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Federal Reserve System Pt. 205_ App. A

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					                                Federal Reserve System                                                                  Pt. 205, App. A

                                location on or at the automated teller                    institution’s option). The notice shall
                                machine; and                                              identify the account involved and the
                                  (2) Screen or paper notice. Provide the                 address of the Internet web site or
                                notice required by paragraphs (b)(1)                      other location where the disclosure is
                                and (b)(2) of this section either by                      available; and
                                showing it on the screen of the auto-                        (ii) Make the disclosure available for
                                mated teller machine or by providing                      at least 90 days from the date the dis-
                                it on paper, before the consumer is                       closure first becomes available or from
                                committed to paying a fee.                                the date of the notice alerting the con-
                                  (d) Temporary exemption. Through De-                    sumer of the disclosure, whichever
                                cember 31, 2004, the notice requirement                   comes later.
                                in paragraph (c)(2) of this section does                     (d) Redelivery. When a disclosure pro-
                                not apply to any automated teller ma-                     vided by electronic communication is
                                chine that lacks the technical capa-                      returned to a financial institution un-
                                bility to provide such information.                       delivered, the financial institution
                                  (e) Imposition of fee. An automated                     shall take reasonable steps to attempt
                                teller machine operator may impose a                      redelivery using information in its
                                fee on a consumer for initiating an                       files.
                                electronic fund transfer or a balance                        (e) Persons other than financial institu-
                                inquiry only if                                           tions. Persons other than a financial in-
                                  (1) The consumer is provided the no-                    stitution that are required to comply
                                tices required under paragraph (c) of                     with this part may use electronic com-
                                this section, and                                         munication in accordance with the re-
                                  (2) The consumer elects to continue                     quirements of § 205.17, as applicable.
                                the transaction or inquiry after receiv-
                                ing such notices.                                         [Reg. E, 66 FR 17793, Apr. 4, 2001]

                                [Reg. E, 66 FR 13412, Mar. 6, 2001]                           APPENDIX A TO PART 205—MODEL
                                                                                              DISCLOSURE CLAUSES AND FORMS
                                § 205.17 Requirements for electronic
                                      communication.                                                     TABLE OF CONTENTS
                                   (a) Definition. Electronic communica-                  A–1—MODEL       CLAUSES      FOR    UNSOLICITED
                                tion means a message transmitted elec-                       ISSUANCE (§ 205.5(b)(2))
                                tronically between a financial institu-                   A–2—MODEL CLAUSES FOR INITIAL DISCLO-
                                                                                             SURES (§ 205.7(b))
                                tion and a consumer in a format that
                                                                                          A–3—MODEL FORMS FOR ERROR RESOLUTION
                                allows visual text to be displayed on                        NOTICE (§§ 205.7(b)(10) AND 205.8(b))
                                equipment, for example, a personal                        A–4—MODEL FORM FOR SERVICE-PROVIDING IN-
                                computer monitor.                                            STITUTIONS (§ 205.14(b)(1)(ii))
                                   (b) General rule. In accordance with                   A–5—MODEL FORMS FOR GOVERNMENT AGEN-
                                the Electronic Signatures in Global                          CIES (§ 205.15(d)(1) AND (2))
                                and National Commerce Act (the E-
                                                                                             A–1—MODEL CLAUSES FOR UNSOLICITED
                                Sign Act), 15 U.S.C. 7001 et seq., and the                         ISSUANCE (§ 205.5(B)(2))
                                rules of this part, a financial institu-
                                tion may provide by electronic commu-                       (a) Accounts using cards. You cannot use
                                                                                          the enclosed card to transfer money into or
                                nication any disclosure required by
                                                                                          out of your account until we have validated
                                this part to be in writing.                               it. If you do not want to use the card, please
                                   (c) Address or location to receive elec-               (destroy it at once by cutting it in half).
                                tronic communication. A financial insti-                    [Financial institution may add validation
                                tution that uses electronic communica-                    instructions here.]
                                tion to provide disclosures required by                     (b) Accounts using codes. You cannot use
                                this part shall:                                          the enclosed code to transfer money into or
                                   (1) Send the disclosure to the con-                    out of your account until we have validated
                                sumer’s electronic address; or                            it. If you do not want to use the code, please
                                                                                          (destroy this notice at once).
                                   (2) Make the disclosure available at                     [Financial institution may add validation
                                another location such as an Internet                      instructions here.]
                                web site; and
                                   (i) Alert the consumer of the disclo-                        A–2—MODEL CLAUSES FOR INITIAL
                                sure’s availability by sending a notice                             DISCLOSURES (§ 205.7(B))
                                to the consumer’s electronic address                       (a) Consumer Liability (§ 205.7(b)(1)). (Tell us
                                (or to a postal address, at the financial                 AT ONCE if you believe your [card] [code]

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                                Pt. 205, App. A                                                        12 CFR Ch. II (1–1–02 Edition)
                                has been lost or stolen. Telephoning is the                 (ii) You can use your telephone bill-pay-
                                best way of keeping your possible losses                  ment service to pay [insert number] bills
                                down. You could lose all the money in your                each [insert time period] [telephone call].
                                account (plus your maximum overdraft line                   (iii) You can use our point-of-sale transfer
                                of credit). If you tell us within 2 business              service for [insert number] transactions each
                                days, you can lose no more than $50 if some-              [insert time period].
                                one used your [card][code] without your per-                (iv) For security reasons, there are limits
                                mission. (If you believe your [card] [code]               on the number of transfers you can make
                                has been lost or stolen, and you tell us with-            using our [terminals] [telephone bill-pay-
                                in 2 business days after you learn of the loss            ment service] [point-of-sale transfer service].
                                or theft, you can lose no more than $50 if                  (3) Limitations on dollar amounts of trans-
                                someone used your [card] [code] without                   fers—(i) You may withdraw up to [insert dol-
                                your permission.)                                         lar amount] from our terminals each [insert
                                                                                          time period] time you use the [card] [code].
                                   If you do NOT tell us within 2 business
                                                                                            (ii) You may buy up to [insert dollar
                                days after you learn of the loss or theft of
                                                                                          amount] worth of goods or services each [in-
                                your [card] [code], and we can prove we could
                                                                                          sert time period] time you use the [card]
                                have stopped someone from using your [card]
                                                                                          [code] in our point-of-sale transfer service.
                                [code] without your permission if you had
                                                                                            (e) Fees (§ 205.7(b)(5))—(1) Per transfer
                                told us, you could lose as much as $500.                  charge. We will charge you [insert dollar
                                   Also, if your statement shows transfers                amount] for each transfer you make using
                                that you did not make, tell us at once. If you            our [automated teller machines] [telephone
                                do not tell us within 60 days after the state-            bill-payment service] [point-of-sale transfer
                                ment was mailed to you, you may not get                   service].
                                back any money you lost after the 60 days if                (2) Fixed charge. We will charge you [insert
                                we can prove that we could have stopped                   dollar amount] each [insert time period] for
                                someone from taking the money if you had                  our [automated teller machine service] [tele-
                                told us in time.                                          phone bill-payment service] [point-of-sale
                                   If a good reason (such as a long trip or a             transfer service].
                                hospital stay) kept you from telling us, we                 (3) Average or minimum balance charge. We
                                will extend the time periods.                             will only charge you for using our [auto-
                                   (b) Contact in event of unauthorized transfer          mated teller machines] [telephone bill-pay-
                                (§ 205.7(b)(2)). If you believe your [card] [code]        ment service] [point-of-sale transfer service]
                                has been lost or stolen or that someone has               if the [average] [minimum] balance in your
                                transferred or may transfer money from                    [checking account] [savings account] [ac-
                                your account without your permission, call:               counts] falls below [insert dollar amount]. If
                                [Telephone number]                                        it does, we will charge you [insert dollar
                                                                                          amount] each [transfer] [insert time period].
                                or write:
                                                                                            (f) Confidentiality (§ 205.7(b)(9)). We will dis-
                                [Name of person or office to be notified]                 close information to third parties about your
                                [Address]                                                 account or the transfers you make:
                                   (c) Business days (§ 205.7(b)(3)). For purposes          (i) Where it is necessary for completing
                                of these disclosures, our business days are               transfers, or
                                (Monday through Friday) (Monday through                     (ii) In order to verify the existence and
                                Saturday) (any day including Saturdays and                condition of your account for a third party,
                                Sundays). Holidays are (not) included.                    such as a credit bureau or merchant, or
                                   (d)    Transfer    types     and     limitations         (iii) In order to comply with government
                                (§ 205.7(b)(4))—(1) Account access. You may use           agency or court orders, or
                                your [card][code] to:                                       (iv) If you give us your written permission.
                                   (i) Withdraw cash from your [checking]                   (g) Documentation (§ 205.7(b)(6))—(1) Ter-
                                [or] [savings] account.                                   minal transfers. You can get a receipt at the
                                                                                          time you make any transfer to or from your
                                   (ii) Make deposits to your [checking] [or]
                                                                                          account using one of our [automated teller
                                [savings] account.
                                                                                          machines] [or] [point-of-sale terminals].
                                   (iii) Transfer funds between your checking               (2) Preauthorized credits. If you have ar-
                                and savings accounts whenever you request.                ranged to have direct deposits made to your
                                   (iv) Pay for purchases at places that have             account at least once every 60 days from the
                                agreed to accept the [card] [code].                       same person or company, (we will let you
                                   (v) Pay bills directly [by telephone] from             know if the deposit is [not] made.) [the per-
                                your [checking] [or] [savings] account in the             son or company making the deposit will tell
                                amounts and on the days you request.                      you every time they send us the money] [you
                                   Some of these services may not be avail-               can call us at (insert telephone number) to
                                able at all terminals.                                    find out whether or not the deposit has been
                                   (2) Limitations on frequency of transfers.—(i)         made].
                                You may make only [insert number, e.g., 3]                  (3) Periodic statements. You will get a
                                cash withdrawals from our terminals each                  [monthly] [quarterly] account statement
                                [insert time period, e.g., week].                         (unless there are no transfers in a particular

