[Federal Register Volume 61, Number 86 (Thursday, May 2, 1996)]
[Proposed Rules]
[Pages 19696-19705]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10181]
Federal Register / Vol. 61, No. 86 / Thursday, May 2, 1996 / Proposed
Rules
[[Page 19696]]
FEDERAL RESERVE SYSTEM
12 CFR Part 205
[Regulation E; Docket No. R-0919]
Electronic Fund Transfers
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Proposed rule.
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SUMMARY: The Board is publishing for comment proposed amendments to
Regulation E, which implements the Electronic Fund Transfer Act. The
proposed amendments relate to: the use of electronic communication in
home-banking services for providing disclosures and other
documentation; error resolution requirements for new accounts; and the
treatment of stored-value cards (imposing modified Regulation E
requirements on stored-value products in systems that track individual
transactions, cards, or consumers; providing an exemption for cards on
which a maximum value of $100 can be stored; and providing that other
stored-value cards are not covered by Regulation E).
DATES: Comments must be received on or before August 1, 1996.
ADDRESSES: Comments should refer to Docket No. R-0919 and be mailed to
William W. Wiles, Secretary, Board of Governors of the Federal Reserve
System, Washington, DC 20551. They may also be delivered to the guard
station in the Eccles Building Courtyard on 20th Street, NW (between
Constitution Avenue and C Street) between 8:45 a.m. and 5:15 p.m.
weekdays. Except as provided in the Board's rules regarding the
availability of information (12 CFR 261.8), comments will be available
for inspection and copying by members of the public in the Freedom of
Information Office, Room MP-500 of the Martin Building, between 9:00
a.m. and 5:00 p.m. weekdays.
FOR FURTHER INFORMATION CONTACT: Regarding the proposed amendments on
electronic communication, Michael Hentrel, Staff Attorney, and
regarding the other proposed amendments, Jane Gell, Natalie Taylor, or
Kyung Cho-Miller, Staff Attorneys, Division of Consumer and Community
Affairs, at (202) 452-2412 or (202) 452-3667. For the hearing impaired
only, Telecommunications Device for the Deaf (TDD), Dorothea Thompson,
at (202) 452-3544.
SUPPLEMENTARY INFORMATION:
I. Background
The Electronic Fund Transfer Act (EFTA) (15 U.S.C. 1693), enacted
in 1978, provides a basic framework establishing the rights,
liabilities, and responsibilities of participants in electronic fund
transfer (EFT) systems. The Federal Reserve Board was given rulewriting
authority to issue implementing regulations. Types of transfers covered
by the act and regulation include transfers initiated through an
automated teller machine (ATM), point-of-sale (POS) terminal, automated
clearinghouse, telephone bill-payment system, or home banking program.
The act and Regulation E (12 CFR Part 205) provide rules that govern
these and other EFTs. The rules prescribe restrictions on the
unsolicited issuance of ATM cards and other access devices; disclosure
of terms and conditions of an EFT service; documentation of EFTs by
means of terminal receipts and periodic statements; limitations on
consumer liability for unauthorized transfers; procedures for error
resolution; and certain rights related to preauthorized EFTs.
In 1994 the Board issued for public comment a proposed revision of
Regulation E under the Board's Regulatory Planning and Review program.
(The Board has taken final action on the proposal; a revised regulation
and revised staff commentary are published in today's Federal
Register.) As part of that process, and based in part on the public
comments received, the Board identified areas that offer an opportunity
for further burden reduction without undercutting consumer protection.
One such area involves the use of electronic communication between
consumers and financial institutions--for example, by personal computer
and modem--in place of paper documents. The proposed revision published
in 1994 included a provision that allowed electronic communication in
place of paper for authorization of recurring electronic debits. The
Board now proposes to permit electronic text messages to substitute for
paper under Regulation E generally. The proposed revision also
solicited comment generally on coverage of prepaid cards and other
stored-value products under Regulation E. To resolve issues raised
during and following the public comment period, the Board undertook an
analysis of stored-value products and their treatment under Regulation
E. The Board now proposes amendments under which many stored-value
products would be exempt, and others would be covered under limited
requirements.
II. Proposed Regulatory Revisions
The following discussion covers the proposed amendments to
Regulation E in the order of the sections of the regulation that would
be affected--first addressing electronic communication, then error
resolution for new accounts, and finally stored-value products.
Electronic Communication--Section 205.4(c)
Financial institutions offer a wide variety of ``home banking''
services ranging from account inquiries, verifications, and fund
transfers between accounts, to bill payment and full account
management; and they are using various forms of electronic
communication to deliver these services. Telephones and personal
computers are the most common means of access to home banking services.
Telephones with digital screens (``screen phones''), equipped with bar
code or magnetic stripe readers, allow consumers to enter transactions
off-line, then send the information to the financial institution on-
line. Financial institutions may offer consumers specialized software
that allows the user to access bank information via personal computer;
oftentimes this software is integrated with other on-line services.
These EFT services use electronic communication as a fast, convenient,
and sometimes less costly means of communication with the consumer.
Electronic communication, for purposes of this discussion, means an
electronically transmitted text message between a financial institution
and a consumer's home computer or other electronic device possessed by
the consumer.
Under Regulation E, certain disclosures (such as initial
disclosures and periodic statements) must be provided to consumers (1)
in writing, (2) in a clear and readily understandable form, and (3) in
a form that the consumer may keep. In the context of home banking and
similar services, financial institutions have asked whether they may
satisfy these requirements by providing the information electronically,
for example, through a consumer's personal computer.
Are Electronic Communications ``Writings''
Many Regulation E disclosures must be provided to consumers in
writing. A writing, up to the present, has typically been presumed to
mean a paper document. Information that is produced,
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stored, or communicated by computer too is generally considered to be a
writing, at least where text is involved. Indeed, in many office
environments in the United States today, documents are produced,
edited, revised, and communicated to others within the organization by
the use of computers and electronic mail, and these documents are
considered written documents when kept in electronic form as well as
when printed on paper. Similarly, under other laws that call for
information to be in writing, information in electronic form is
considered to be ``written.''
Communications by telephone (including voicemail systems) are
typically characterized as oral communication as they do not have the
feature generally associated with a writing--visual text. Therefore,
pursuant to its authority under section 904(c) of the EFTA, the Board
proposes to permit financial institutions to use an electronic
communication where the regulation calls for information to be provided
in writing, but to limit the scope of the term ``electronic
communication'' to a communication in a form that can be displayed as
visual text. An example would be an electronic message that the
receiver could display on a screen (including a computer monitor or a
screen phone).
