumer by means of a
prepaid card. Because the prepaid card is simply the means for
providing the insurance proceeds to the consumer and the
availability of the card is not advertised to the general public,
the exclusion in Sec. 1005.20(b)(4) applies.
v. A merchant provides store credit to a consumer following a
merchandise return by issuing a prepaid card that clearly indicates
that the card contains funds for store credit. Because the prepaid
card is issued for the stated purpose of providing store credit to
the consumer and the ability to receive refunds by a prepaid card is
not advertised to the general public, the exclusion in Sec.
1005.20(b)(4) applies.
vi. A tax preparation company elects to distribute tax refunds
to its clients by issuing prepaid cards, but does not advertise or
otherwise promote the ability to receive proceeds in this manner.
Because the prepaid card is simply the mechanism for providing the
tax refund to the consumer, and the tax preparer does not advertise
the ability to obtain tax refunds by a prepaid card, the exclusion
in Sec. 1005.20(b)(4) applies. However, if the tax preparer
promotes the ability to receive tax refund proceeds through a
prepaid card as a way to obtain ``faster'' access to the proceeds,
the exclusion in Sec. 1005.20(b)(4) does not apply.
Paragraph 20(b)(5)
1. Exclusion explained. To qualify for the exclusion in Sec.
1005.20(b)(5), the sole means of issuing the card, code, or other
device must be in a paper form. Thus, the exclusion generally
applies to certificates issued in paper form where solely the paper
itself may be used to purchase goods or services. A card, code or
other device is not issued solely in paper form simply because it
may be reproduced or printed on paper. For example, a bar code, card
or certificate number, or certificate or coupon electronically
provided to a consumer and redeemable for goods and services is not
issued in paper form, even if it may be reproduced or otherwise
printed on paper by the consumer. In this circumstance, although the
consumer might hold a paper facsimile of the card, code, or other
device, the exclusion does not apply because the information
necessary to redeem the value was initially issued in electronic
form. A paper certificate is within the exclusion regardless of
whether it may be redeemed electronically. For example, a paper
certificate or receipt that bears a bar code, code, or account
number falls within the exclusion in Sec. 1005.20(b)(5) if the bar
code, code, or account number is not issued in any form other than
on the paper. In addition, the exclusion in Sec. 1005.20(b)(5)
continues to apply in circumstances where an issuer replaces a gift
certificate that was initially issued in paper form with a card or
electronic code (for example, to replace a lost paper certificate).
2. Examples. The following examples illustrate the application
of the exclusion in Sec. 1005.20(b)(5):
i. A merchant issues a paper gift certificate that entitles the
bearer to a specified dollar amount that can be applied towards a
future meal. The merchant fills in the certificate with the name of
the certificate holder and the amount of the certificate. The
certificate falls within the exclusion in Sec. 1005.20(b)(5)
because it is issued in paper form only.
ii. A merchant allows a consumer to prepay for a good or
service, such as a car wash or time at a parking meter, and issues a
paper receipt bearing a numerical or bar code that the consumer may
redeem to obtain the good or service. The exclusion in Sec.
1005.20(b)(5) applies because the code is issued in paper form only.
iii. A merchant issues a paper certificate or receipt bearing a
bar code or certificate number that can later be scanned or entered
into the merchant's system and redeemed by the certificate or
receipt holder towards the purchase of goods or services. The bar
code or certificate number is not issued by the merchant in any form
other than paper. The exclusion in Sec. 1005.20(b)(5) applies
because the bar code or certificate number is issued in paper form
only.
iv. An online merchant electronically provides a bar code, card
or certificate number, or certificate or coupon to a
[[Page 81056]]
consumer that the consumer may print on a home printer and later
redeem towards the purchase of goods or services. The exclusion in
Sec. 1005.20(b)(5) does not apply because the bar code or card or
certificate number was issued to the consumer in electronic form,
even though it can be reproduced or otherwise printed on paper by
the consumer.