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                                Federal Reserve System                                                                  Pt. 205, App. A
                                month. In any case you will get the state-                balance inquiry even if you do not complete
                                ment at least quarterly).                                 a fund transfer).
                                   (4) Passbook account where the only possible
                                electronic fund transfers are preauthorized cred-          A–3—MODEL FORMS FOR ERROR RESOLUTION
                                its. If you bring your passbook to us, we will                 NOTICE (§§ 205.7(b)(10) AND 205.8(b))
                                record any electronic deposits that were
                                                                                             (a) Initial and annual error resolution notice
                                made to your account since the last time
                                                                                          (§§ 205.7(b)(10) and 205.8(b)).
                                you brought in your passbook.
                                   (h) Preauthorized payments (§ 205.7(b) (6), (7)           In Case of Errors or Questions About Your
                                and (8); § 205.10(d))—(1) Right to stop payment           Electronic Transfers Telephone us at [insert
                                and procedure for doing so. If you have told us           telephone number] Write us at [insert ad-
                                in advance to make regular payments out of                dress] [or E-mail us at [insert electronic
                                your account, you can stop any of these pay-              mail address]] as soon as you can, if you
                                ments. Here’s how:                                        think your statement or receipt is wrong or
                                   Call us at [insert telephone number], or               if you need more information about a trans-
                                write us at [insert address], in time for us to           fer listed on the statement or receipt. We
                                receive your request 3 business days or more              must hear from you no later than 60 days
                                before the payment is scheduled to be made.               after we sent the FIRST statement on which
                                If you call, we may also require you to put               the problem or error appeared.
                                your request in writing and get it to us with-               (1) Tell us your name and account number
                                in 14 days after you call. (We will charge you            (if any).
                                [insert amount] for each stop-payment order                  (2) Describe the error or the transfer you
                                you give.)                                                are unsure about, and explain as clearly as
                                   (2) Notice of varying amounts. If these reg-           you can why you believe it is an error or why
                                ular payments may vary in amount, [we]                    you need more information.
                                [the person you are going to pay] will tell                  (3) Tell us the dollar amount of the sus-
                                you, 10 days before each payment, when it                 pected error.
                                will be made and how much it will be. (You                   If you tell us orally, we may require that
                                may choose instead to get this notice only                you send us your complaint or question in
                                when the payment would differ by more than                writing within 10 business days.
                                a certain amount from the previous pay-                      We will determine whether an error oc-
                                ment, or when the amount would fall outside               curred within 10 business days after we hear
                                certain limits that you set.)                             from you and will correct any error prompt-
                                   (3) Liability for failure to stop payment of           ly. If we need more time, however, we may
                                preauthorized transfer. If you order us to stop           take up to 45 days to investigate your com-
                                one of these payments 3 business days or                  plaint or question. If we decide to do this, we
                                more before the transfer is scheduled, and we             will credit your account within 10 business
                                do not do so, we will be liable for your losses           days for the amount you think is in error, so
                                or damages.                                               that you will have the use of the money dur-
                                   (i)      Financial     institution’s   liability       ing the time it takes us to complete our in-
                                (§ 205.7(b)(8)). If we do not complete a trans-           vestigation. If we ask you to put your com-
                                fer to or from your account on time or in the             plaint or question in writing and we do not
                                correct amount according to our agreement                 receive it within 10 business days, we may
                                with you, we will be liable for your losses or            not credit your account.
                                damages. However, there are some excep-                      For errors involving new accounts, point-
                                tions. We will not be liable, for instance:               of-sale, or foreign-initiated transactions, we
                                   (1) If, through no fault of ours, you do not           may take up to 90 days to investigate your
                                have enough money in your account to make                 complaint or question. For new accounts, we
                                the transfer.                                             may take up to 20 business days to credit
                                   (2) If the transfer would go over the credit           your account for the amount you think is in
                                limit on your overdraft line.                             error.
                                   (3) If the automated teller machine where
                                                                                             We will tell you the results within three
                                you are making the transfer does not have
                                                                                          business days after completing our investiga-
                                enough cash.
                                                                                          tion. If we decide that there was no error, we
                                   (4) If the [terminal] [system] was not work-
                                                                                          will send you a written explanation. You
                                ing properly and you knew about the break-
                                                                                          may ask for copies of the documents that we
                                down when you started the transfer.
                                                                                          used in our investigation.
                                   (5) If circumstances beyond our control
                                (such as fire or flood) prevent the transfer,                (b) Error resolution notice on periodic state-
                                despite reasonable precautions that we have               ments (§ 205.8(b)).
                                taken.                                                     A–4—MODEL FORM FOR SERVICE-PROVIDING
                                   (6) There may be other exceptions stated in                 INSTITUTIONS (§ 205.14(b)(1)(ii))
                                our agreement with you.
                                   (j) ATM fees (§ 205.7(b)(11)). When you use an           ALL  QUESTIONS    ABOUT    TRANS-
                                ATM not owned by us, you may be charged a                 ACTIONS MADE WITH YOUR (NAME OF
                                fee by the ATM operator [or any network                   CARD) CARD MUST BE DIRECTED TO US
                                used] (and you may be charged a fee for a                 (NAME OF SERVICE PROVIDER), AND NOT

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                                Pt. 205, App. B                                                        12 CFR Ch. II (1–1–02 Edition)
                                TO THE BANK OR OTHER FINANCIAL IN-                          We will determine whether an error oc-
                                STITUTION WHERE YOU HAVE YOUR AC-                         curred within 10 business days after we hear
                                COUNT. We are responsible for the [name of                from you and will correct any error prompt-
                                service] service and for resolving any errors             ly. If we need more time, however, we may
                                in transactions made with your [name of                   take up to 45 days to investigate your com-
                                card] card.                                               plaint or question. If we decide to do this, we
                                  We will not send you a periodic statement               will credit your account within 10 business
                                listing transactions that you make using                  days for the amount you think is in error, so
                                your [name of card] card. The transactions                that you will have the use of the money dur-
                                will appear only on the statement issued by               ing the time it takes us to complete our in-
                                your bank or other financial institution.                 vestigation. If we ask you to put your com-
                                SAVE THE RECEIPTS YOU ARE GIVEN                           plaint or question in writing and we do not
                                WHEN YOU USE YOUR [NAME OF CARD]                          receive it within 10 business days, we may
                                CARD, AND CHECK THEM AGAINST THE                          not credit your account.
                                ACCOUNT STATEMENT YOU RECEIVE                               For errors involving new accounts, point-
                                FROM YOUR BANK OR OTHER FINANCIAL                         of-sale, or foreign-initiated transactions, we
                                INSTITUTION. If you have any questions                    may take up to 90 days to investigate your
                                about one of these transactions, call or write            complaint or question. For new accounts, we
                                us at [telephone number and address] [the                 may take up to 20 business days to credit
                                telephone number and address indicated                    your account for the amount you think is in
                                below].                                                   error.
                                  IF YOUR [NAME OF CARD] CARD IS
                                                                                            We will tell you the results within three
                                LOST OR STOLEN, NOTIFY US AT ONCE
                                                                                          business days after completing our investiga-
                                by calling or writing to us at [telephone
                                                                                          tion. If we decide that there was no error, we
                                number and address].
                                                                                          will send you a written explanation. You
                                     A–5—MODEL FORMS FOR GOVERNMENT                       may ask for copies of the documents that we
                                        AGENCIES (§ 205.15(d)(1) AND (2))                 used in our investigation.
                                                                                            If you need more information about our
                                  (a) Disclosure by government agencies of in-            error resolution procedures, call us at [tele-
                                formation about obtaining account balances and            phone number][the telephone number shown
                                account histories (§ 205.15(d)(1)(i) and (ii)).
                                                                                          above].
                                  You may obtain information about the
                                amount of benefits you have remaining by                  [Reg. E, 61 FR 19669, May 2, 1996, as amended
                                calling [telephone number]. That informa-                 at 63 FR 52118, Sept. 29, 1998; 66 FR 13412,
                                tion is also available [on the receipt you get            Mar. 6, 2001; 66 FR 17793, Apr. 4, 2001]
                                when you make a transfer with your card at
                                (an ATM)(a POS terminal)][when you make                      APPENDIX B TO PART 205—FEDERAL
                                a balance inquiry at an ATM][when you                            ENFORCEMENT AGENCIES
                                make a balance inquiry at specified loca-
                                tions].                                                     The following list indicates which Federal
                                  You also have the right to receive a writ-              agency enforces Regulation E (12 CFR part
                                ten summary of transactions for the 60 days               205) for particular classes of institutions.
                                preceding your request by calling [telephone              Any questions concerning compliance by a
                                number]. [Optional: Or you may request the                particular institution should be directed to
                                summary by contacting your caseworker.]                   the appropriate enforcing agency. Terms
                                  (b) Disclosure of error resolution procedures           that are not defined in the Federal Deposit
                                for government agencies that do not provide               Insurance Act (12 U.S.C. 1813(s)) shall have
                                periodic   statements     (§ 205.15(d)(1)(iii)  and       the meaning given to them in the Inter-
                                (d)(2)).                                                  national Banking Act of 1978 (12 U.S.C. 3101).
                                  In Case of Errors or Questions About Your
                                Electronic Transfers Telephone us at [tele-                  National banks, and Federal branches and
                                phone number] Write us at [insert address]                       Federal agencies of foreign banks
                                [or E-mail us at [insert electronic mail ad-
                                dress]] as soon as you can, if you think an                 District office of the Office of the Comp-
                                error has occurred in your [EBT][agency’s                 troller of the Currency where the institution
                                name for program] account. We must hear                   is located.
                                from you no later than 60 days after you
                                learn of the error. You will need to tell us:             State member banks, branches and agencies of
                                  • Your name and [case] [file] number.                     foreign banks (other than Federal branches,
                                  • Why you believe there is an error, and                  Federal agencies, and insured state branches
                                the dollar amount involved.                                 of foreign banks), commercial lending compa-
                                  • Approximately when the error took                       nies owned or controlled by foreign banks,
                                place.                                                      and organizations operating under section 25
                                                                                            or 25(a) of the Federal Reserve Act
                                If you tell us orally, we may require that
                                you send us your complaint or question in                   Federal Reserve Bank serving the District
                                writing within 10 business days.                          in which the institution is located.