Clear and Readily Understandable Form
Regulation E requires financial institutions to provide required
information in a clear and readily understandable form. Some means of
displaying an electronic communication appear to meet this standard;
for example, a personal computer monitor should allow the consumer to
read the text of a disclosure. Others may not have this capability; a
screen phone, for example, may display only a few lines of text at a
time, making it difficult for a consumer to review initial disclosures
or a periodic statement, where it may be necessary to move back and
forth between various parts of the document. The Board believes that
the requirement for clear and readily understandable disclosures
applies fully to electronic communications. The Board requests specific
comments on the likelihood and extent of compliance problems that could
be caused by this requirement, as well as suggestions for resolving
such problems.
Retainability
The act and regulation establish a retainability requirement. In
general, if information must be provided in writing, Regulation E
requires that the information must be in a form that the consumer may
retain.
Consumers with home banking systems will most likely have the
ability to download information, print it out, and store it on a
computer disk for later retrieval. The responsibility to provide EFTA
information in a retainable form belongs to the financial institution.
Still, the Board recognizes that to satisfy the retainability
requirement for electronic communications, financial institutions will
have to rely on the consumer's having the capability to download data.
The Board believes that where a consumer has agreed to receive
information electronically, the financial institution should be deemed
to satisfy the retention requirement by making information available
for downloading, provided some consumer safeguards are established. In
the event of printer malfunctions and other unforeseen computer
problems, for instance, the consumer may be precluded from effectively
retaining an electronic message received from a financial institution.
The Board proposes to amend Regulation E to provide that if a
financial institution uses electronic communication to send information
that is required to be in writing, the consumer may request a paper
copy of the information within one year after receipt of the electronic
communication. Commenters are asked to address whether this is an
appropriate time period, and if not, to offer suggestions for an
alternative.
The Board also solicits comment on possible alternatives to
providing a paper copy upon request to consumers. One such means might
be for a financial institution to maintain the information in data
storage and re-send the information electronically to a consumer whose
computer facilities were temporarily inoperable.
Some electronic messages from a consumer to an institution trigger
the need for a response from the institution. For example, an oral or
written notice of error from a consumer requires the institution to
investigate and resolve the error within a specified period. Some
financial institutions have indicated that in accepting electronic
communications from consumers, they may want to require paper
verifications, for their own and the consumer's protection. For
example, Regulation E provides that a consumer may stop payment of a
preauthorized electronic fund transfer by notifying the institution
orally or in writing, and that the institution may require written
confirmation of an oral stop-payment order. If an institution accepts
an electronic stop-payment order, the institution might want to require
confirmation of the order in paper form, to make sure that a
preauthorized payment is not dishonored by mistake.
The Board believes that (as in the case of an oral communication)
if the consumer sends an electronic communication to the institution,
the institution could require a confirmation from the consumer in paper
form. Comment is requested, however, on whether and how the regulation
should address this point.
Electronic communication between financial institutions and
consumers could also be used in contexts other than home banking. For
example, a consumer who possesses a modem-equipped personal computer
may wish to send and receive information required by Regulation E about
an EFT service used by the consumer, such as debit card access to the
consumer's account. The proposal covers this situation. The Board
solicits comment on whether the regulation should, as proposed, permit
electronic communication to substitute for paper disclosures and other
required paper messages for EFT services other than home banking, or
should limit electronic communication to home-banking services.
Error Resolution for New Accounts--Section 205.11
Regulation E requires a financial institution to investigate and
resolve a consumer's claim of error within specified time limits. An
institution generally is expected to resolve the alleged error within
ten business days after receiving a notice of error. If the institution
needs more time, it must provisionally credit the consumer's account
and resolve the error no later than 45 calendar days after receiving
the notice.
In the course of commenting on the Board's 1994 proposal to revise
Regulation E, some institutions requested that the Board use its
exception authority under the statute either (1) to exempt new accounts
from the requirement to provisionally credit the account by the tenth
business day or (2) to extend the time period for resolving errors.
Commenters expressed concern about individuals who open a new
account with the intent to defraud. Such individuals may open an
account, immediately withdraw all or a large amount of the funds
through ATMs, and file a claim with the financial institution disputing
the ATM transactions. Often they receive provisional credit because of
the financial institution's inability to
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research the claim (such as by obtaining photographic evidence from ATM
cameras) within ten business days. At that point, the individual
immediately withdraws the funds that were provisionally credited and
abandons the account. Commenters believe that having more time to
investigate errors involving new accounts would enable institutions to
limit their losses and control this type of fraud.
Some commenters pointed to the Board's exception for new accounts
under Regulation CC, which implements the Expedited Funds Availability
Act. There, the regulation extends the time within which an institution
is required to make funds available to a customer for new accounts.
Regulation CC defines a new account as an account during the first 30
calendar days after the first deposit to the account is made.
The Board proposes to amend Regulation E, pursuant to its section
904(c) authority to provide for adjustments and exceptions in the
regulation, to extend the time periods for resolving errors that
involve new accounts. The proposal would allow 20 business days for
resolving an error before an institution is required to provisionally
credit, and an outside limit of 90 calendar days for resolving the
claim. Comment is solicited on the proposed extensions of time, on the
30-day definition for new accounts, and on whether consumer protections
relating to error resolution would be adversely affected.
Stored-Value Systems--Section 205.16
Over the past few years the financial services industry has shown
increasing interest in providing ``stored-value cards'' (also referred
to as prepaid or value-added cards) to consumers. These cards maintain,
typically in a computer chip or magnetic stripe, a ``stored value'' of
funds available to the consumer for access primarily at retail
locations. The balance recorded on the card is debited at a merchant's
POS terminal when the consumer makes a purchase.
Products that could be characterized broadly as ``stored-value''
cover a wide range. In their simplest form, stored-value systems are
targeted at low-value uses (public transit, pay telephones, or
photocopiers, for example); the amount that can be stored on the card
is limited; and the card is disposed of once its value has been used
up. These cards typically have a single type of use, and only one card
issuer and one entity (likely to be the same as the issuer) that
accepts the card as payment for goods or services.
More sophisticated systems can involve large transactions and
permit consumers to store value in the hundreds of dollars on a card.
The cards may have multiple uses, and there may be multiple card
issuers and multiple card-accepting merchants. The cards may allow the
consumer to obtain cash from ATMs instead of, or in addition to, making
purchases. At least one system (now in the pilot stage) would enable
the consumer to transfer stored-value balances to another person's
card. Some systems would provide access to funds in foreign currencies.
Cards tend to be reloadable, allowing the consumer to load value onto
the card, for example, by withdrawing funds from an account at a
depository institution through a teller, via an ATM, or, potentially,
via a specially-equipped telephone. Some systems are designed as stand-
alone products. In other cases, stored-value features may be added to
debit or credit cards. Some of these more sophisticated stored-value
systems are in operation as pilot programs or are under development by
financial institutions or associations of institutions.