Paragraph 20(b)(6)
1. Exclusion explained. The exclusion for cards, codes, or other
devices that are redeemable solely for admission to events or venues
at a particular location or group of affiliated locations generally
applies to cards, codes, or other devices that are not redeemed for
a specified monetary value, but rather solely for admission or entry
to an event or venue. The exclusion also covers a card, code, or
other device that is usable to purchase goods or services in
addition to entry into the event or the venue, either at the event
or venue or at an affiliated location or location in geographic
proximity to the event or venue.
2. Examples. The following examples illustrate the application
of the exclusion in Sec. 1005.20(b)(6):
i. A consumer purchases a prepaid card that entitles the holder
to a ticket for entry to an amusement park. The prepaid card may
only be used for entry to the park. The card qualifies for the
exclusion in Sec. 1005.20(b)(6) because it is redeemable for
admission or entry and for goods or services in conjunction with
that admission. In addition, if the prepaid card does not have a
monetary value, and therefore is not ``issued in a specified
amount,'' the card does not meet the definitions of ``gift
certificate,'' ``store gift card,'' or ``general-use prepaid card''
in Sec. 1005.20(a). See comment 20(a)-3.
ii. Same facts as in i., except that the gift card also entitles
the holder of the gift card to a dollar amount that can be applied
towards the purchase of food and beverages or goods or services at
the park or at nearby affiliated locations. The card qualifies for
the exclusion in Sec. 1005.20(b)(6) because it is redeemable for
admission or entry and for goods or services in conjunction with
that admission.
iii. A consumer purchases a $25 gift card that the holder of the
gift card can use to make purchases at a merchant, or,
alternatively, can apply towards the cost of admission to the
merchant's affiliated amusement park. The card is not eligible for
the exclusion in Sec. 1005.20(b)(6) because it is not redeemable
solely for the admission or ticket itself (or for goods and services
purchased in conjunction with such admission). The card meets the
definition of ``store gift card'' and is therefore subject to Sec.
1005.20, unless a different exclusion applies.
20(c) Form of Disclosures
20(c)(1) Clear and Conspicuous
1. Clear and conspicuous standard. All disclosures required by
this section must be clear and conspicuous. Disclosures are clear
and conspicuous for purposes of this section if they are readily
understandable and, in the case of written and electronic
disclosures, the location and type size are readily noticeable to
consumers. Disclosures need not be located on the front of the
certificate or card, except where otherwise required, to be
considered clear and conspicuous. Disclosures are clear and
conspicuous for the purposes of this section if they are in a print
that contrasts with and is otherwise not obstructed by the
background on which they are printed. For example, disclosures on a
card or computer screen are not likely to be conspicuous if obscured
by a logo printed in the background. Similarly, disclosures on the
back of a card that are printed on top of indentations from embossed
type on the front of the card are not likely to be conspicuous if
the indentations obstruct the readability of the disclosures. To the
extent permitted, oral disclosures meet the standard when they are
given at a volume and speed sufficient for a consumer to hear and
comprehend them.
2. Abbreviations and symbols. Disclosures may contain commonly
accepted or readily understandable abbreviations or symbols, such as
``mo.'' for month or a ``/'' to indicate ``per.'' Under the clear
and conspicuous standard, it is sufficient to state, for example,
that a particular fee is charged ``$2.50/mo. after 12 mos.''
20(c)(2) Format
1. Electronic disclosures. Disclosures provided electronically
pursuant to this section are not subject to compliance with the
consumer consent and other applicable provisions of the Electronic
Signatures in Global and National Commerce Act (E-Sign Act) (15
U.S.C. 7001 et seq.). Electronic disclosures must be in a retainable
form. For example, a person may satisfy the requirement if it
provides an online disclosure in a format that is capable of being
printed. Electronic disclosures may not be provided through a
hyperlink or in another manner by which the purchaser can bypass the
disclosure. A person is not required to confirm that the consumer
has read the electronic disclosures.