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                                Federal Reserve System                                                                      Pt. 205, Supp. I
                                  Nonmember insured banks and insured state                   issue, including copies of all pertinent docu-
                                         branches of foreign banks                            ments.
                                  Federal Deposit Insurance Corporation re-                               SCOPE OF INTERPRETATIONS
                                gional director for the region in which the
                                institution is located.                                         No staff interpretations will be issued ap-
                                                                                              proving financial institutions’ forms or
                                Savings institutions insured under the Savings                statements. This restriction does not apply
                                  Association Insurance Fund of the FDIC and                  to forms or statements whose use is required
                                  federally-chartered savings banks insured                   or sanctioned by a government agency.
                                  under the Bank Insurance Fund of the FDIC
                                  (but not including state-chartered savings                   SUPPLEMENT I TO PART 205—OFFICIAL
                                  banks insured under the Bank Insurance                            STAFF INTERPRETATIONS
                                  Fund)
                                                                                                          SECTION 205.2—DEFINITIONS
                                  Office of Thrift Supervision Regional Di-
                                rector for the region in which the institution                                2(a) Access Device
                                is located.
                                                                                                1. Examples. The term access device in-
                                               Federal Credit Unions                          cludes debit cards, personal identification
                                                                                              numbers (PINs), telephone transfer and tele-
                                  Division of Consumer Affairs, National                      phone bill payment codes, and other means
                                Credit Union Administration, 1775 Duke                        that may be used by a consumer to initiate
                                Street, Alexandria, Virginia 22314–3428                       an electronic fund transfer (EFT) to or from
                                                        Air Carriers                          a consumer account. The term does not in-
                                                                                              clude magnetic tape or other devices used in-
                                  Assistant General Counsel for Aviation En-                  ternally by a financial institution to initiate
                                forcement and Proceedings, Department of                      electronic transfers.
                                Transportation, 400 Seventh Street, S.W.,                       2. Checks used to capture information. The
                                Washington, D.C. 20590.                                       term ‘‘access device’’ does not include a
                                                                                              check or draft used to capture the MICR
                                                Brokers and Dealers                           (Magnetic Ink Character Recognition) encod-
                                  Division of Market Regulation, Securities                   ing to initiate a one-time ACH debit. For ex-
                                and Exchange Commission, Washington, D.C.                     ample, if a consumer authorizes a one-time
                                20549.                                                        ACH debit from the consumer’s account
                                                                                              using a blank, partially completed, or fully
                                Retailers, Consumer Finance Companies, Cer-                   completed and signed check for the mer-
                                 tain Other Financial Institutions, and all oth-              chant to capture the routing, account, and
                                 ers not covered above                                        serial numbers to initiate the debit, the
                                                                                              check is not an access device. (Although the
                                 Federal Trade Commission, Electronic                         check is not an access device under Regula-
                                Fund Transfers, Washington, D.C. 20580.                       tion E, the transaction is nonetheless cov-
                                                                                              ered by the regulation. See comment 3(b)–
                                 APPENDIX C TO PART 205—ISSUANCE OF                           1(v).)
                                      STAFF INTERPRETATIONS
                                                                                                                 2(b) Account
                                       OFFICIAL STAFF INTERPRETATIONS
                                                                                                1. Consumer asset account. The term con-
                                  Pursuant to section 915(d) of the act, the                  sumer asset account includes:
                                Board has designated the director and other                     i. Club accounts, such as vacation clubs. In
                                officials of the Division of Consumer and                     many cases, however, these accounts are ex-
                                Community Affairs as officials ‘‘duly author-                 empt from the regulation under § 205.3(c)(5)
                                ized’’ to issue, at their discretion, official                because all electronic transfers to or from
                                staff interpretations of this part. Except in                 the account have been preauthorized by the
                                unusual circumstances, such interpretations                   consumer and involve another account of the
                                will not be issued separately but will be in-                 consumer at the same institution.
                                corporated in an official commentary to this                    ii. A retail repurchase agreement (repo),
                                part, which will be amended periodically.                     which is a loan made to a financial institu-
                                                                                              tion by a consumer that is collateralized by
                                 REQUESTS FOR ISSUANCE OF OFFICIAL STAFF                      government or government-insured securi-
                                            INTERPRETATIONS                                   ties.
                                  A request for an official staff interpreta-                   2. Examples of accounts not covered by
                                tion shall be in writing and addressed to the                 Regulation E (12 CFR part 205) include:
                                Director, Division of Consumer and Commu-                       i. Profit-sharing and pension accounts es-
                                nity Affairs, Board of Governors of the Fed-                  tablished under a trust agreement, which are
                                eral Reserve System, Washington, D.C. 20551.                  exempt under § 205.2(b)(2).
                                The request shall contain a complete state-                     ii. Escrow accounts, such as those estab-
                                ment of all relevant facts concerning the                     lished to ensure payment of items such as

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                                Pt. 205, Supp. I                                                       12 CFR Ch. II (1–1–02 Edition)
                                real estate taxes, insurance premiums, or                 such as by home banking equipment or a fac-
                                completion of repairs or improvements.                    simile machine.
                                  iii. Accounts for accumulating funds to                   2. POS terminals. A POS terminal that cap-
                                purchase U.S. savings bonds.                              tures data electronically, for debiting or
                                                                                          crediting to a consumer’s asset account, is
                                                 Paragraph 2(b)(2)                        an electronic terminal for purposes of Regu-
                                  1. Bona fide trust agreements. The term bona            lation E even if no access device is used to
                                fide trust agreement is not defined by the                initiate the transaction. (See § 205.9 for re-
                                act or regulation; therefore, financial insti-            ceipt requirements.)
                                tutions must look to state or other applica-                3. Teller-operated terminals. A terminal or
                                ble law for interpretation.                               other computer equipment operated by an
                                  2. Custodial agreements. An account held                employee of a financial institution is not an
                                under a custodial agreement that qualifies as             electronic terminal for purposes of the regu-
                                a trust under the Internal Revenue Code,                  lation. However, transfers initiated at such
                                such as an individual retirement account, is              terminals by means of a consumer’s access
                                considered to be held under a trust agree-                device (using the consumer’s PIN, for exam-
                                ment for purposes of Regulation E.                        ple) are EFTs and are subject to other re-
                                                                                          quirements of the regulation. If an access de-
                                                 2(d) Business Day                        vice is used only for identification purposes
                                   1. Duration. A business day includes the en-           or for determining the account balance, the
                                tire 24-hour period ending at midnight, and a             transfers are not EFTs for purposes of the
                                notice required by the regulation is effective            regulation.
                                even if given outside normal business hours.
                                The regulation does not require, however,                   2(k) Preauthorized Electronic Fund Transfer
                                that a financial institution make telephone                 1. Advance authorization. A ‘‘preauthorized
                                lines available on a 24-hour basis.                       electronic fund transfer’’ under Regulation E
                                   2. Substantially all business functions. ‘‘Sub-        is one authorized by the consumer in ad-
                                stantially all business functions’’ include               vance of a transfer that will take place on a
                                both the public and the back-office oper-                 recurring basis, at substantially regular in-
                                ations of the institution. For example, if the            tervals, and will require no further action by
                                offices of an institution are open on Satur-              the consumer to initiate the transfer. In a
                                days for handling some consumer trans-                    bill-payment system, for example, if the con-
                                actions (such as deposits, withdrawals, and               sumer authorizes a financial institution to
                                other teller transactions), but not for per-              make monthly payments to a payee by
                                forming internal functions (such as inves-                means of EFTs, and the payments take place
                                tigating account errors), then Saturday is                without further action by the consumer, the
                                not a business day for that institution. In               payments are preauthorized EFTs. In con-
                                this case, Saturday does not count toward                 trast, if the consumer must take action each
                                the business-day standard set by the regula-              month to initiate a payment (such as by en-
                                tion for reporting lost or stolen access de-              tering instructions on a touch-tone tele-
                                vices, resolving errors, etc.                             phone or home computer), the payments are
                                   3. Short hours. A financial institution may            not preauthorized EFTs.
                                determine, at its election, whether an abbre-
                                viated day is a business day. For example, if               2(m) Unauthorized Electronic Fund Transfer
                                an institution engages in substantially all
                                business functions until noon on Saturdays                  1. Transfer by institution’s employee. A con-
                                instead of its usual 3:00 p.m. closing, it may            sumer has no liability for erroneous or fraud-
                                consider Saturday a business day.                         ulent transfers initiated by an employee of a
                                   4. Telephone line. If a financial institution          financial institution.
                                makes a telephone line available on Sundays                 2. Authority. If a consumer furnishes an ac-
                                for reporting the loss or theft of an access              cess device and grants authority to make
                                device, but performs no other business func-              transfers to a person (such as a family mem-
                                tions, Sunday is not a business day under the             ber or co-worker) who exceeds the authority
                                ‘‘substantially all business functions’’ stand-           given, the consumer is fully liable for the
                                ard.                                                      transfers unless the consumer has notified
                                                                                          the financial institution that transfers by
                                              2(h) Electronic Terminal                    that person are no longer authorized.
                                  1. Point-of-sale (POS) payments initiated by              3. Access device obtained through robbery or
                                telephone. Because the term electronic ter-               fraud. An unauthorized EFT includes a
                                minal excludes a telephone operated by a                  transfer initiated by a person who obtained
                                consumer, a financial institution need not                the access device from the consumer through
                                provide a terminal receipt when:                          fraud or robbery.
                                  i. A consumer uses a debit card at a public               4. Forced initiation. An EFT at an auto-
                                telephone to pay for the call.                            mated teller machine (ATM) is an unauthor-
                                  ii. A consumer initiates a transfer by a                ized transfer if the consumer has been in-
                                means analogous in function to a telephone,               duced by force to initiate the transfer.