Colleges and universities are increasingly adding a stored-value
feature to student identification cards, so that students can make
purchases at campus locations such as cafeterias, bookstores, and
vending machines. In some cases, the educational institution is both
the issuer and the only card-accepting entity; in others, the card is
also accepted by off-campus merchants. In addition to the stored-value
features that some student card systems may have, these systems may
operate with student asset accounts maintained by the university or by
a depository institution on behalf of the university; these accounts
are covered by Regulation E.
There are significant differences among proposed systems in the
manner that they handle balances and transaction data. Some systems
operate off-line, with transaction approval and data retention
occurring only at the merchant level. The balance of available funds
may be stored only on the card itself as transactions occur, and
transactions neither require nor receive authorization from a central
database. The data for a given transaction are kept at the merchant
location, and are not forwarded to the central data facility. Only the
aggregate amount for a batch of transactions is transmitted by the
merchant (usually daily) so that the merchant can receive appropriate
credit from a financial institution. In other off-line systems, the
dollar value remaining on the card is stored both on the card and in a
central data facility. Data for individual transactions are transmitted
to the central data facility, typically at the end of each business
day, and maintained there. Still other systems operate on-line, and
transactions are authorized by communication between a terminal and a
central database.
Status of Stored-Value Cards Under the EFTA
In 1994, the Board issued proposed revisions to Regulation E under
the Board's Regulatory Planning and Review program. At that time, the
Board generally requested comment on whether, and the extent to which,
the regulation should apply to stored-value cards. The Board made clear
that a transaction involving such cards is covered by Regulation E when
the transaction accesses a consumer's account (such as when value is
``loaded'' onto the card from the consumer's deposit account via an
ATM). Among the commenters that addressed this issue, many asked the
Board to provide an exemption from Regulation E for stored-value cards
and other stored-value products so as not to hinder their development
or, alternatively, to modify the requirements applicable to them.
Legislation introduced and still pending in the Congress would
exempt stored-value cards and other stored-value products from the EFTA
and Regulation E. (H.R. 2520, 104th Cong., 1st Sess., Sec. 443; S. 650,
104th Cong., 1st Sess., Sec. 601 (1995).) The Board has suggested in
congressional testimony that, while certain provisions of Regulation E
should not apply, it would be appropriate to first examine basic issues
raised by these new payments systems before legislating a blanket
exemption from the EFTA. The Board mentioned terminal receipts and
periodic statements as examples of requirements that should not apply,
but suggested that consumers might benefit from receiving initial
disclosures (such as disclosure of a consumer's risk for unauthorized
transactions), a requirement that would likely entail minimal added
expense for card issuers.
Coverage Issue
Coverage of stored-value systems under the EFTA and Regulation E
depends on whether a stored-value transaction involves an EFT from a
consumer's asset account. The act defines an ``electronic fund
transfer'' as a transfer of funds initiated through electronic means
(such as an electronic terminal or a computer) that results in a debit
or credit to an account. Stored-value transactions involve a transfer
of funds and are carried out through
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electronic means--namely, terminals in retail locations that read the
magnetic strip or chip embedded in the card.
The act defines ``account'' as a demand deposit, savings, or other
``asset account''--as described in regulations of the Board--that is
established primarily for personal, family, or household purposes.
Asset accounts are not limited to traditional checking and other
deposit accounts. For example, the term includes a consumer's money
market mutual fund or other securities account held by a broker-dealer.
The Board also interprets the term ``account'' to include accounts
established by government agencies under electronic benefit transfer
(EBT) programs (59 FR 10678, March 7, 1994).
The legislative history of the act provides guidance as to the
Board's regulatory authority under the EFTA for determining issues of
coverage. Senate Banking Committee reports noted that the ``definitions
of `financial institution' and `account' are deliberately broad so as
to assure that all persons who offer equivalent EFT services involving
any type of asset account are subject to the same standards and
consumers owning such accounts are assured of uniform protection.'' (S.
Rep. No. 915, 95th Cong., 2d Sess. 9 (1978).) This concept is captured
in section 904(d) of the EFTA, which provides that if EFT services
``are made available to consumers by a person other than a financial
institution holding a consumer's account, the Board shall by regulation
assure that the disclosures, protections, responsibilities, and
remedies created by this title are made applicable to such persons and
services.''
Further, section 904(c) provides that the rules issued by the Board
``may contain such classifications, differentiations, or other
provisions * * * as in the judgment of the Board are necessary or
proper to effectuate the purposes of this title, [or] to prevent
circumvention or evasion thereof. * * *'' Senate Banking Committee
reports on two separate bills, in discussing section 904(c), stated
that ``since no one can foresee EFT developments in the future,
regulations would keep pace with new services and assure that the act's
basic protections continue to apply.'' (S. Rep. No. 915, 95th Cong., 2d
Sess. 10 (1978).)
Types of Stored-Value Systems
In some stored-value systems, the balance of funds available is
recorded on the card, but is also maintained at a central data facility
at a bank or elsewhere. The systems operate off-line; there is no
authorization of transactions by communication with a database at a
financial institution or elsewhere. Transaction data are periodically
transmitted to and maintained by a data facility. As in the case of the
traditional consumer deposit account accessed by a debit card, in these
stored-value card systems a consumer has the right to draw upon funds
held by an institution. The maintenance of a record of value and of
transactions for a given card apart from the card itself--so that
transactions are traceable to the individual card--strongly parallels
the functioning of a deposit account. The Board believes that the facts
support a finding that such systems involve an account for purposes of
the EFTA. These systems are referred to below as ``off-line accountable
stored-value systems.''
In another type of stored-value system that also operates off-line,
the record of value is maintained only on the card itself, and not in a
central database. Transaction data for debits to the card's ``stored
value'' are recorded on the card and captured at merchant terminals
(where they are maintained for a limited period of time). Only the
aggregate amount of transactions for a given period is transmitted by
the merchant to a financial institution or other entity so that the
merchant can receive credit. Given the lack of a centrally maintained,
ongoing record of individual card balances or of transaction data in
these systems, it is more difficult to conclude that an ``account''
exists for purposes of Regulation E. These systems will be referred to
below as ``off-line unaccountable stored-value systems.''