20(c)(3) Disclosure Prior to Purchase
1. Method of purchase. The disclosures required by this
paragraph must be provided before a certificate or card is purchased
regardless of whether the certificate or card is purchased in
person, online, by telephone, or by other means.
2. Electronic disclosures. Section 1005.20(c)(3) provides that
the disclosures required by this section must be provided to the
consumer prior to purchase. For certificates or cards purchased
electronically, disclosures made to the consumer after a consumer
has initiated an online purchase of a certificate or card, but prior
to completing the purchase of the certificate or card, would satisfy
the prior-to-purchase requirement. However, electronic disclosures
made available on a person's Web site that may or may not be
accessed by the consumer are not provided to the consumer and
therefore would not satisfy the prior-to-purchase requirement.
3. Non-physical certificates and cards. If no physical
certificate or card is issued, the disclosures must be provided to
the consumer before the certificate or card is purchased. For
example, where a gift certificate or card is a code that is provided
by telephone, the required disclosures may be provided orally prior
to purchase. See also Sec. 1005.20(c)(2).
20(c)(4) Disclosures on the Certificate or Card
1. Non-physical certificates and cards. If no physical
certificate or card is issued, the disclosures required by this
paragraph must be disclosed on the code, confirmation, or other
written or electronic document provided to the consumer. For
example, where a gift certificate or card is a code or confirmation
that is provided to a consumer online or sent to a consumer's email
address, the required disclosures may be provided electronically on
the same document as the code or confirmation.
2. No disclosures on a certificate or card. Disclosures required
by Sec. 1005.20(c)(4) need not be made on a certificate or card if
it is accompanied by a certificate or card that complies with this
section. For example, a person may issue or sell a supplemental gift
card that is smaller than a standard size and that does not bear the
applicable disclosures if it is accompanied by a fully compliant
certificate or card. See also comment 20(c)(2)-2.
20(d) Prohibition on Imposition of Fees or Charges
1. One-year period. Section 1005.20(d) provides that a person
may impose a dormancy, inactivity, or service fee only if there has
been no activity with respect to a certificate or card for one year.
The following examples illustrate this rule:
i. A certificate or card is purchased on January 15 of year one.
If there has been no activity on the certificate or card since the
certificate or card was purchased, a dormancy, inactivity, or
service fee may be imposed on the certificate or card on January 15
of year two.
ii. Same facts as i., and a fee was imposed on January 15 of
year two. Because no more than one dormancy, inactivity, or service
fee may be imposed in any given calendar month, the earliest date
that another dormancy, inactivity, or service fee may be imposed,
assuming there continues to be no activity on the certificate or
card, is February 1 of year two. A dormancy, inactivity, or service
fee is permitted to be imposed on February 1 of year two because
there has been no activity on the certificate or card for the
preceding year (February 1 of year one through January 31 of year
two), and February is a new calendar month. The imposition of a fee
on January 15 of year two is not activity for purposes of Sec.
1005.20(d). See comment 20(a)(7)-1.
iii. Same facts as i., and a fee was imposed on January 15 of
year two. On January 31 of year two, the consumer uses the card to
make a purchase. Another dormancy, inactivity, or service fee could
not be imposed until January 31 of year three, assuming there has
been no activity on the certificate or card since January 31 of year
two.
2. Relationship between Sec. Sec. 1005.20(d)(2) and (c)(3).
Sections 1005.20(d)(2) and (c)(3) contain similar, but not
identical, disclosure requirements. Section 1005.20(d)(2) requires
the disclosure of dormancy, inactivity, and
[[Page 81057]]
service fees on a certificate or card. Section 1005.20(c)(3)
requires that vendor person that issues or sells such certificate or
card disclose to a consumer any dormancy, inactivity, and service
fees associated with the certificate or card before such certificate
or card may be purchased. Depending on the context, a single
disclosure that meets the clear and conspicuous requirements of both
Sec. Sec. 1005.20(d)(2) and (c)(3) may be used to disclose a
dormancy, inactivity, or service fee. For example, if the
disclosures on a certificate or card, required by Sec.