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                                Federal Reserve System                                                                  Pt. 205, Supp. I
                                  5. Reversal of direct deposits. The reversal of         tution by means of a computer printout from
                                a direct deposit made in error is not an un-              a correspondent bank.
                                authorized EFT when it involves:                            iii. A preauthorized transfer credited or
                                  i. A credit made to the wrong consumer’s                debited to an account in accordance with in-
                                account;                                                  structions contained on magnetic tape, even
                                  ii. A duplicate credit made to a consumer’s             if the financial institution holding the ac-
                                account; or
                                                                                          count sends or receives a composite check.
                                  iii. A credit in the wrong amount (for ex-
                                ample, when the amount credited to the con-                 iv. A transfer from the consumer’s account
                                sumer’s account differs from the amount in                resulting from a debit-card transaction at a
                                the transmittal instructions).                            merchant location, even if no electronic ter-
                                                                                          minal is involved at the time of the trans-
                                            SECTION 205.3—COVERAGE                        action, if the consumer’s asset account is
                                                                                          subsequently debited for the amount of the
                                                    3(a) General
                                                                                          transfer.
                                  1. Accounts covered. The requirements of                  v. A transfer via ACH where a consumer
                                the regulation apply only to an account for               has provided a check to enable the merchant
                                which an agreement for EFT services to or                 or other payee to capture the routing, ac-
                                from the account has been entered into be-                count, and serial numbers to initiate the
                                tween:                                                    transfer, whether the check is blank, par-
                                  i. The consumer and the financial institu-              tially completed, or fully completed and
                                tion (including an account for which an ac-
                                                                                          signed; whether the check is presented at
                                cess device has been issued to the consumer,
                                                                                          POS or is mailed to a merchant or other
                                for example);
                                  ii. The consumer and a third party (for                 payee or lockbox and later converted to an
                                preauthorized debits or credits, for example),            EFT; or whether the check is retained by the
                                when the account-holding institution has re-              consumer, the merchant or other payee, or
                                ceived notice of the agreement and the fund               the payee’s financial institution.
                                transfers have begun.                                       vi. A payment made by a bill payer under
                                  2. Automated clearing house (ACH) member-               a bill-payment service available to a con-
                                ship. The fact that membership in an ACH                  sumer via computer or other electronic
                                requires a financial institution to accept                means, unless the terms of the bill-payment
                                EFTs to accounts at the institution does not              service explicitly state that all payments, or
                                make every account of that institution sub-               all payments to a particular payee or payees,
                                ject to the regulation.                                   will be solely by check, draft, or similar
                                  3. Foreign applicability. Regulation E ap-              paper instrument drawn on the consumer’s
                                plies to all persons (including branches and
                                                                                          account, and the payee or payees that will be
                                other offices of foreign banks located in the
                                                                                          paid in this manner are identified to the con-
                                United States) that offer EFT services to
                                residents of any state, including resident                sumer.
                                aliens. It covers any account located in the                2. Fund transfers not covered. The term elec-
                                United States through which EFTs are of-                  tronic fund transfer does not include:
                                fered to a resident of a state. This is the case            i. A payment that does not debit or credit
                                whether or not a particular transfer takes                a consumer asset account, such as a payroll
                                place in the United States and whether or                 allotment to a creditor to repay a credit ex-
                                not the financial institution is chartered in             tension (which is deducted from salary).
                                the United States or a foreign country. The                 ii. A payment made in currency by a con-
                                regulation does not apply to a foreign branch             sumer to another person at an electronic ter-
                                of a U.S. bank unless the EFT services are                minal.
                                offered in connection with an account in a                  iii. A preauthorized check drawn by the fi-
                                state as defined in § 205.2(l).
                                                                                          nancial institution on the consumer’s ac-
                                           3(b) Electronic Fund Transfer                  count (such as an interest or other recurring
                                                                                          payment to the consumer or another party),
                                  1. Fund transfers covered. The term elec-               even if the check is computer-generated.
                                tronic fund transfer includes:
                                                                                            3. Authorization of one-time EFT initiated
                                  i. A deposit made at an ATM or other elec-
                                tronic terminal (including a deposit in cash              using MICR encoding on a check. A consumer
                                or by check) provided a specific agreement                authorizes a one-time EFT (in providing a
                                exists between the financial institution and              check to a merchant or other payee for the
                                the consumer for EFTs to or from the ac-                  MICR encoding), where the consumer re-
                                count to which the deposit is made.                       ceives notice that the transaction will be
                                  ii. A transfer sent via ACH. For example,               processed as an EFT and completes the
                                social security benefits under the U.S. Treas-            transaction. Examples of notice include, but
                                ury’s direct-deposit program are covered,                 are not limited to, signage at POS and writ-
                                even if the listing of payees and payment                 ten statements.
                                amounts reaches the account-holding insti-


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                                Pt. 205, Supp. I                                                       12 CFR Ch. II (1–1–02 Edition)
                                           3(c) Exclusions From Coverage                    3. Similar fund transfer systems. Fund trans-
                                                                                          fer systems that are similar to Fedwire in-
                                            Paragraph 3(c)(1)—Checks                      clude the Clearing House Interbank Pay-
                                  1. Re-presented checks. The electronic re-              ments System (CHIPS), Society for World-
                                presentment of a returned check is not cov-               wide Interbank Financial Telecommuni-
                                ered by Regulation E because the trans-                   cation (SWIFT), Telex, and transfers made
                                action originated by check. Regulation E                  on the books of correspondent banks.
                                does apply, however, to any fee authorized                      Paragraph 3(c)(4)—Securities and
                                by the consumer to be debited electronically                        Commodities Transfers
                                from the consumer’s account because the
                                check was returned for insufficient funds.                  1. Coverage. The securities exemption ap-
                                Authorization occurs where the consumer                   plies to securities and commodities that may
                                has received notice that a fee imposed for re-            be sold by a registered broker-dealer or fu-
                                turned checks will be debited electronically              tures commission merchant, even when the
                                from the consumer’s account.                              security or commodity itself is not regulated
                                  2. Check used to capture information for a              by the Securities and Exchange Commission
                                one-time EFT. See comment 3(b)–1(v).                      or the Commodity Futures Trading Commis-
                                                                                          sion.
                                   Paragraph 3(c)(2)—Check Guarantee or                     2. Example of exempt transfer. The exemp-
                                              Authorization                               tion applies to a transfer involving a transfer
                                  1. Memo posting. Under a check guarantee                initiated by a telephone order to a stock-
                                or check authorization service, debiting of               broker to buy or sell securities or to exercise
                                the consumer’s account occurs when the                    a margin call.
                                check or draft is presented for payment.                    3. Examples of nonexempt transfers. The ex-
                                These services are exempt from coverage,                  emption does not apply to a transfer involv-
                                even when a temporary hold on the account                 ing:
                                is memo-posted electronically at the time of                i. A debit card or other access device that
                                authorization.                                            accesses a securities or commodities account
                                                                                          such as a money market mutual fund and
                                  Paragraph 3(c)(3)—Wire or Other Similar                 that the consumer uses for purchasing goods
                                                 Transfers                                or services or for obtaining cash.
                                                                                            ii. A payment of interest or dividends into
                                  1. Fedwire and ACH. If a financial institu-             the consumer’s account (for example, from a
                                tion makes a fund transfer to a consumer’s                brokerage firm or from a Federal Reserve
                                account after receiving funds through                     Bank for government securities).
                                Fedwire or a similar network, the transfer
                                by ACH is covered by the regulation even                   Paragraph 3(c)(5)—Automatic Transfers by
                                though the Fedwire or network transfer is                        Account-Holding Institution
                                exempt.
                                  2. Article 4A. Financial institutions that                 1. Automatic transfers exempted. The exemp-
                                offer telephone-initiated Fedwire payments                tion applies to:
                                are subject to the requirements of UCC sec-                  i. Electronic debits or credits to consumer
                                tion 4A–202, which encourages verification of             accounts for check charges, stop-payment
                                Fedwire payment orders pursuant to a secu-                charges, NSF charges, overdraft charges,
                                rity procedure established by agreement be-               provisional credits, error adjustments, and
                                tween the consumer and the receiving bank.                similar items that are initiated automati-
                                These transfers are not subject to Regula-                cally on the occurrence of certain events.
                                tion E and the agreement is not considered a                 ii. Debits to consumer accounts for group
                                telephone plan if the service is offered sepa-            insurance available only through the finan-
                                rately from a telephone bill-payment or                   cial institution and payable only by means
                                other prearranged plan subject to Regulation              of an aggregate payment from the institu-
                                E. The Board’s Regulation J (12 CFR part                  tion to the insurer.
                                210) specifies the rules applicable to funds                 iii. EFTs between a thrift institution and
                                handled by Federal Reserve Banks. To en-                  its paired commercial bank in the state of
                                sure that the rules for all fund transfers                Rhode Island, which are deemed under state
                                through Fedwire are consistent, the Board                 law to be intra-institutional.
                                used its preemptive authority under UCC                      iv. Automatic transfers between a con-
                                section 4A–107 to determine that subpart B                sumer’s accounts within the same financial
                                of Regulation J (12 CFR part 210), including              institution, even if the account holders on
                                the provisions of Article 4A, applies to all              the two accounts are not identical.
                                fund transfers through Fedwire, even if a                    2. Automatic transfers not exempted. Trans-
                                portion of the fund transfer is governed by               fers between accounts of the consumer at af-
                                the EFTA. The portion of the fund transfer                filiated institutions (such as between a bank
                                that is governed by the EFTA is not gov-                  and its subsidiary or within a holding com-
                                erned by subpart B of Regulation J (12 CFR                pany) are not intra-institutional transfers,
                                part 210).                                                and thus do not qualify for the exemption.