A third type of stored-value system operates in a manner that is
the functional equivalent of using a debit card to access a traditional
deposit account. Notably, this type of system involves on-line access
to a database for purposes of transaction authorization and data
capture. That is, when the card is used at an ATM or a POS terminal,
the transaction is authorized by means of on-line communication with
the data facility, where the transaction data are stored (including
information such as merchant identification, amount, date, and card
number). The balance of funds available to the consumer is not recorded
on the card itself, as in off-line stored-value systems; instead, the
balance information is maintained in the data facility. Two
distinctions between these systems and traditional deposit accounts
accessed by debit card are (1) the value associated with a card is
limited to the amount that the cardholder has chosen to make accessible
through the card (as opposed to a deposit account accessed by debit
card, where the entire account is accessible and funds available may
fluctuate); and (2) the value associated with the card is accessible
only through use of the card itself (in contrast to deposit accounts
accessible by debit card, which typically may be accessed through
various means, including check, withdrawal slip, ACH, or telephone bill
payment).
The Board believes these systems--which are referred to as ``on-
line stored-value systems''--meet the definition of a consumer asset
account, and thus are covered by Regulation E, based on their on-line
operation and extensive data capture and retention. As discussed below,
however, the Board also believes it is appropriate to propose modifying
the rules applicable to these systems.
Modifications and Exceptions for Various Types of Stored-Value Systems
The discussion that follows is organized to address separately each
of the three types of systems described above--off-line accountable
stored-value systems, off-line unaccountable stored-value systems, and
on-line stored-value systems. The Board notes that, in all three types
of systems, a transaction in which a stored-value card is used to
access a consumer's deposit account, such as ``reloading'' the card by
drawing on the consumer's checking account at an ATM, is covered by
Regulation E and subject to all Regulation E requirements. The
discussion below, therefore, relates to transactions in which value
stored on a card is drawn down to obtain cash or purchase goods or
services.
A. Off-line ``Accountable'' Stored-Value Systems
To the extent that off-line accountable stored-value systems are
similar to systems involving debit cards and traditional deposit
accounts, parallel consumer protections under Regulation E may be
appropriate. If these stored-value systems were to be covered by all
requirements of Regulation E, however, their further development could
be seriously slowed or even halted in some cases. The following
discussion presents an analysis of the major provisions of Regulation
E, including the compliance burdens to financial institutions and the
benefits to consumers associated with each.
1. Restrictions on unsolicited issuance of access devices.
Generally Regulation E prohibits issuing a debit card, personal
identification number (PIN), or other ``access device'' to a consumer
(for example, by mail) unless the consumer has requested the device,
orally or in writing. The purpose is to avoid making
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consumers' accounts accessible by a means that consumers may not want
and that may subject them to added risk, and to reduce the likelihood
of unauthorized transactions from interception of cards. There is a
qualified exception, for an access device that is not ``validated''
(meaning usable) at the time of issuance and that the issuer will
validate only upon request by the consumer and verification of the
consumer's identity.
As a practical matter, most providers of stored-value products will
likely issue stored-value cards only to consumers who request them.
Some may choose to promote their product by targeting populations and
sending unsolicited cards with small amounts of ``free money'' on the
card. Such a practice would not appear to harm consumers, since there
would be no access to the consumer's own deposit-account funds.
Application of the unsolicited issuance rules to off-line
accountable stored-value cards (aside from those that could access a
consumer's existing deposit account, where the rules already apply)
appears unnecessary for consumer protection. The Board proposes to
exclude off-line accountable stored-value cards from the Regulation E
rules on unsolicited issuance, but solicits specific comment on whether
there is any practical need for the rules to apply.
2. Initial disclosures. Regulation E requires that at the time a
financial institution and a consumer enter into an agreement for an EFT
service, the institution must disclose certain terms and conditions.
Items to be disclosed include a summary of the consumer's liability for
unauthorized transfers, error-resolution procedures, any limits on the
frequency or dollar amount of transfers, and any fees or charges for
individual transfers or for the service.
Without the disclosure of terms and conditions, consumers might
regard off-line accountable stored-value products as comparable to
debit or credit cards, and thus might expect similar rights and
remedies to apply. This could be particularly likely if the stored-
value feature were made part of the consumer's debit or credit card, or
if a consumer could use the card for transactions in the same locations
where debit or credit card transactions take place.
Financial institutions that provide stored-value products may
disclose certain information voluntarily; however, the disclosures that
they opt to give could vary considerably. Requiring disclosures under
Regulation E would ensure that uniform information is given to
consumers. Such disclosures would be useful in alerting consumers to
important features of these new services, such as transaction charges
and risk of loss for lost or stolen cards.
Providing initial disclosures would probably not impose significant
compliance costs. The disclosures can be given along with the card or
other account-opening material in a preprinted format; they need not be
individually customized for each account. Accordingly, the Board
proposes to amend Regulation E to require initial disclosures for off-
line accountable stored-value systems.
The proposed amendment would not include all the items generally
required to be disclosed under Regulation E, but only those that appear
relevant to off-line accountable stored-value systems. These include
the disclosures of consumer liability for unauthorized transactions;
the types of transfers available; transaction charges, if any; and
error resolution procedures available to the consumer, if any. The
disclosure of consumer liability for unauthorized transactions would
expressly state that the consumer bears the full risk of loss (if such
is the case), or would state any limits on liability that might be
adopted by agreement with the consumer.
3. Change-in-terms notices. Under Regulation E, if terms or
conditions required to be disclosed (such as limits on transfers, or
transaction fees) were to change from those initially in effect, the
institution must generally notify the consumer at least 21 days before
the effective date of the change.
Whether change-in-terms notices are relevant for off-line
accountable stored-value products depends on whether contract terms
applicable to the card are likely to change. If there are increases in
transaction charges, for instance, it is reasonable for consumers to be
informed of the increase before it takes effect. (It appears that,
currently at least, charges are not imposed on stored-value
transactions.) But issuers of some of these products may not expect to
have an ongoing relationship with the consumer, and thus may not
typically obtain an address at the time the consumer purchases the
card. In some cases, stored-value cards are freely transferrable; even
if the card issuer has the address of the original cardholder, the
issuer may not have the address of a subsequent holder. If the value
stored on the card is likely to be used within a short period, it is
also probable that new transaction charges would not be imposed or
charges increased during its lifetime.
The Board believes that the potential costs of having to comply
with the change-in-terms notice requirement outweighs the consumer
protections that would be afforded by such notices and proposes to
exempt off-line accountable stored-value systems from this requirement.
The Board specifically solicits comment on whether there might be
circumstances in which the notice requirement should apply.
4. Transaction receipts and periodic statements. For an EFT
initiated at an ATM or a POS terminal, Regulation E requires that a
transaction receipt be made available to a consumer. The receipt must
show the date, amount, type of transaction and account, card or account
number, terminal location, and name of any third party (such as a
merchant) involved in the transfer. The regulation also requires
periodic account statements, generally monthly, that detail largely the
same information as on terminal receipts and provide other information
such as opening and closing account balances and fees or charges
assessed during the statement period. These receipts and periodic
statements allow consumers to verify account activity and to detect
unauthorized transactions and errors, so that they can be reported and
resolved.
