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You Are Reading about Regulation E, Related Federal Laws, and Parallel State Laws
You are learning about Regulation E, as codified under Section 12 CFR 1005.20(a)(4).
The Electronic Fund Transfer Act (EFTA) (15 U.S.C. 1693 et seq.) of 1978 is intended to protect individual consumers engaging in electronic fund transfers (EFTs) and remittance transfers. The EFTA is implemented through Regulation E.
Regulation E covers the following consumer services:
- Transfers through automated teller machines (ATMs);
- Point-of-sale (POS) terminals;
- Automated clearinghouse (ACH) systems;
- Telephone bill-payment plans in which periodic or recurring transfers are contemplated;
- Remote banking programs; and
- Remittance transfers.
Coverage — 12 CFR 1005.3
Subpart A of Regulation E applies to any electronic fund transfer (EFT) that authorizes a financial institution to debit or credit a consumer's account. The requirements of subpart A of Regulation E apply only to accounts for which there is an agreement for EFT services to or from the account between (i) the consumer and the financial institution or (ii) the consumer and a third party, when the account-holding financial institution has received notice of the agreement and the fund transfers have begun (Comment 3(a)-1).
Regulation E applies to all persons, including offices of foreign financial institutions in the United States, that offer EFT services to residents of any state and it covers any account located in the United States through which EFTs are offered to a resident of a state, no matter where a particular transfer occurs or where the financial institution is chartered (Comment 3(a)-3). Regulation E does not apply to a foreign branch of a U.S. financial institution unless the EFT services are offered in connection with an account in a state, as defined in 12 CFR 1005.2(l) (Comment 3(a)-3).
Exclusions from Coverage.
12 CFR 1005.3(c) describes transfers that are not EFTs and are therefore not covered by the EFTA and Regulation E:
- Transfers of funds originated by check, draft, or similar paper instrument;
- Check guarantee or authorization services that do not directly result in a debit or credit to a consumer's account;
- Any transfer of funds for a consumer within a system that is used primarily to transfer funds between financial institutions or businesses, e.g., Fedwire or other similar network;
- Any transfer of funds which has as its primary purpose the purchase or sale of securities or commodities regulated by the SEC or the CFTC , purchased or sold through a broker-dealer regulated by the SEC or through a futures commission merchant regulated by the CFTC, or held in book-entry form by a Federal Reserve Bank or federal agency;
- Intra-institutional automatic transfers under an agreement between a consumer and a financial institution;
- Transfers initiated by telephone between a consumer and a financial institution provided the transfer is not a function of a written plan contemplating periodic or recurring transfers. A written statement available to the public, such as a brochure, that describes a service allowing a consumer to initiate transfers by telephone constitutes a written plan; or
- Preauthorized transfers to or from accounts at financial institutions with assets of less than $100 million on the preceding December 31. Such preauthorized transfers, however, remain subject to the compulsory use prohibition under Section 913 of the EFTA and 12 CFR 1005.10(e), as well as the civil and criminal liability provisions of Sections 915 and 916 of the EFTA. A small financial institution that provides EFT services besides preauthorized transfers must comply with the requirements of subpart A for those other services (Comment 3(c)(7)-1). For example, a small financial institution that offers ATM services must comply with subpart A in regard to the issuance of debit cards, terminal receipts, periodic statements, and other requirements.
Disclosures Generally — 12 CFR 1005.4
Required disclosures must be clear and readily understandable, in writing, and in a form the consumer may keep. The required disclosures may be provided to the consumer in electronic form, if the consumer affirmatively consents after receiving a notice that complies with the E-Sign Act (12 CFR 1005.4(a)(1)).
Disclosures may be made in a language other than English, if the disclosures are made available in English upon the consumer's request (12 CFR 1005.4(a)(2)).
A financial institution has the option of disclosing additional information and combining disclosures required by other laws (for example, Truth in Lending disclosures) with Regulation E disclosures (12 CFR 1005.4(b)).
A financial institution may combine required disclosures into a single statement if a consumer holds two or more accounts at the financial institution. Thus, a single periodic statement or error resolution notice is sufficient for multiple accounts. In addition, it is only necessary for a financial institution to provide one set of disclosures for a joint account (12 CFR 1005.4(c)(1) and (2)).
Two or more financial institutions that jointly provide EFT services may contract among themselves to meet the requirements that the regulation imposes on any or all of them. When making initial disclosures (see 12 CFR 1005.7) and disclosures of a change in terms or an error resolution notice (see 12 CFR 1005.8), a financial institution in a shared system only needs to make disclosures that are within its knowledge and apply to its relationship with the consumer for whom it holds an account (12 CFR 1005.4(d)).