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                                Federal Reserve System                                                                   Pt. 205, Supp. I
                                   Paragraph 3(c)(6)—Telephone-Initiated                  readily understandable if explained else-
                                                 Transfers                                where on the disclosure form.
                                                                                            2. Foreign language disclosures. Disclosures
                                  1. Written plan or agreement. A transfer that           may be made in languages other than
                                the consumer initiates by telephone is cov-               English, provided they are available in
                                ered by Regulation E if the transfer is made              English upon request.
                                under a written plan or agreement between
                                the consumer and the financial institution                 SECTION 205.5—ISSUANCE OF ACCESS DEVICES
                                making the transfer. A written statement
                                available to the public or to account holders               1. Coverage. The provisions of this section
                                that describes a service allowing a consumer              limit the circumstances under which a finan-
                                to initiate transfers by telephone constitutes            cial institution may issue an access device to
                                a plan—for example, a brochure, or material               a consumer. Making an additional account
                                included with periodic statements. The fol-               accessible through an existing access device
                                lowing, however, do not by themselves con-                is equivalent to issuing an access device and
                                stitute a written plan or agreement:                      is subject to the limitations of this section.
                                  i. A hold-harmless agreement on a signa-                              5(a) Solicited Issuance
                                ture card that protects the institution if the
                                consumer requests a transfer.                                             Paragraph 5(a)(1)
                                  ii. A legend on a signature card, periodic                1. Joint account. For a joint account, a fi-
                                statement, or passbook that limits the num-               nancial institution may issue an access de-
                                ber of telephone-initiated transfers the con-             vice to each account holder if the requesting
                                sumer can make from a savings account be-                 holder specifically authorizes the issuance.
                                cause of reserve requirements under Regula-                 2. Permissible forms of request. The request
                                tion D (12 CFR part 204).                                 for an access device may be written or oral
                                  iii. An agreement permitting the consumer               (for example, in response to a telephone so-
                                to approve by telephone the rollover of funds             licitation by a card issuer).
                                at the maturity of an instrument.
                                  2. Examples of covered transfers. When a                                Paragraph 5(a)(2)
                                written plan or agreement has been entered
                                                                                            1. One-for-one rule. In issuing a renewal or
                                into, a transfer initiated by a telephone call
                                                                                          substitute access device, a financial institu-
                                from a consumer is covered even though:
                                                                                          tion may not provide additional devices. For
                                  i. An employee of the financial institution             example, only one new card and PIN may re-
                                completes the transfer manually (for exam-                place a card and PIN previously issued. If the
                                ple, by means of a debit memo or deposit                  replacement device permits either additional
                                slip).                                                    or fewer types of electronic fund transfer
                                  ii. The consumer is required to make a sep-             services, a change-in-terms notice or new
                                arate request for each transfer.                          disclosures are required.
                                  iii. The consumer uses the plan infre-                    2. Renewal or substitution by a successor in-
                                quently.                                                  stitution. A successor institution is an entity
                                  iv. The consumer initiates the transfer via             that replaces the original financial institu-
                                a facsimile machine.                                      tion (for example, following a corporate
                                  v. The consumer initiates the transfer                  merger or acquisition) or that acquires ac-
                                using a financial institution’s audio-response            counts or assumes the operation of an EFT
                                or voice-response telephone system.                       system.
                                    Paragraph 3(c)(7)—Small Institutions                               5(b) Unsolicited Issuance
                                  1. Coverage. This exemption is limited to                  1. Compliance. A financial institution may
                                preauthorized transfers; institutions that                issue an unsolicited access device (such as
                                offer other EFTs must comply with the ap-                 the combination of a debit card and PIN) if
                                plicable sections of the regulation as to such            the institution’s ATM system has been pro-
                                services. The preauthorized transfers remain              grammed not to accept the access device
                                subject to sections 913, 915, and 916 of the act          until after the consumer requests and the in-
                                and § 205.10(e), and are therefore exempt from            stitution validates the device. Merely in-
                                UCC Article 4A.                                           structing a consumer not to use an unsolic-
                                                                                          ited debit card and PIN until after the insti-
                                    SECTION 205.4—GENERAL DISCLOSURE                      tution verifies the consumer’s identity does
                                 REQUIREMENTS; JOINTLY OFFERED SERVICES                   not comply with the regulation.
                                                                                             2. PINS. A financial institution may im-
                                              4(a) Form of Disclosures
                                                                                          pose no liability on a consumer for unau-
                                  1. General. Although no particular rules                thorized transfers involving an unsolicited
                                govern type size, number of pages, or the rel-            access device until the device becomes an
                                ative conspicuousness of various terms, the               ‘‘accepted access device’’ under the regula-
                                disclosures must be in a clear and readily un-            tion. A card and PIN combination may be
                                derstandable written form that the consumer               treated as an accepted access device once the
                                may retain. Numbers or codes are considered               consumer has used it to make a transfer.

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                                Pt. 205, Supp. I                                                       12 CFR Ch. II (1–1–02 Edition)
                                  3. Functions of PIN. If an institution issues           consumer for an unauthorized transfer than
                                a PIN at the consumer’s request, the                      the limits provided in Regulation E.
                                issuance may constitute both a way of vali-
                                dating the debit card and the means to iden-                 Paragraph 6(b)(1)—Timely Notice Given
                                tify the consumer (required as a condition of               1. $50 limit applies. The basic liability limit
                                imposing liability for unauthorized trans-                is $50. For example, the consumer’s card is
                                fers).                                                    lost or stolen on Monday and the consumer
                                  4. Verification of identity. To verify the con-         learns of the loss or theft on Wednesday. If
                                sumer’s identity, a financial institution may             the consumer notifies the financial institu-
                                use any reasonable means, such as a photo-                tion within two business days of learning of
                                graph, fingerprint, personal visit, signature             the loss or theft (by midnight Friday), the
                                comparison, or personal information about                 consumer’s liability is limited to $50 or the
                                the consumer. However, even if reasonable                 amount of the unauthorized transfers that
                                means were used, if an institution fails to               occurred before notification, whichever is
                                verify correctly the consumer’s identity and              less.
                                an imposter succeeds in having the device                   2. Knowledge of loss or theft of access device.
                                validated, the consumer is not liable for any             The fact that a consumer has received a peri-
                                unauthorized transfers from the account.                  odic statement that reflects unauthorized
                                                                                          transfers may be a factor in determining
                                 SECTION 205.6—LIABILITY OF CONSUMER FOR                  whether the consumer had knowledge of the
                                        UNAUTHORIZED TRANSFERS                            loss or theft, but cannot be deemed to rep-
                                            6(a) Conditions for Liability                 resent conclusive evidence that the con-
                                                                                          sumer had such knowledge.
                                  1. Means of identification. A financial insti-            3. Two-business-day rule. The two-business-
                                tution may use various means for identifying              day period does not include the day the con-
                                the consumer to whom the access device is                 sumer learns of the loss or theft or any day
                                issued, including but not limited to:                     that is not a business day. The rule is cal-
                                  i. Electronic or mechanical confirmation                culated based on two 24-hour periods, with-
                                (such as a PIN).                                          out regard to the financial institution’s busi-
                                  ii. Comparison of the consumer’s signa-                 ness hours or the time of day that the con-
                                ture, fingerprint, or photograph.                         sumer learns of the loss or theft. For exam-
                                  2. Multiple users. When more than one ac-               ple, a consumer learns of the loss or theft at
                                cess device is issued for an account, the fi-             6 p.m. on Friday. Assuming that Saturday is
                                nancial institution may, but need not, pro-               a business day and Sunday is not, the two-
                                vide a separate means to identify each user               business-day period begins on Saturday and
                                of the account.                                           expires at 11:59 p.m. on Monday, not at the
                                                                                          end of the financial institution’s business
                                     6(b) Limitations on Amount of Liability              day on Monday.
                                  1. Application of liability provisions. There
                                                                                           Paragraph 6(b)(2)—Timely Notice Not Given
                                are three possible tiers of consumer liability
                                for unauthorized EFTs depending on the sit-                 1. $500 limit applies. The second tier of li-
                                uation. A consumer may be liable for (1) up               ability is $500. For example, the consumer’s
                                to $50; (2) up to $500; or (3) an unlimited               card is stolen on Monday and the consumer
                                amount depending on when the unauthorized                 learns of the theft that same day. The con-
                                EFT occurs. More than one tier may apply to               sumer reports the theft on Friday. The $500
                                a given situation because each corresponds                limit applies because the consumer failed to
                                to a different (sometimes overlapping) time               notify the financial institution within two
                                period or set of conditions.                              business days of learning of the theft (which
                                  2. Consumer negligence. Negligence by the               would have been by midnight Wednesday).
                                consumer cannot be used as the basis for im-              How much the consumer is actually liable
                                posing greater liability than is permissible              for, however, depends on when the unauthor-
                                under Regulation E. Thus, consumer behav-                 ized transfers take place. In this example, as-
                                ior that may constitute negligence under                  sume a $100 unauthorized transfer was made
                                state law, such as writing the PIN on a debit             on Tuesday and a $600 unauthorized transfer
                                card or on a piece of paper kept with the                 on Thursday. Because the consumer is liable
                                card, does not affect the consumer’s liability            for the amount of the loss that occurs within
                                for unauthorized transfers. (However, refer               the first two business days (but no more than
                                to comment 2(m)–2 regarding termination of                $50), plus the amount of the unauthorized
                                the authority of given by the consumer to                 transfers that occurs after the first two busi-
                                another person.)                                          ness days and before the consumer gives no-
                                  3. Limits on liability. The extent of the con-          tice, the consumer’s total liability is $500
                                sumer’s liability is determined solely by the             ($50 of the $100 transfer plus $450 of the $600
                                consumer’s promptness in reporting the loss               transfer, in this example). But if $600 was
                                or theft of an access device. Similarly, no               taken on Tuesday and $100 on Thursday, the
                                agreement between the consumer and an in-                 consumer’s maximum liability would be $150
                                stitution may impose greater liability on the             ($50 of the $600 plus $100).

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                                Federal Reserve System                                                                  Pt. 205, Supp. I
                                   Paragraph 6(b)(3)—Periodic Statement;                    2. Notice by third party. Notice to a finan-
                                         Timely Notice Not Given                          cial institution by a person acting on the
                                                                                          consumer’s behalf is considered valid under
                                  1. Unlimited liability applies. The standard of         this section. For example, if a consumer is
                                unlimited liability applies if unauthorized               hospitalized and unable to report the loss or
                                transfers appear on a periodic statement,                 theft of an access device, notice is considered
                                and may apply in conjunction with the first               given when someone acting on the con-
                                two tiers of liability. If a periodic statement           sumer’s behalf notifies the bank of the loss
                                shows an unauthorized transfer made with a                or theft. A financial institution may require
                                lost or stolen debit card, the consumer must              appropriate documentation from the person
                                notify the financial institution within 60 cal-           representing the consumer to establish that
                                endar days after the periodic statement was               the person is acting on the consumer’s be-
                                sent; otherwise, the consumer faces unlim-                half.
                                ited liability for all unauthorized transfers               3. Content of notice. Notice to a financial in-
                                made after the 60-day period. The consumer’s              stitution is considered given when a con-
                                liability for unauthorized transfers before               sumer takes reasonable steps to provide the
                                the statement is sent, and up to 60 days fol-             institution with the pertinent account infor-
                                lowing, is determined based on the first two              mation. Even when the consumer is unable
                                tiers of liability: up to $50 if the consumer             to provide the account number or the card
                                notifies the financial institution within two             number in reporting a lost or stolen access
                                business days of learning of the loss or theft            device or an unauthorized transfer, the no-
                                of the card and up to $500 if the consumer no-            tice effectively limits the consumer’s liabil-
                                tifies the institution after two business days            ity if the consumer otherwise identifies suf-
                                of learning of the loss or theft.                         ficiently the account in question. For exam-
                                  2. Transfers not involving access device. The           ple, the consumer may identify the account
                                first two tiers of liability do not apply to un-          by the name on the account and the type of
                                authorized transfers from a consumer’s ac-                account in question.
                                count made without an access device. If,
                                however, the consumer fails to report such                     SECTION 205.7—INITIAL DISCLOSURES
                                unauthorized transfers within 60 calendar
                                                                                                      7(a) Timing of Disclosures
                                days of the financial institution’s trans-
                                mittal of the periodic statement, the con-                  1. Early disclosures. Disclosures given by a
                                sumer may be liable for any transfers occur-              financial institution earlier than the regula-
                                ring after the close of the 60 days and before            tion requires (for example, when the con-
                                notice is given to the institution. For exam-             sumer opens a checking account) need not be
                                ple, a consumer’s account is electronically               repeated when the consumer later enters
                                debited for $200 without the consumer’s au-               into an agreement with a third party who
                                thorization and by means other than the                   will initiate preauthorized transfers to or
                                consumer’s access device. If the consumer                 from the consumer’s account, unless the
                                notifies the institution within 60 days of the            terms and conditions differ from those that
                                transmittal of the periodic statement that                the institution previously disclosed. On the
                                shows the unauthorized transfer, the con-                 other hand, if an agreement is directly be-
                                sumer has no liability. However, if in addi-              tween the consumer and the account-holding
                                tion to the $200, the consumer’s account is               institution, disclosures must be given in
                                debited for a $400 unauthorized transfer on               close proximity to the event requiring dis-
                                the 61st day and the consumer fails to notify             closure, for example, when the consumer
                                the institution of the first unauthorized                 contracts for a new service.
                                transfer until the 62nd day, the consumer                   2. Lack of advance notice of a transfer.
                                may be liable for the full $400.                          Where a consumer authorizes a third party
                                                                                          to debit or credit the consumer’s account, an
                                Paragraph 6(b)(4)—Extension of Time Limits                account-holding institution that has not re-
                                                                                          ceived advance notice of the transfer or
                                  1. Extenuating circumstances. Examples of               transfers must provide the required disclo-
                                circumstances that require extension of the               sures as soon as reasonably possible after the
                                notification periods under this section in-               first debit or credit is made, unless the insti-
                                clude the consumer’s extended travel or hos-              tution has previously given the disclosures.
                                pitalization.                                               3. Addition of new accounts. If a consumer
                                    Paragraph 6(b)(5)—Notice to Financial                 opens a new account permitting EFTs at a fi-
                                                 Institution                              nancial institution, and the consumer al-
                                                                                          ready has received Regulation E disclosures
                                  1. Receipt of notice. A financial institution           for another account at that institution, the
                                is considered to have received notice for pur-            institution need only disclose terms and con-
                                poses of limiting the consumer’s liability if             ditions that differ from those previously
                                notice is given in a reasonable manner, even              given.
                                if the consumer notifies the institution but                4. Addition of EFT services. If an EFT serv-
                                uses an address or telephone number other                 ice is added to a consumer’s account and is
                                than the one specified by the institution.                subject to terms and conditions different