For off-line accountable stored-value products, documentation
requirements could present compliance difficulties and considerable
costs, while providing only limited benefits to consumers. In some
cases, receipts may be given whether or not required by Regulation E. A
retailer that accepts debit cards must provide receipts under
Regulation E for debit card transactions, and therefore might provide
receipts for stored-value card transactions as well. But if the card
can be used at places not equipped with printers (such as vending
machines), to require receipts would necessitate a retrofitting of
terminals and would impose ongoing compliance costs. Moreover, for
small or commonly-made transactions, many consumers may not want or
need a receipt.
The requirement for periodic statements too may present compliance
problems for some off-line accountable stored-value systems. In some of
these systems, transaction data are collected in centralized data
facilities, not by the card-issuing financial institutions. Given that
lack of data, providing periodic statements would be costly and could
impede the development of stored-value products. Moreover, as in the
case of receipts, for small or commonly-made transactions on these
cards, consumers may not need or want documentation on a periodic
statement.
[[Page 19701]]
The Board believes that the consumer benefits of terminal receipts
and periodic statements--in the context of stored-value transactions--
may be somewhat limited and be outweighed by the compliance costs.
Consequently, the Board proposes to exempt off-line accountable stored-
value systems from these requirements.
5. Limitations on consumer liability for unauthorized transfers.
Regulation E generally limits a consumer's losses for unauthorized EFT
debits to a maximum of $50. If the consumer fails to notify the
financial institution of the loss or theft of a debit card or other
``access device'' within two business days of learning of the loss or
theft, the consumer's potential liability rises to $500. If the
consumer fails to notify the institution of unauthorized transfers
appearing on a periodic statement within 60 days after the institution
sent the statement, the consumer's liability for any further
unauthorized transfers is unlimited.
Absent Regulation E's limits on liability, stored-value cardholders
bear the entire risk unless the issuer opts to assume some part of it
(or offers insurance to consumers against losses). If the regulatory
liability limits applied, the risk would be imposed on the issuer,
because these systems operate off-line and will not typically require
PIN-protection or any other means of identifying the consumer. Without
PIN-protection there is an almost certain likelihood that lost or
stolen cards could and would be used.
Some off-line accountable systems could conceivably store negative
files at merchant POS terminals for blocking unauthorized transactions.
Thus, they might be able to prevent unauthorized use, assuming a
consumer promptly reported loss or theft of the card. But many systems
do not have this capability. In addition, even for those that could,
the cost of transmitting negative files to terminals frequently enough
to effectively block unauthorized transactions could be prohibitive.
Arguably, the lack of PIN-protection in these systems may lead
consumers to be more careful in handling the cards. Consumers might act
more prudently if initial disclosures were provided, explaining the
risk. In addition, if loss does occur, the amount stored on the card
may be substantially less than would typically be at risk with the loss
or theft of a traditional debit card, where the deposit account may
serve several purposes (as a repository for savings or for paying
bills, for instance), and thus may tend to have a larger account
balance.
In light of these factors, the Board proposes to exempt off-line
accountable stored-value cards from the liability provisions. Under the
proposal, the initial disclosures given to consumers would summarize
the full extent of their risk.
6. Error resolution procedures. Regulation E requires financial
institutions to investigate and resolve claims of error made by
consumers within specified times--generally, no later than ten business
days after receiving the consumer's notice of error; or 45 days after
the notice if the institution provisionally credits the consumer's
account, in the amount of the claimed error, within ten business days.
A summary of these procedures is given to consumers with the initial
disclosures, and consumers also receive an annual notice as a reminder.
``Error'' includes an unauthorized electronic debit, a transaction in
an incorrect amount, and failure to provide required identification of
transactions.
Prompt resolution of errors is an important consumer protection,
but the detailed procedures prescribed by the act and regulation pose a
potentially difficult compliance problem for off-line accountable
stored-value systems. Investigation and resolution of errors in
accordance with Regulation E would be complicated and costly.
After weighing the potential costs against the consumer's need for
these protections, the Board proposes to exempt off-line accountable
stored-value systems from application of the error resolution
procedures and also from the related requirement to mail an annual
notice describing them. Initial disclosures would inform consumers that
they bear the full risk of loss in case of lost or stolen cards, if
that is the case, and would summarize any error resolution procedures
available.
The Board requests specific comment on whether, alternatively, some
minimal error resolution procedures should be required. For example, an
error within the financial institution's control, such as one resulting
from a malfunctioning card, may not be unduly difficult to correct.
Commenters are also asked to address whether, if no error resolution
requirements are imposed, the initial disclosures should include a
statement that there are no error resolution procedures available to
the consumer.
7. De minimis exclusion. In addition to the modifications presented
above, the Board proposes a de minimis exclusion for off-line
accountable stored-value systems based on the maximum balance that can
be stored on the card or other device. For a stored-value product
limited to a relatively small amount of funds, the amount at risk would
be sufficiently minimal that application of even modified Regulation E
protections appears unnecessary. This provision would apply to off-line
accountable devices that are limited to a maximum of $100 at a given
time; such devices would be completely exempt from Regulation E.
B. Off-line ``Unaccountable'' Stored-Value Systems
As described above, off-line unaccountable stored-value systems are
those in which the card balances and transaction data are maintained
only on the card itself. Transaction data may be maintained for a
limited time at merchant terminals, but are not captured or maintained
by the issuer or a central database. Photocopier cards and farecards
for the mass transit systems in some cities are examples of such cards.
Under the proposed amendments, off-line unaccountable stored-value
systems would not be covered by Regulation E. The proposed amendments
do not provide an explicit exemption; instead, the definitions of
systems that would be covered under the proposal do not capture off-
line unaccountable systems.
Most off-line unaccountable systems currently involve small dollar
amounts and a single use, such as paying transit fares. Other proposed
systems, however, could involve substantially larger transaction
amounts and maximum card values, and could have multiple uses. These
features may make such a system more comparable to traditional debit
cards than the small-value cards, in terms of potential uses by
consumers. This being the case, the Board could consider whether to
exercise its authority under the EFTA (to provide uniform protections
for all equivalent consumer EFT services) by proposing to bring off-
line unaccountable systems within the coverage of the act. If the
requirements applicable to off-line unaccountable stored-value systems
were the same as those that the Board is proposing with regard to off-
line accountable systems--initial disclosures, with an exemption for
card values of $100 or less--compliance would not be particularly
costly or difficult. Since the concern about consumer protection would
exist primarily for systems that store substantial amounts on a card,
any proposal could be framed in terms of covering only those cards with
a maximum value of more than a certain amount.