1005.20(d)(2), are visible to the consumer without having to remove
packaging or other materials sold with the certificate or card, for
a purchase made in person, the disclosures also meet the
requirements of Sec. 1005.20(c)(3). Otherwise, a dormancy,
inactivity, or service fee may need to be disclosed multiple times
to satisfy the requirements of Sec. Sec. 1005.20(d)(2) and (c)(3).
For example, if the disclosures on a certificate or card, required
by Sec. 1005.20(d)(2), are obstructed by packaging sold with the
certificate or card, for a purchase made in person, they also must
be disclosed on the packaging sold with the certificate or card to
meet the requirements of Sec. 1005.20(c)(3).
3. Relationship between Sec. Sec. 1005.20(d)(2), (e)(3), and
(f)(2). In addition to any disclosures required under Sec.
1005.20(d)(2), any applicable disclosures under Sec. Sec.
1005.20(e)(3) and (f)(2) of this section must also be provided on
the certificate or card.
4. One fee per month. Under Sec. 1005.20(d)(3), no more than
one dormancy, inactivity, or service fee may be imposed in any given
calendar month. For example, if a dormancy fee is imposed on January
1, following a year of inactivity, and a consumer makes a balance
inquiry on January 15, a balance inquiry fee may not be imposed at
that time because a dormancy fee was already imposed earlier that
month and a balance inquiry fee is a type of service fee. If,
however, the dormancy fee could be imposed on January 1, following a
year of inactivity, and the consumer makes a balance inquiry on the
same date, the person assessing the fees may choose whether to
impose the dormancy fee or the balance inquiry fee on January 1. The
restriction in Sec. 1005.20(d)(3) does not apply to any fee that is
not a dormancy, inactivity, or service fee. For example, assume a
service fee is imposed on a general-use prepaid card on January 1,
following a year of inactivity. If a consumer cashes out the
remaining funds by check on January 15, a cash-out fee, to the
extent such cash-out fee is permitted under Sec. 1005.20(e)(4), may
be imposed at that time because a cash-out fee is not a dormancy,
inactivity, or service fee.
5. Accumulation of fees. Section 1005.20(d) prohibits the
accumulation of dormancy, inactivity, or service fees for previous
periods into a single fee because such a practice would circumvent
the limitation in Sec. 1005.20(d)(3) that only one fee may be
charged per month. For example, if a consumer purchases and
activates a store gift card on January 1 but never uses the card, a
monthly maintenance fee of $2.00 a month may not be accumulated such
that a fee of $24 is imposed on January 1 the following year.
20(e) Prohibition on Sale of Gift Certificates or Cards With
Expiration Dates
1. Reasonable opportunity. Under Sec. 1005.20(e)(1), no person
may sell or issue a gift certificate, store gift card, or general-
use prepaid card with an expiration date, unless there are policies
and procedures in place to provide consumers with a reasonable
opportunity to purchase a certificate or card with at least five
years remaining until the certificate or card expiration date.
Consumers are deemed to have a reasonable opportunity to purchase a
certificate or card with at least five years remaining until the
certificate or card expiration date if:
i. There are policies and procedures established to prevent the
sale of a certificate or card unless the certificate or card
expiration date is at least five years after the date the
certificate or card was sold or initially issued to a consumer; or
ii. A certificate or card is available to consumers to purchase
five years and six months before the certificate or card expiration
date.
2. Applicability to replacement certificates or cards. Section
1005.20(e)(1) applies solely to the purchase of a certificate or
card. Therefore, Sec. 1005.20(e)(1) does not apply to the
replacement of such certificates or cards. Certificates or cards
issued as a replacement may bear a certificate or card expiration
date of less than five years from the date of issuance of the
replacement certificate or card. If the certificate or card
expiration date for a replacement certificate or card is later than
the date set forth in Sec. 1005.20(e)(2)(i), then pursuant to Sec.