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                                Pt. 205, Supp. I                                                       12 CFR Ch. II (1–1–02 Edition)
                                from those described in the initial disclo-               provide a specific telephone number and ad-
                                sures, disclosures for the new service are re-            dress, on or with the disclosure statement,
                                quired. The disclosures must be provided                  for reporting a lost or stolen access device or
                                when the consumer contracts for the new                   a possible unauthorized transfer.
                                service or before the first EFT is made using
                                the new service.                                              Paragraph 7(b)(4)—Types of Transfers;
                                  5. Addition of service in interchange systems.                          Limitations
                                If a financial institution joins an inter-
                                change or shared network system (which                      1. Security limitations. Information about
                                provides access to terminals operated by                  limitations on the frequency and dollar
                                other institutions), disclosures are required             amount of transfers generally must be dis-
                                for additional EFT services not previously                closed in detail, even if related to security
                                available to consumers if the terms and con-              aspects of the system. If the confidentiality
                                ditions differ from those previously dis-                 of certain details is essential to the security
                                closed.                                                   of an account or system, these details may
                                  6. Disclosures covering all EFT services of-            be withheld (but the fact that limitations
                                fered. An institution may provide disclosures             exist must still be disclosed). For example,
                                covering all EFT services that it offers, even            an institution limits cash ATM withdrawals
                                if some consumers have not arranged to use                to $100 per day. The institution may disclose
                                all services.                                             that daily withdrawal limitations apply and
                                                                                          need not disclose that the limitations may
                                            7(b) Content of Disclosures                   not always be in force (such as during peri-
                                                                                          ods when its ATMs are off-line).
                                  Paragraph 7(b)(1)—Liability of Consumer
                                                                                            2. Restrictions on certain deposit accounts. A
                                  1. No liability imposed by financial institu-           limitation on account activity that restricts
                                tion. If a financial institution chooses to im-           the consumer’s ability to make EFTs must
                                pose zero liability for unauthorized EFTs, it             be disclosed even if the restriction also ap-
                                need not provide the liability disclosures. If            plies to transfers made by nonelectronic
                                the institution later decides to impose liabil-           means. For example, Regulation D (12 CFR
                                ity, however, it must first provide the disclo-           Part 204) restricts the number of payments
                                sures.                                                    to third parties that may be made from a
                                  2. Preauthorized transfers. If the only EFTs            money market deposit account; an institu-
                                from an account are preauthorized transfers,              tion that does not execute fund transfers in
                                liability could arise if the consumer fails to            excess of those limits must disclose the re-
                                report unauthorized transfers reflected on a              striction as a limitation on the frequency of
                                periodic statement. To impose such liability              EFTs.
                                on the consumer, the institution must have                  3. Preauthorized transfers. Financial institu-
                                disclosed the potential liability and the tele-           tions are not required to list preauthorized
                                phone number and address for reporting un-                transfers among the types of transfers that a
                                authorized transfers.                                     consumer can make.
                                  3. Additional information. At the institu-
                                tion’s option, the summary of the con-                                 Paragraph 7(b)(5)—Fees
                                sumer’s liability may include advice on
                                promptly reporting unauthorized transfers                   1. Disclosure of EFT fees. An institution is
                                or the loss or theft of the access device.                required to disclose all fees for EFTs or the
                                                                                          right to make them. Others fees (for exam-
                                  Paragraph 7(b)(2)—Telephone Number and                  ple, minimum-balance fees, stop-payment
                                                   Address                                fees, or account overdrafts) may, but need
                                  1. Disclosure of telephone numbers. An insti-           not, be disclosed (but see Regulation DD, 12
                                tution may use the same or different tele-                CFR Part 230. An institution is not required
                                phone numbers in the disclosures for the pur-             to disclose fees for inquiries made at an ATM
                                pose of:                                                  since no transfer of funds is involved.
                                  i. Reporting the loss or theft of an access               2. Fees also applicable to non-EFT. A per-
                                device or possible unauthorized transfers;                item fee for EFTs must be disclosed even if
                                  ii. Inquiring about the receipt of a                    the same fee is imposed on nonelectronic
                                preauthorized credit;                                     transfers. If a per-item fee is imposed only
                                  iii. Stopping payment of a preauthorized                under certain conditions, such as when the
                                debit;                                                    transactions in the cycle exceed a certain
                                  iv. Giving notice of an error.                          number, those conditions must be disclosed.
                                  2. Location of telephone number. The tele-              Itemization of the various fees may be pro-
                                phone number need not be incorporated into                vided on the disclosure statement or on an
                                the text of the disclosure; for example, the              accompanying document that is referenced
                                institution may instead insert a reference to             in the statement.
                                a telephone number that is readily available                3. Interchange system fees. Fees paid by the
                                to the consumer, such as ‘‘Call your branch               account-holding institution to the operator
                                office. The number is shown on your periodic              of a shared or interchange ATM system need
                                statement.’’ However, an institution must                 not be disclosed, unless they are imposed on

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                                Federal Reserve System                                                                   Pt. 205, Supp. I
                                the consumer by the account-holding insti-                   3. Limitations on transfers. When the initial
                                tution. Fees for use of an ATM that are deb-              disclosures omit details about limitations
                                ited directly from the consumer’s account by              because secrecy is essential to the security
                                an institution other than the account-hold-               of the account or system, a subsequent in-
                                ing institution (for example, fees included in            crease in those limitations need not be dis-
                                the transfer amount) need not be disclosed.               closed if secrecy is still essential. If, how-
                                (See § 205.7(b)(11) for the general notice re-            ever, an institution had no limits in place
                                quirement regarding fees that may be im-                  when the initial disclosures were given and
                                posed by ATM operators and by a network                   now wishes to impose limits for the first
                                used to complete the transfer.)                           time, it must disclose at least the fact that
                                                                                          limits have been adopted. (See also
                                      Paragraph 7(b)(9)—Confidentiality                   § 205.7(b)(4) and the related commentary.)
                                   1. Information provided to third parties. An              4. Change in telephone number or address.
                                institution must describe the circumstances               When a financial institution changes the
                                under which any information relating to an                telephone number or address used for report-
                                account to or from which EFTs are per-                    ing possible unauthorized transfers, a
                                mitted will be made available to third par-               change-in-terms notice is required only if
                                ties, not just information concerning those               the institution will impose liability on the
                                EFTs. The term ‘‘third parties’’ includes af-             consumer for unauthorized transfers under
                                filiates such as other subsidiaries of the                § 205.6. (See also § 205.6(a) and the related
                                same holding company.                                     commentary.)

                                     Paragraph 7(b)(10)—Error Resolution                              8(b) Error Resolution Notice

                                   1. Substantially similar. The error resolution            1. Change between annual and periodic no-
                                notice must be substantially similar to the               tice. If an institution switches from an an-
                                model form in appendix A of part 205. An in-              nual to a periodic notice, or vice versa, the
                                stitution may use different wording so long               first notice under the new method must be
                                as the substance of the notice remains the                sent no later than 12 months after the last
                                same, may delete inapplicable provisions (for             notice sent under the old method.
                                example, the requirement for written con-                    2. Exception for new accounts. For new ac-
                                firmation of an oral notification), and may               counts, disclosure of the longer error resolu-
                                substitute substantive state law require-                 tion time periods under § 205.11(c)(3) is not re-
                                ments affording greater consumer protection               quired in the annual error resolution notice
                                than Regulation E.                                        or in the notice that may be provided with
                                   2. Extended time-period for certain trans-             each periodic statement as an alternative to
                                actions. To take advantage of the longer time             the annual notice.
                                periods      for    resolving     errors    under
                                § 205.11(c)(3) (for new accounts as defined in               SECTION 205.9—RECEIPTS AT ELECTRONIC
                                Regulation CC (12 CFR part 229), transfers                     TERMINALS; PERIODIC STATEMENTS
                                initiated outside the United States, or trans-
                                                                                                9(a) Receipts at Electronic Terminals
                                fers resulting from POS debit-card trans-
                                actions), a financial institution must have                 1. Receipts furnished only on request. The
                                disclosed these longer time periods. Simi-                regulation requires that a receipt be ‘‘made
                                larly, an institution that relies on the excep-           available.’’ A financial institution may pro-
                                tion     from      provisional     crediting   in         gram its electronic terminals to provide a
                                § 205.11(c)(2) for accounts subject to Regula-            receipt only to consumers who elect to re-
                                tion T (12 CFR part 220) must have disclosed              ceive one.
                                accordingly.                                                2. Third party providing receipt. An account-
                                                                                          holding institution may make terminal re-
                                  SECTION 205.8—CHANGE-IN-TERMS NOTICE;                   ceipts available through third parties such
                                        ERROR RESOLUTION NOTICE                           as merchants or other financial institutions.
                                           8(a) Change-in-Terms Notice                      3. Inclusion of promotional material. A finan-
                                                                                          cial institution may include promotional
                                  1. Form of notice. No specific form or word-            material on receipts if the required informa-
                                ing is required for a change-in-terms notice.             tion is set forth clearly (for example, by sep-
                                The notice may appear on a periodic state-                arating it from the promotional material). In
                                ment, or may be given by sending a copy of                addition, a consumer may not be required to
                                a revised disclosure statement, provided at-              surrender the receipt or that portion con-
                                tention is directed to the change (for exam-              taining the required disclosures in order to
                                ple, in a cover letter referencing the changed            take advantage of a promotion.
                                term).                                                      4. Transfer not completed. The receipt re-
                                  2. Changes not requiring notice. The fol-               quirement does not apply to a transfer that
                                lowing changes do not require disclosure:                 is initiated but not completed (for example,
                                  i. Closing some of an institution’s ATMs;               if the ATM is out of currency or the con-
                                  ii. Cancellation of an access device.                   sumer decides not to complete the transfer).