Gift Card Disclosures — 12 CFR 1005.20(c)
Disclosures must be clear and conspicuous and generally in a written or electronic form (except for certain pre-purchase disclosures, which may be given orally) that the consumer may retain. The fees and terms and conditions of expiration that are required to be disclosed prior to purchase may not be changed after purchase.
A number of disclosures must be made on the actual card. Making such disclosures 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.
Those disclosures include the following:
- The existence, amount, and frequency of any dormancy, inactivity, or service fee;
- The expiration date for the underlying funds (or the fact that the funds do not expire);
- A toll-free telephone number and (if any) a website that the consumer may use to obtain a replacement certificate or card if the certificate or card expires while underlying funds are still available;
- A statement that the certificate or card expires, but the underlying funds do not expire or expire later than the certificate or card, as well as a statement that the consumer may contact the issuer for a replacement card; and
- A toll-free telephone number and (if any) a website that the consumer may use to obtain information about fees.
Additional Disclosure Requirements Regarding Fees.
In addition to the disclosure requirements related to dormancy, inactivity, or service fees, all other fees must be disclosed as well. These disclosures must be provided on or with the certificate or card and disclosed prior to purchase. The certificate or card must also disclose a toll-free telephone number and website, if one is maintained, that a consumer may use to obtain fee information or replacement certificates or cards (12 CFR 1005.20(f)).
Disclosure Requirements for Loyalty, Award, or Promotional Gift Cards (12 CFR 1005.20(a)(4)).
To qualify for the exclusion for loyalty, award, or promotional gift cards, the following must be disclosed:
- 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;
- The expiration date for the underlying funds, which must be included on the front of the card, code, or other device;
- 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
- A toll-free telephone number and, if one is maintained, a website, that a consumer may use to obtain fee information, which must be included on the card, code, or other device.
Amendments to Regulation E were issued on August 11, 2010. The amendments implemented legislation that modified the effective date of certain disclosure and card expiration requirements in the gift card provisions of the Credit Card Accountability Responsibility and Disclosure Act of 2009 for cards produced prior to April 1, 2010.
The disclosures and card expiration requirements are:
- Disclosures required to be made prior to purchase (see 12 CFR 1005.20(c)(3));
- Disclosures that must be stated on the certificate or card regarding the fees and expiration dates (see 12 CFR 1005.20(d)(2), (e)(1) & (e)(3)); and
- Disclosures that may be provided on or with the certificate or card (see 12 CFR 1005.20(f)). Gift cards must comply with all other provisions of the gift card rule.
Issuers must make the following disclosures on in-store signs, messages during customer service calls, websites, and general advertising:
- The funds underlying the gift card do not expire;
- Consumers have the right to receive a free replacement card, along with the packaging and materials that typically accompany the gift card; and
- The issuer will charge dormancy, inactivity, or service fees only if the fee is permitted by the gift card rule.
Regulation E has two main subparts:
Subpart A
- I. Scope and Key Definitions (12 CFR 1005.2, 1005.3, 1005.17, 1005.20)
- II. Disclosures (12 CFR 1005.4, 1005.7, 1005.8, 1005.16, 1005.17, 1005.20)
- III. Electronic Transaction Overdraft Service Opt In (12 CFR 1005.17)
- W. Issuance of Access Devices (12 CFR 1005.5, 1005.18)
- V. Consumer Liability and Error Resolution (12 CFR 1005.6, 1005.11)
- VI. Receipts and Periodic Statements (12 CFR 1005.9, 1005.18)
- VII. Gift Cards (12 CFR 1005.20)
- VIII. Other Requirements (12 CFR 1005.10, 1005.14, 1005.15)
- IX. Relation to Other Laws (12 CFR 1005.12)
Subpart B
Requirements for remittance transfers
- X. Remittance Transfer Definitions (12 CFR 1005.30)
- XI. Disclosures (12 CFR 1005.31)
- XII. Estimates (12 CFR 1005.32)
- XIII. Procedures for Resolving Errors (12 CFR 1005.33)
- XIV. Procedures for Cancellation and Refund of Remittance transfers (12 CFR 1005.34)
- XV.Acts of Agents(12 CFR 1005.35)
- XVI.Transfers Scheduled Before the Date of Transfer(12 CFR 1005.36)
Sections Applicable to both subpart A and subpart B
- XVII. Preemption
- XVIII. Administrative Enforcement and Record Retention (12 CFR 1005.13)
- XIX. Miscellaneous (EFTA provisions not reflected in Regulation E)