Although some off-line stored-value systems that permit larger
maximum card values may fall within the
[[Page 19702]]
unaccountable category, it is not clear that such systems would operate
in this manner at all times and with respect to all transactions. As
systems are further developed, they could evolve into systems that
capture and maintain some transactions in a location other than on
cards and at merchant terminals. If so, the Board believes such systems
could be characterized as off-line accountable, rather than off-line
unaccountable, systems, and thus would be subject to the same set of
rules.
There is some risk that the application of Regulation E to off-line
accountable stored-value systems, but not to off-line unaccountable
systems, could act as an incentive for developers of stored-value
systems to structure systems as unaccountable in order to avoid being
covered under the regulation. It is not desirable to have system design
be guided by regulatory rather than economic considerations. However,
the requirements applicable to off-line accountable systems--initial
disclosures--are so minimal when compared to other factors that could
affect system design (for example, the transaction data collected in
accountable systems may be useful for various purposes including fraud
detection and marketing) that it seems unlikely the potential for
coverage by Regulation E would have much impact.
On balance, the Board believes that it is preferable to state that
off-line unaccountable cards are not covered by Regulation E. The Board
solicits specific comment, however, on whether the distinction between
off-line accountable and off-line unaccountable systems (especially
high-value ones) reaches the right result, in light of the
considerations discussed above, and accordingly on whether the Board
should consider coverage of off-line unaccountable systems, under very
limited requirements such as initial disclosures. The Board also
solicits comment on whether, if Regulation E coverage were extended to
off-line unaccountable systems, it would be preferable in defining the
scope of coverage to focus on the value capable of being stored, on
whether the system has multiple uses, or on both of these features.
C. ``On-line'' Stored-Value Systems
The third type of stored-value system in some respects resembles
off-line accountable stored-value systems, and in others resembles
traditional deposit accounts accessed by debit cards. As in off-line
accountable stored-value systems, data about individual card balances
and transactions (including merchant identification, amount, date, and
card number) are collected and maintained at centralized locations; and
the value associated with a card is limited to an amount that the
consumer chooses, not a fluctuating balance in the consumer's checking
or savings account.
As in traditional deposit accounts accessed by debit cards, these
stored-value systems operate on-line. When a card is used at an ATM or
a POS terminal, the transaction is authorized by means of on-line
communication with a financial institution or central data facility.
The balance of funds available to the consumer is not recorded on the
card itself, as in off-line stored-value systems; instead, the balance
information is maintained only at the data facility. In this respect
too, an on-line stored-value system is the functional equivalent of a
deposit account accessed by a debit card, and thus can be viewed as
representing a consumer asset account for Regulation E purposes,
subject to coverage by the regulation.
In general, compliance with Regulation E requirements does not
appear to be a significant problem. For example, because these systems
operate on-line, they are designed to block unauthorized access, and
compliance with the limitations on consumer liability for unauthorized
transactions should not be more burdensome than for a traditional
deposit account accessed by debit card. However, a few exceptions from
particular provisions of Regulation E may be appropriate, as presented
below.
1. Exceptions for periodic statements and annual error resolution
notices. Regulation E requires statements that detail account activity.
In some on-line stored-value systems, cards are not reloadable, but
instead are meant to be discarded after the funds associated with the
card are drawn down to zero. For example, a consumer may purchase a
card for use on a trip of a few weeks, and draw down all value tied to
the card within that time. In such cases, the potentially short-term
nature of the product and the lack of an ongoing account relationship
may make periodic statements unnecessary.
As an alternative to the periodic statement requirement, an issuer
could provide account balances and account histories upon request, for
the preceding one or two months. This treatment would parallel the
exception adopted by the Board under the rules applicable to EBT
systems. (See 59 FR 10678, March 7, 1994, codified at 12 CFR
Sec. 205.15.) This alternative documentation would not appear to be
unduly burdensome, because cardholders who have used up the value
associated with the card will presumably not request an account
history. For similar reasons, the Board believes that it would be
appropriate to propose exempting these systems from the requirement to
send annual notices summarizing error resolution procedures. Again, if
the card is used and discarded within a year, this annual notice would
serve little purpose.
It may also be appropriate to propose an exemption from the
periodic statement requirement for on-line stored-value systems
involving cards that are reloadable. Since the stored value is
accessible only through use of the card itself (not, for example, by
check), then periodic statements may be unnecessary. If a consumer
receives a receipt for each transaction, periodic statements may not be
needed even if the relationship between the consumer and the issuer is
ongoing. If the consumer needed to check on recent account
transactions, the consumer could request the issuer to provide an
account history.
There may be less reason to exempt reloadable on-line cards from
the annual error resolution notice requirement. If a card issuer has an
ongoing relationship with the consumer, sending the annual notice does
not seem burdensome. However, extending the exemption to both
requirements--periodic statements and the annual error notice--
regardless of whether a card is reloadable, would avoid making the
proposed rule overly complex.
Accordingly, the Board proposes to provide that on-line stored-
value systems are not subject to (1) the periodic statement
requirement, but may instead provide the account balance and
transaction history to the cardholder upon request; or (2) the
requirement for an annual reminder of error resolution procedures. The
Board solicits comment on whether the proposed modifications should be
different for on-line stored-value cards that are reloadable.
2. Change-in-terms notices. Under Regulation E, if terms or
conditions required to be disclosed (such as limits on transfers, or
transaction fees) were to change from those initially in effect, the
institution must generally notify the consumer at least 21 days before
the effective date of the change.
For the reasons discussed in connection with off-line accountable
stored-value products, the Board believes that the change-in-terms
notice requirements need not apply to on-line accountable stored-value
products and, accordingly, proposes to exempt them from this
requirement. Specific comment is solicited on whether there
[[Page 19703]]
might be circumstances in which the notice requirement should apply.
3. De minimis exclusion. Some on-line stored-value systems may make
relatively small amounts accessible through use of the card. For
example, a number of prepaid telephone card systems apparently operate
on-line. As in the case of off-line accountable stored-value systems,
if the amount associated with a consumer's card is limited to a
relatively small amount, application of Regulation E protections such
as the limitation on the consumer's liability for unauthorized
transactions seems less important. And if transaction amounts are on
average quite small (as is likely to be true if the maximum amount on a
card is low), the cost impact of Regulation E compliance would be
proportionately greater than for systems involving large transactions.
For these reasons, the Board proposes to exempt on-line stored-value
systems completely from coverage under Regulation E if the maximum
amount that can be associated with a card is limited to $100.