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                                Pt. 205, Supp. I                                                       12 CFR Ch. II (1–1–02 Edition)
                                  5. Receipts not furnished due to inadvertent            savings to checking,’’ or ‘‘payment from sav-
                                error. If a receipt is not provided to the con-           ings.’’
                                sumer because of a bona fide unintentional                  2. Exception. Identification of an account is
                                error, such as when a terminal runs out of                not required when the consumer can access
                                paper or the mechanism jams, no violation                 only one asset account at a particular time
                                results if the financial institution maintains            or terminal, even if the access device can
                                procedures reasonably adapted to avoid such               normally be used to access more than one ac-
                                occurrences.                                              count. For example, the consumer may be
                                  6. Multiple transfers. If the consumer makes            able to access only one particular account at
                                multiple transfers at the same time, the fi-              terminals not operated by the account-hold-
                                nancial institution may document them on a                ing institution, or may be able to access only
                                single or on separate receipts.                           one particular account when the terminal is
                                                                                          off-line. The exception is available even if, in
                                           Paragraph 9(a)(1)—Amount                       addition to accessing one asset account, the
                                   1. Disclosure of transaction fee. The required         consumer also can access a credit line.
                                display of a fee amount on or at the terminal               3. Access to multiple accounts. If the con-
                                may be accomplished by displaying the fee                 sumer can use an access device to make
                                on a sign at the terminal or on the terminal              transfers to or from different accounts of the
                                screen for a reasonable duration. Displaying              same type, the terminal receipt must specify
                                the fee on a screen provides adequate notice,             which account was accessed, such as ‘‘with-
                                as long as a consumer is given the option to              drawal from checking I’’ or ‘‘withdrawal
                                cancel the transaction after receiving notice             from checking II.’’ If only one account be-
                                of a fee. (See § 205.16 for the notice require-           sides the primary checking account can be
                                ments applicable to ATM operators that im-                debited, the receipt can identify the account
                                pose a fee for providing EFT services.)                   as ‘‘withdrawal from other account.’’
                                   2. Relationship between § 205.9(a)(1) and                4. Generic descriptions. Generic descriptions
                                § 205.16. The requirements of §§ 205.9(a)(1) and          may be used for accounts that are similar in
                                205.16 are similar but not identical.                     function, such as share draft or NOW ac-
                                   i. Section 205.9(a)(1) requires that if the            counts and checking accounts. In a shared
                                amount of the transfer as shown on the re-                system, for example, when a credit union
                                ceipt will include the fee, then the fee must             member initiates transfers to or from a
                                be disclosed either on a sign on or at the ter-           share draft account at a terminal owned or
                                minal, or on the terminal screen. Section                 operated by a bank, the receipt may identify
                                205.16 requires disclosure both on a sign on or           a withdrawal from the account as a ‘‘with-
                                at the terminal (in a prominent and con-                  drawal from checking.’’
                                spicuous location) and on the terminal                      5. Point-of-sale transactions. There is no pre-
                                screen. Section 205.16 permits disclosure on a            scribed terminology for identifying a trans-
                                paper notice as an alternative to the on-                 fer at a merchant’s POS terminal. A transfer
                                screen disclosure.                                        may be identified, for example, as a pur-
                                   ii. The disclosure of the fee on the receipt           chase, a sale of goods or services, or a pay-
                                under § 205.9(a)(1) cannot be used to comply              ment to a third party. When a consumer ob-
                                with the alternative paper disclosure proce-              tains cash from a POS terminal in addition
                                dure under § 205.16, if the receipt is provided           to purchasing goods, or obtains cash only,
                                at the completion of the transaction be-                  the documentation need not differentiate the
                                cause, pursuant to the statute, the paper no-             transaction from one involving the purchase
                                tice must be provided before the consumer is              of goods.
                                committed to paying the fee.
                                   iii. Section 205.9(a)(1) applies to any type of            Paragraph 9(a)(5)—Terminal Location
                                electronic terminal as defined in Regulation                 1. Options for identifying terminal. The insti-
                                E (for example, to POS terminals as well as               tution may provide either:
                                to ATMs), while § 205.16 applies only to                     i. The city, state or foreign country, and
                                ATMs.                                                     the information in §§ 205.9(a)(5) (i), (ii), or
                                             Paragraph 9(a)(2)—Date                       (iii), or
                                                                                             ii. A number or a code identifying the ter-
                                   1. Calendar date. The receipt must disclose            minal. If the institution chooses the second
                                the calendar date on which the consumer                   option, the code or terminal number identi-
                                uses the electronic terminal. An accounting               fying the terminal where the transfer is ini-
                                or business date may be disclosed in addition             tiated may be given as part of a transaction
                                if the dates are clearly distinguished.                   code.
                                                                                             2. Omission of city name. The city may be
                                             Paragraph 9(a)(3)—Type
                                                                                          omitted if the generally accepted name (such
                                  1. Identifying transfer and account. Exam-              as a branch name) contains the city name.
                                ples identifying the type of transfer and the                3. Omission of a state. A state may be omit-
                                type of the consumer’s account include                    ted from the location information on the re-
                                ‘‘withdrawal from checking,’’ ‘‘transfer from             ceipt if:

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                                Federal Reserve System                                                                  Pt. 205, Supp. I
                                  i. All the terminals owned or operated by               regularly-scheduled cycles, interim state-
                                the financial institution providing the state-            ments must be provided. For example, if an
                                ment (or by the system in which it partici-               institution issues quarterly statements at
                                pates) are located in that state, or                      the end of March, June, September and De-
                                  ii. All transfers occur at terminals located            cember, and the consumer initiates an EFT
                                within 50 miles of the financial institutions’s           in February, an interim statement for Feb-
                                main office.                                              ruary must be provided. If an interim state-
                                  4. Omission of a city and state. A city and             ment contains interest or rate information,
                                state may be omitted if all the terminals                 the institution must comply with Regulation
                                owned or operated by the financial institu-               DD, 12 CFR 230.6.
                                tion providing the statement (or by the sys-                3. Inactive accounts. A financial institution
                                tem in which it participates) are located in              need not send statements to consumers
                                the same city.                                            whose accounts are inactive as defined by
                                                                                          the institution.
                                                Paragraph 9(a)(5)(i)                        4. Statement pickup. A financial institution
                                  1. Street address. The address should include           may permit, but may not require, consumers
                                number and street (or intersection); the                  to pick up their periodic statements at the
                                number (or intersecting street) may be omit-              financial institution.
                                ted if the street alone uniquely identifies the             5. Periodic statements limited to EFT activity.
                                terminal location.                                        A financial institution that uses a passbook
                                                                                          as the primary means for displaying account
                                               Paragraph 9(a)(5)(ii)                      activity, but also allows the account to be
                                  1. Generally accepted name. Examples of a               debited electronically, may provide a peri-
                                generally accepted name for a specific loca-              odic statement requirement that reflects
                                tion include a branch of the financial insti-             only the EFTs and other required disclosures
                                tution, a shopping center, or an airport.                 (such as charges, account balances, and ad-
                                                                                          dress and telephone number for inquiries).
                                               Paragraph 9(a)(5)(iii)                     (See § 205.9(c)(1)(i) for the exception applica-
                                  1. Name of owner or operator of terminal. Ex-           ble to preauthorized transfers for passbook
                                amples of an owner or operator of a terminal              accounts.)
                                are a financial institution or a retail mer-                6. Codes and accompanying documents. To
                                chant.                                                    meet the documentation requirements for
                                                                                          periodic statements, a financial institution
                                   Paragraph 9(a)(6)—Third Party Transfer                 may:
                                                                                            i. Include copies of terminal receipts to re-
                                  1. Omission of third-party name. The receipt
                                                                                          flect transfers initiated by the consumer at
                                need not disclose the third-party name if the
                                                                                          electronic terminals;
                                name is provided by the consumer in a form
                                                                                            ii. Enclose posting memos, deposit slips,
                                that is not machine readable (for example, if
                                                                                          and other documents that, together with the
                                the consumer indicates the payee by depos-
                                                                                          statement, disclose all the required informa-
                                iting a payment stub into the ATM). If, on
                                                                                          tion;
                                the other hand, the consumer keys in the
                                                                                            iii. Use codes for names of third parties or
                                identity of the payee, the receipt must iden-
                                                                                          terminal locations and explain the informa-
                                tify the payee by name or by using a code
                                                                                          tion to which the codes relate on an accom-
                                that is explained elsewhere on the receipt.
                                                                                          panying document.
                                  2. Receipt as proof of payment. Documenta-
                                tion required under the regulation con-                    Paragraph 9(b)(1)—Transaction Information
                                stitutes prima facie proof of a payment to
                                another person, except in the case of a ter-                1. Information obtained from others. While fi-
                                minal receipt documenting a deposit.                      nancial institutions must maintain reason-
                                                                                          able procedures to ensure the integrity of
                                              9(b) Periodic Statements                    data obtained from another institution, a
                                  1. Periodic cycles. Periodic statements may             merchant, or other third parties, verification
                                be sent on a cycle that is shorter than                   of each transfer that appears on the periodic
                                monthly. The statements must correspond to                statement is not required.
                                periodic cycles that are reasonably equal,                               Paragraph 9(b)(1)(i)
                                that is, do not vary by more than four days
                                from the regular cycle. The requirement of                  1. Incorrect deposit amount. If a financial in-
                                reasonably equal cycles does not apply when               stitution determines that the amount actu-
                                an institution changes cycles for operational             ally deposited at an ATM is different from
                                or other reasons, such as to establish a new              the amount entered by the consumer, the in-
                                statement day or date.                                    stitution need not immediately notify the
                                  2. Interim statements. Generally, a financial           consumer of the discrepancy. The periodic
                                institution must provide periodic statements              statement reflecting the deposit may show
                                for each monthly cycle in which an EFT oc-                either the correct amount of the deposit or
                                curs, and at least quarterly if a transfer has            the amount entered by the consumer along
                                not occurred. Where EFTs occur between                    with the institution’s adjustment.