1005.20(e)(2), the expiration date for the underlying funds at the
time the replacement certificate or card is issued must be no
earlier than the expiration date for the replacement certificate or
card. For purposes of Sec. 1005.20(e)(2), funds are not considered
to be loaded to a store gift card or general-use prepaid card solely
because a replacement card has been issued or activated for use.
3. Disclosure of funds expiration--date not required. Section
1005.20(e)(3)(i) does not require disclosure of the precise date the
funds will expire. It is sufficient to disclose, for example,
``Funds expire 5 years from the date funds last loaded to the
card.''; ``Funds can be used 5 years from the date money was last
added to the card.''; or ``Funds do not expire.''
4. Disclosure not required if no expiration date. If the
certificate or card and underlying funds do not expire, the
disclosure required by Sec. 1005.20(e)(3)(i) need not be stated on
the certificate or card. If the certificate or card and underlying
funds expire at the same time, only one expiration date need be
disclosed on the certificate or card.
5. Reference to toll-free telephone number and Web site. If a
certificate or card does not expire, or if the underlying funds are
not available after the certificate or card expires, the disclosure
required by Sec. 1005.20(e)(3)(ii) need not be stated on the
certificate or card. See, however, Sec. 1005.20(f)(2).
6. Relationship to Sec. 226.20(f)(2). The same toll-free
telephone number and Web site may be used to comply with Sec. Sec.
226.20(e)(3)(ii) and (f)(2). Neither a toll-free number nor a Web
site must be maintained or disclosed if no fees are imposed in
connection with a certificate or card, and the certificate or card
and the underlying funds do not expire.
7. Distinguishing between certificate or card expiration and
funds expiration. If applicable, a disclosure must be made on the
certificate or card that notifies a consumer that the certificate or
card expires, but the funds either do not expire or expire later
than the certificate or card, and that the consumer may contact the
issuer for a replacement card. The disclosure must be made with
equal prominence and in close proximity to the certificate or card
expiration date. The close proximity requirement does not apply to
oral disclosures. In the case of a certificate or card, close
proximity means that the disclosure must be on the same side as the
certificate or card expiration date. For example, if the disclosure
is the same type size and is located immediately next to or directly
above or below the certificate or card expiration date, without any
intervening text or graphical displays, the disclosures would be
deemed to be equally prominent and in close proximity. The
disclosure need not be embossed on the certificate or card to be
deemed equally prominent, even if the expiration date is embossed on
the certificate or card. The disclosure may state on the front of
the card, for example, ``Funds expire after card. Call for
replacement card.'' or ``Funds do not expire. Call for new card
after 09/2016.'' Disclosures made pursuant to Sec.
1005.20(e)(3)(iii)(A) may also fulfill the requirements of Sec.
1005.20(e)(3)(i). For example, making a disclosure that ``Funds do
not expire'' to comply with Sec. 1005.20(e)(3)(iii)(A) also
fulfills the requirements of Sec. 1005.20(e)(3)(i).
8. Expiration date safe harbor. A non-reloadable certificate or
card that bears an expiration date that is at least seven years from
the date of manufacture need not state the disclosure required by
Sec. 1005.20(e)(3)(iii). However, Sec. 1005.20(e)(1) still
prohibits the sale or issuance of such certificate or card unless
there are policies and procedures in place to provide a consumer
with a reasonable opportunity to purchase the certificate or card
with at least five years remaining until the certificate or card
expiration date. In addition, under Sec. 1005.20(e)(2), the funds
may not expire before the certificate or card expiration date, even
if the expiration date of the certificate or card bears an
expiration date that is more than five years from the date of
purchase. For purposes of this safe harbor, the date of manufacture
is the date on which the certificate or card expiration date is
printed on the certificate or card.