Computer Network Payment Products
Parallel to the development of stored-value card products, there
has been an increasing interest in other products that might adopt
stored-value concepts. Systems are being proposed, for example, for
making payments over computer networks, such as the Internet. In these
cases, a balance of funds could be accessed via a consumer's personal
computer, and transferred or used in purchases via a computer network.
As in the case of card-based products, there is a range of network
payment products in operation or under development.
Some of these network payment products involve on-line access to a
consumer account in a financial institution, and thus are fully subject
to Regulation E. Other products may involve various procedures for
authorizing and carrying out transactions, and may or may not be
subject to the regulation. The Board requests specific comment on the
extent to which the Board should consider proposing that Regulation E
apply to various types of network payment products. In general, the
Board believes that the same principles should apply to network payment
products as to stored-value card products in analyzing coverage under
Regulation E. For example, the Board might consider applying a de
minimis exemption to network payment products in the same way the Board
is proposing for stored-value card products.
Summary of Proposed Amendments for Stored-Value Systems
To summarize, with respect to stored-value systems, the Board
proposes to amend Regulation E to:
(1) Exempt completely from Regulation E off-line unaccountable
stored-value systems;
(2) Exempt completely from Regulation E both off-line accountable
stored-value systems and on-line stored-value systems if the maximum
amount that can be stored on or associated with a card at any given
time is $100 or less;
(3) Establish modified requirements for coverage of off-line
accountable stored-value systems, applying only the requirements
relating to initial disclosures; and
(4) Modify the requirements applicable to on-line stored-value
systems, under which such systems would not be subject to (a) the
periodic statement requirement, if an account balance and a summary of
recent transactions is provided upon request; (b) the annual error
resolution notice requirement; or (c) change-in-terms notices.
III. Form of Comment Letters
Comment letters should refer to Docket No. R-0919. The Board
requests that, when possible, comments be prepared using a standard
courier typeface with a type size of 10 or 12 characters per inch. This
will enable the Board to convert the text into machine-readable form
through electronic scanning, and will facilitate automated retrieval of
comments for review. Comments may also be submitted on computer
diskettes, using either the 3.5'' or 5.25'' size, in any DOS-compatible
format. Comments on computer diskettes must be accompanied by a paper
version.
IV. Regulatory Flexibility Analysis
In accordance with section 603 of the Regulatory Flexibility Act
and section 904(a)(2) of the EFTA, the Board's Division of Research and
Statistics has prepared an economic impact statement on the proposed
regulation. A copy of the analysis may be requested from Publications
Services, Board of Governors of the Federal Reserve System, Washington,
DC 20551, or by telephone at (202) 452-3245.
V. Paperwork Reduction Act
In accordance with section 3506 of the Paperwork Reduction Act of
1995 (44 U.S.C. Ch. 35; 5 CFR 1320 Appendix A.1), the Board reviewed
the proposed rule under the authority delegated to the Board by the
Office of Management and Budget. Comments on the collection of
information should be sent to the Office of Management and Budget,
Paperwork Reduction Project (7100-0200), Washington, DC 20503, with
copies of such comments to be sent to Mary M. McLaughlin, Federal
Reserve Board Clearance Officer, Division of Research and Statistics,
Mail Stop 97, Board of Governors of the Federal Reserve System,
Washington, DC 20551.
The collection of information requirements in this proposed
regulation are found in 12 CFR Part 205. This information would be
mandatory (15 USC 1693 et seq.) to ensure adequate disclosure of basic
terms, costs, and rights relating to electronic fund transfer (EFT)
services affecting consumers using certain stored-value cards or home-
banking services and consumers exercising their error resolution rights
under Regulation E. The respondents/recordkeepers are for-profit
financial institutions, including small businesses. Regulation E
applies to all types of financial institutions, not just state member
banks. However, under Paperwork Reduction Act regulations, the Federal
Reserve accounts for the burden of the paperwork associated with the
regulation only for state member banks. Other agencies account for the
Regulation E paperwork burden on their respective constituencies.
The Federal Reserve has no data on which to estimate the burden the
proposed requirements would impose on state member banks. With regard
to stored-value cards, there are as yet no such systems in full
operation in the United States, and only a few stored-value card pilot
projects. It is difficult to predict how many state member banks will
choose to offer these products and how many cards will be issued to
consumers. However, because the proposed amendments include a number of
exemptions for stored-value products from Regulation E requirements,
the proposed amendments could have the effect of reducing paperwork
burden, compared to what the burden would be without the amendments in
place.
The proposed amendments on the use of electronic communication in
home banking would likely reduce the paperwork burden of financial
institutions. Institutions offering home banking programs would be able
to use electronic communication to provide disclosures, periodic
statements, and other information required by Regulation E rather than
having to print and mail the information in paper form.
The proposed amendment relating to error resolution for new
accounts may reduce paperwork burden, because institutions may be able
to complete
[[Page 19704]]
error investigations within the longer time allowed under the proposal
(20 business days), rather than have to provisionally credit consumer's
accounts within ten business days and provide related notices to the
consumer, as is required currently under Regulation E.
The Federal Reserve requests comments from issuers, especially
state member banks, that will help to estimate the number and burden of
the various disclosures that would be made in the first year this
regulation is effective. Comments are invited on: (a) the cost of
compliance; (b) ways to enhance the quality, utility, and clarity of
the information to be disclosed; and (c) ways to minimize the burden of
disclosure on respondents, including through the use of automated
disclosure techniques or other forms of information technology.
List of Subjects in 12 CFR Part 205
Consumer protection, Electronic fund transfers, Federal Reserve
System, Reporting and recordkeeping requirements.
Text of Proposed Revisions
Certain conventions have been used to highlight the proposed
changes to Regulation E. New language is shown inside bold-faced
arrows, while language that would be removed is set off with brackets.
Pursuant to the authority granted in sections 904 (a), (c), and (d)
of the Electronic Fund Transfer Act, 15 U.S.C. 1693b (a), (c), and (d),
and for the reasons set forth in the preamble, the Board proposes to
amend 12 CFR Part 205 as set forth below:
PART 205--ELECTRONIC FUND TRANSFERS (REGULATION E)
1. The authority citation for Part 205 would be revised to read as
follows:
Authority: 15 U.S.C. 1693-1693r.
2. Section 205.4 would be amended by adding paragraph (c) to read
as follows:
Sec. 205.4 General disclosure requirements; jointly offered services.
* * * * *
(c) Electronic communication. (1) Definition. For
purposes of this part, the term electronic communication means an
electronically transmitted text message between a consumer and a
financial institution; in the case of a communication to the consumer,
the message shall allow text to be displayed on equipment in the
consumer's possession such as a modem-equipped personal computer or
screen telephone.