9. Relationship between Sec. Sec. 1005.20(d)(2), (e)(3), and
(f)(2). In addition to any disclosures required to be made under
Sec. 1005.20(e)(3), any applicable disclosures under Sec. Sec.
1005.20(d)(2) and (f)(2) must also be provided on the certificate or
card.
10. Replacement or remaining balance of an expired certificate
or card. When a certificate or card expires, but the underlying
funds have not expired, an issuer, at its option in accordance with
applicable state
[[Page 81058]]
law, may provide either a replacement certificate or card or
otherwise provide the certificate or card holder, for example, by
check, with the remaining balance on the certificate or card. In
either case, the issuer may not charge a fee for the service.
11. Replacement of a lost or stolen certificate or card not
required. Section 1005.20(e)(4) does not require the replacement of
a certificate or card that has been lost or stolen.
12. Date of issuance or loading. For purposes of Sec.
1005.20(e)(2)(i), a certificate or card is not issued or loaded with
funds until the certificate or card is activated for use.
13. Application of expiration date provisions after redemption
of certificate or card. The requirement that funds underlying a
certificate or card must not expire for at least five years from the
date of issuance or date of last load ceases to apply once the
certificate or card has been fully redeemed, even if the underlying
funds are not used to contemporaneously purchase a specific good or
service. For example, some certificates or cards can be used to
purchase music, media, or virtual goods. Once redeemed by a
consumer, the entire balance on the certificate or card is debited
from the certificate or card and credited or transferred to another
``account'' established by the merchant of such goods or services.
The consumer can then make purchases of songs, media, or virtual
goods from the merchant using that ``account'' either at the time
the value is transferred from the certificate or card or at a later
time. Under these circumstances, once the card has been fully
redeemed and the ``account'' credited with the amount of the
underlying funds, the five-year minimum expiration term no longer
applies to the underlying funds. However, if the consumer only
partially redeems the value of the certificate or card, the five-
year minimum expiration term requirement continues to apply to the
funds remaining on the certificate or card.
20(f) Additional Disclosure Requirements for Gift Certificates or
Cards
1. Reference to toll-free telephone number and Web site. If a
certificate or card does not have any fees, the disclosure under
Sec. 1005.20(f)(2) is not required on the certificate or card. See,
however, Sec. 1005.20(e)(3)(ii).
2. Relationship to Sec. 226.20(e)(3)(ii). The same toll-free
telephone number and Web site may be used to comply with Sec. Sec.
226.20(e)(3)(ii) and (f)(2). Neither a toll-free number nor a Web
site must be maintained or disclosed if no fees are imposed in
connection with a certificate or card, and both the certificate or
card and underlying funds do not expire.
3. Relationship between Sec. Sec. 1005.20(d)(2), (e)(3), and
(f)(2). In addition to any disclosures required pursuant to Sec.
1005.20(f)(2), any applicable disclosures under Sec. Sec.
1005.20(d)(2) and (e)(3) must also be provided on the certificate or
card.
20(g) Compliance Dates
1. Period of eligibility for loyalty, award, or promotional
programs. For purposes of Sec. 1005.20(g)(2), the period of
eligibility is the time period during which a consumer must engage
in a certain action or actions to meet the terms of eligibility for
a loyalty, award, or promotional program and obtain the card, code,
or other device. Under Sec. 1005.20(g)(2), a gift card issued
pursuant to a loyalty, award, or promotional program that began
prior to August 22, 2010 need not state the disclosures in Sec.
1005.20(a)(4)(iii) regardless of whether the consumer became
eligible to receive the gift card prior to August 22, 2010, or after
that date. For example, a product manufacturer may provide a $20
rebate card to a consumer if the consumer purchases a particular
product and submits a fully completed entry between January 1, 2010
and December 31, 2010. Similarly, a merchant may provide a $20 gift
card to a consumer if the consumer makes $200 worth of qualifying
purchases between June 1, 2010 and October 30, 2010. Under both
examples, gift cards provided pursuant to these loyalty, award, or
promotional programs need not state the disclosures in Sec.