(2) Communication between financial institution and consumer. (i)
By agreement between a financial institution and a consumer, either may
send to the other by electronic communication any information required
by this part to be provided orally or in writing. Information required
by this part to be in writing and sent to a consumer by electronic
communication shall be clear and readily understandable and shall be
provided in a manner that would allow a consumer to retain the
information.
(ii) If this part specifies that information be provided to the
consumer in writing, the consumer may request a paper copy of the
information up to one year after receiving the electronic
communication.
* * * * *
3. Section 205.11 would be amended by revising paragraph (c)(3), to
read as follows:
Sec. 205.11 Procedures for resolving errors.
* * * * *
(c) Time limits and extent of investigation. * * *
* * * * *
(3) Extension of time periods. The applicable time periods in this
paragraph (c)(3) are 20 business days in place of 10 business days, and
90 days in place of 45 days, if a notice of error involves an
electronic fund transfer that:
(i) Was not initiated within a state; [or]
(ii) Resulted from a point-of-sale debit card transaction;
or
(iii) Involves a new account during the first 30 calendar days
after the first deposit to the account is made.
* * * * *
4. A new section 205.16 would be added, to read as follows:
Sec. 205.16 Certain stored-value services.
(a) General. The rules in this section apply to stored-value
accounts as defined in paragraph (b) of this section.
(b) Definitions. For purposes of this section, the following
definitions apply:
(1) Off-line stored-value account means a balance of funds recorded
on a card that a consumer may use at electronic terminals to obtain
cash or purchase goods or services, where the record of such balance is
also maintained on a separate database, apart from the card, and where
on-line authorization of transactions is not required to access the
funds. Off-line stored-value accounts are subject to the requirements
in paragraph (d) of this section.
(2) On-line stored-value account means a balance of funds that may
be accessed only through the use of a card that a consumer may use at
electronic terminals to obtain cash or purchase goods or services,
where the record of such balance is maintained on a separate database,
and not on the card, and where on-line authorization of transactions is
required to access the funds. On-line stored-value accounts are subject
to the requirements in paragraph (e) of this section.
(3) Financial institution includes any person that, directly or
indirectly, holds an on-line or off-line stored-value account, or that
issues a card to a consumer for use in obtaining cash or purchasing
goods or services by accessing such an account.
(c) $100 exemption. A stored-value account, as defined in
paragraphs (b) (1) and (2) of this section, is exempt from the
requirements of this part if the maximum amount that may be in the
account at any given time is $100 or less.
(d) Modified requirements for off-line stored-value accounts;
initial disclosures. Stored-value accounts as defined in paragraph
(b)(1) of this section are subject only to the following initial
disclosure requirements of this part, as applicable:
(1) Liability of consumer. A summary of the consumer's liability,
under state or other applicable law or agreement, for unauthorized
transfers.
(2) Types of transfers; limitations. The type of electronic fund
transfers that the consumer may make and any limitations on the
frequency and the dollar amount of transfers.
(3) Fees. Any fees imposed by the financial institution for
electronic fund transfers or for the right to make transfers.
(4) Error resolution. A summary of the financial institution's
procedures for resolving errors concerning electronic fund transfers,
including the telephone number and address of the person or office to
be notified in the event of an error.
(e) Modified requirements for on-line stored-value accounts.
Stored-value accounts as defined in paragraph (b)(2) of this section
are subject to the requirements of this part, with the following
modifications:
(1) Exceptions; change-in-terms notice; error resolution notice.
The account is exempt from the requirements of Sec. 205.8.
(2) Alternative to periodic statement. A financial institution need
not furnish the periodic statement required by Sec. 205.9(b) if the
financial institution makes available to the consumer:
[[Page 19705]]
(i) The consumer's account balance, through a readily available
telephone line and at a terminal; and
(ii) 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.
(3) Additional modifications. A financial institution that does not
furnish periodic statements, in accordance with paragraph (e)(2) of
this section, shall comply with the following special rules:
(i) Initial disclosures. The financial institution shall modify the
disclosures under Sec. 205.7 by disclosing:
(A) Account balance. The means by which the consumer may obtain
information concerning the account balance, including a telephone
number. This disclosure may be made by providing a notice substantially
similar to the notice in paragraph A-6 of Appendix A of this part.
(B) Written account history. A summary of the consumer's right to
receive a written account history upon request, in place of the
periodic-statement disclosure required by section 205.7(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
in paragraph A-6 of Appendix A of this part.
(C) Error resolution. A notice concerning error resolution that is
substantially similar to the notice contained in paragraph A-6 of
Appendix A of this part.
(ii) Limitations on liability. For purposes of Sec. 205.6(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 the
transmittal of a written account history provided to the consumer under
paragraph (e)(2) of this section.
(iii) Error resolution. The financial institution shall comply with
the requirements of section 205.11 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, under
paragraph (e)(2) of this section, in which the error is first
reflected.
5. Appendix A would be amended by adding an entry to the table of
contents at the beginning of the appendix and by adding a new paragraph
A-6, to read as follows:
Appendix A to Part 205--Model Disclosure Clauses and Forms
Table of Contents
* * * * *
A-6--Model Forms for On-Line Stored-Value Card Services
(Sec. 205.16(e)(3))
* * * * *
A-6--Model Forms for On-Line Stored-Value Card Services
(Sec. 205.16(e)(3))
(1) Disclosure of information about obtaining account balances
and account histories in on-line stored-value card service
(Sec. 205.16(e)(3)(i) (A) and (B))
You may find out about the balance remaining on your card by
calling [telephone number]. You can also learn your remaining
balance [by making a balance inquiry at an ATM] [on the receipt you
get when withdrawing cash from an ATM] [on the receipt you get when
making a purchase].
You also have the right to get a written summary of transactions
made with your card for the 60 days preceding your request by
calling [telephone number].
(2) Disclosure of error resolution procedures in on-line stored-
value card service (Sec. 205.16(e)(3)(i)(C))
In Case of Errors of Questions About Your Card Transactions
Telephone us at [telephone number] or Write us at [address] as soon
as you can, if you think an error has occurred involving a
transaction made with your card. We must hear from you no later than
60 days after you receive a written summary of transactions (which
you can request from us), showing the error. You will need to tell
us:
Your name and card 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
generally complete our investigation within 10 business days and
correct any error promptly. In some cases, an investigation may take
longer, but you will have the use of the funds in question after the
10 business days. However, 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 the funds in question back to the card
during the investigation.
If we decide that there was no error, we will send you a written
explanation within three business days after we finish our
investigation. 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].
By order of the Board of Governors of the Federal Reserve
System, April 19, 1996.
William W. Wiles,
Secretary of the Board.
[FR Doc. 96-10181 Filed 5-1-96; 8:45 a.m.]
BILLING CODE 6210-01-P