1005.20(a)(4)(iii) to qualify for the exclusion in Sec.
1005.20(b)(3) for loyalty, award, or promotional gift cards because
the period of eligibility for each program began prior to August 22,
2010.
20(h) Temporary Exemption
20(h)(1) Delayed Effective Date
1. Application to certificates or cards produced prior to April
1, 2010. Certificates or cards produced prior to April 1, 2010 may
be sold to a consumer on or after August 22, 2010 without satisfying
the requirements of Sec. Sec. 1005.20(c)(3), (d)(2), (e)(1),
(e)(3), and (f) through January 30, 2011, provided that issuers of
such certificates or cards comply with the additional substantive
and disclosure requirements of Sec. Sec. 1005.20(h)(1)(i) through
(iv). Issuers of certificates or cards produced prior to April 1,
2010 need not satisfy these additional requirements if the
certificates or cards fully comply with the rule (Sec. Sec.
1005.20(a) through (f)). For example, the in-store signage and other
disclosures required by Sec. 1005.20(h)(2) do not apply to gift
cards produced prior to April 1, 2010 that do not have fees and do
not expire, and which otherwise comply with the rule.
2. Expiration of temporary exemption. Certificates or cards
produced prior to April 1, 2010 that do not fully comply with
Sec. Sec. 1005.20(a) through (f) may not be issued or sold to
consumers on or after January 31, 2011.
20(h)(2) Additional Disclosures
1. Disclosures through third parties. Issuers may make the
disclosures required by Sec. 1005.20(h)(2) through a third party,
such as a retailer or merchant. For example, an issuer may have a
merchant install in-store signage with the disclosures required by
Sec. 1005.20(h)(2) on the issuer's behalf.
2. General advertising disclosures. Section 1005.20(h)(2) does
not impose an obligation on the issuer to advertise gift
certificates, store gift cards, or general-use prepaid cards.
Appendix A--Model Disclosure Clauses and Forms
1. Review of forms. The Bureau will not review or approve
disclosure forms or statements for financial institutions. However,
the Bureau has issued model clauses for institutions to use in
designing their disclosures. If an institution uses these clauses
accurately to reflect its service, the institution is protected from
liability for failure to make disclosures in proper form.
2. Use of forms. The appendix contains model disclosure clauses
for optional use by financial institutions to facilitate compliance
with the disclosure requirements of sections 1005.5(b)(2) and
(b)(3), 1005.6(a), 1005.7, 1005.8(b), 1005.14(b)(1)(ii),
1005.15(d)(1) and (d)(2), and 1005.18(c)(1) and (c)(2). The use of
appropriate clauses in making disclosures will protect a financial
institution from liability under sections 916 and 917 of the Act
provided the clauses accurately reflect the institution's EFT
services.
3. Altering the clauses. Financial institutions may use clauses
of their own design in conjunction with the Bureau's model clauses.
The inapplicable words or portions of phrases in parentheses should
be deleted. The catchlines are not part of the clauses and need not
be used. Financial institutions may make alterations, substitutions,
or additions in the clauses to reflect the services offered, such as
technical changes (including the substitution of a trade name for
the word ``card,'' deletion of inapplicable services, or
substitution of lesser liability limits). Several of the model
clauses include references to a telephone number and address. Where
two or more of these clauses are used in a disclosure, the telephone
number and address may be referenced and need not be repeated.
Dated: October 24, 2011.
Alastair M. Fitzpayne,
Deputy Chief of Staff and Executive Secretary, Department of the
Treasury.
[FR Doc. 2011-31725 Filed 12-23-11; 8:45 am]
BILLING CODE 4810-AM-P