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                                Pt. 205, Supp. I                                                       12 CFR Ch. II (1–1–02 Edition)
                                               Paragraph 9(b)(1)(iii)                                  Paragraph 9(b)(3)—Fees
                                  1. Type of transfer. There is no prescribed               1. Disclosure of fees. The fees disclosed may
                                terminology for describing a type of transfer.            include fees for EFTs and for other nonelec-
                                Placement of the amount of the transfer in                tronic services, and both fixed fees and per-
                                the debit or the credit column is sufficient if           item fees; they may be given as a total or
                                other information on the statement, such as               may be itemized in part or in full.
                                a terminal location or third-party name, en-                2. Fees in interchange system. An account-
                                ables the consumer to identify the type of                holding institution must disclose any fees it
                                transfer.                                                 imposes on the consumer for EFTs, including
                                                                                          fees for ATM transactions in an interchange
                                               Paragraph 9(b)(1)(iv)                      or shared ATM system. Fees for use of an
                                                                                          ATM imposed on the consumer by an institu-
                                  1. Nonproprietary terminal in network. An in-
                                                                                          tion other than the account-holding institu-
                                stitution need not reflect on the periodic
                                                                                          tion and included in the amount of the trans-
                                statement the street addresses, identifica-
                                                                                          fer by the terminal-operating institution
                                tion codes, or terminal numbers for transfers
                                                                                          need not be separately disclosed on the peri-
                                initiated in a shared or interchange system
                                                                                          odic statement.
                                at a terminal operated by an institution
                                                                                            3. Finance charges. The requirement to dis-
                                other than the account-holding institution.
                                                                                          close any fees assessed against the account
                                The statement must, however, specify the
                                                                                          does not include a finance charge imposed on
                                entity that owns or operates the terminal,
                                                                                          the account during the statement period.
                                plus the city and state.
                                                                                              Paragraph 9(b)(4)—Account Balances
                                               Paragraph 9(b)(1)(v)
                                                                                            1. Opening and closing balances. The opening
                                  1. Recurring payments by government agency.             and closing balances must reflect both EFTs
                                The third-party name for recurring pay-                   and other account activity.
                                ments from federal, state, or local govern-
                                ments need not list the particular agency.                  Paragraph 9(b)(5)—Address and Telephone
                                For example, ‘‘U.S. gov’t’’ or ‘‘N.Y. sal’’ will                     Number for Inquiries
                                suffice.
                                                                                            1. Telephone number. A single telephone
                                  2. Consumer as third-party payee. If a con-
                                                                                          number, preceded by the ‘‘direct inquiries
                                sumer makes an electronic fund transfer to
                                                                                          to’’ language, will satisfy the requirements
                                another consumer, the financial institution
                                                                                          of § 205.9(b)(5) and (6).
                                must identify the recipient by name (not
                                just by an account number, for example).                    Paragraph 9(b)(6)—Telephone Number for
                                  3. Terminal location/third party. A single                       Preauthorized Transfers
                                entry may be used to identify both the ter-
                                minal location and the name of the third                    1. Telephone number. See comment 9(b)(5)–1.
                                party to or from whom funds are transferred.
                                                                                              9(c) Exceptions to the Periodic Statement
                                For example, if a consumer purchases goods
                                                                                                 Requirements for Certain Accounts
                                from a merchant, the name of the party to
                                whom funds are transferred (the merchant)                   1. Transfers between accounts. The regula-
                                and the location of the terminal where the                tion provides an exception from the periodic
                                transfer is initiated will be satisfied by a dis-         statement requirement for certain intra-in-
                                closure such as ‘‘XYZ Store, Anytown,                     stitutional transfers between a consumer’s
                                Ohio.’’                                                   accounts. The financial institution must
                                  4. Account-holding institution as third party.          still comply with the applicable periodic
                                Transfers to the account-holding institution              statement requirements for any other EFTs
                                (by ATM, for example) must show the insti-                to or from the account. For example, a Regu-
                                tution as the recipient, unless other informa-            lation E statement must be provided quar-
                                tion on the statement (such as, ‘‘loan pay-               terly for an account that also receives pay-
                                ment from checking’’) clearly indicates that              roll deposits electronically, or for any month
                                the payment was to the account-holding in-                in which an account is also accessed by a
                                stitution.                                                withdrawal at an ATM.
                                  5. Consistency in third-party identity. The
                                periodic statement must disclose a third-                  Paragraph 9(c)(1)—Preauthorized Transfers
                                party name as it appeared on the receipt,                                 to Accounts
                                whether it was, for example, the ‘‘dba’’                    1. Accounts that may be accessed only by
                                (doing business as) name of the third party               preauthorized transfers to the account. The ex-
                                or the parent corporation’s name.                         ception for ‘‘accounts that may be accessed
                                  6. Third-party identity on deposits at elec-            only by preauthorized transfers to the ac-
                                tronic terminal. A financial institution need             count’’ includes accounts that can be
                                not identify third parties whose names ap-                accessed by means other than EFTs, such as
                                pear on checks, drafts, or similar paper in-              checks. If, however, an account may be
                                struments deposited to the consumer’s ac-                 accessed    by    any     EFT     other   than
                                count at an electronic terminal.                          preauthorized credits to the account, such as

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                                Federal Reserve System                                                                  Pt. 205, Supp. I
                                preauthorized debits or ATM transactions,                 stitution must provide enough telephone
                                the account does not qualify for the excep-               lines so that consumers get a reasonably
                                tion.                                                     prompt response. The institution need only
                                  2. Reversal of direct deposits. For direct-de-          provide telephone service during normal
                                posit-only accounts, a financial institution              business hours. Within its primary service
                                must send a periodic statement at least                   area, an institution must provide a local or
                                quarterly. A reversal of a direct deposit to              toll-free telephone number. It need not pro-
                                correct an error does not trigger the month-              vide a toll-free number or accept collect
                                ly statement requirement when the error                   long-distance calls from outside the area
                                represented a credit to the wrong consumer’s              where it normally conducts business.
                                account, a duplicate credit, or a credit in the
                                wrong amount. (See also comment 2(m)–5.)                   10(b) Written Authorization for Preauthorized
                                                                                                Transfers From Consumer’s Account
                                    9(d) Documentation for Foreign-Initiated
                                                                                            1. Preexisting authorizations. The financial
                                                  Transfers
                                                                                          institution need not require a new authoriza-
                                  1. Foreign-initiated transfers. An institution          tion before changing from paper-based to
                                must make a good faith effort to provide all              electronic debiting when the existing author-
                                required information for foreign-initiated                ization does not specify that debiting is to
                                transfers. For example, even if the institu-              occur electronically or specifies that the
                                tion is not able to provide a specific terminal           debiting will occur by paper means. A new
                                location, it should identify the country and              authorization also is not required when a
                                city in which the transfer was initiated.                 successor institution begins collecting pay-
                                                                                          ments.
                                 SECTION 205.10—PREAUTHORIZED TRANSFERS                     2. Authorization obtained by third party. The
                                                                                          account-holding financial institution does
                                  10(a) Preauthorized Transfers to Consumer’s
                                                                                          not violate the regulation when a third-
                                                    Account
                                                                                          party payee fails to obtain the authorization
                                   Paragraph 10(a)(1)—Notice by Financial                 in writing or fails to give a copy to the con-
                                                 Institution                              sumer; rather, it is the third-party payee
                                                                                          that is in violation of the regulation.
                                  1. Content. No specific language is required              3. Written authorization for preauthorized
                                for    notice     regarding    receipt    of   a          transfers.      The      requirement       that
                                preauthorized transfer. Identifying the de-               preauthorized EFTs be authorized by the
                                posit is sufficient; however, simply providing            consumer ‘‘only by a writing’’ cannot be met
                                the current account balance is not.                       by a payee’s signing a written authorization
                                  2. Notice of credit. A financial institution            on the consumer’s behalf with only an oral
                                may use different methods of notice for var-              authorization from the consumer. A tape re-
                                ious types or series of preauthorized trans-              cording of a telephone conversation with a
                                fers, and the institution need not offer con-             consumer who agrees to preauthorized debits
                                sumers a choice of notice methods.                        also does not constitute written authoriza-
                                  3. Positive notice. A periodic statement sent           tion for purposes of this provision.
                                within two business days of the scheduled                   4. Use of a confirmation form. A financial in-
                                transfer, showing the transfer, can serve as              stitution or designated payee may comply
                                notice of receipt.                                        with the requirements of this section in var-
                                  4. Negative notice. The absence of a deposit            ious ways. For example, a payee may provide
                                entry (on a periodic statement sent within                the consumer with two copies of a
                                two business days of the scheduled transfer               preauthorization form, and ask the consumer
                                date) will serve as negative notice.                      to sign and return one and to retain the sec-
                                  5. Telephone notice. If a financial institu-            ond copy.
                                tion uses the telephone notice option, it                   5. Similarly authenticated. The similarly au-
                                should be able in most instances to verify                thenticated standard permits signed, written
                                during a consumer’s initial call whether a                authorizations to be provided electronically.
                                transfer was received. The institution must               The writing and signature requirements of
                                respond within two business days to any in-               this section are satisfied by complying with
                                quiry not answered immediately.                           the Electronic Signatures in Global and Na-
                                  6. Phone number for passbook accounts. The              tional Commerce Act, 15 U.S.C. 7001 et seq.,
                                financial institution may use any reasonable              which defines electronic records and elec-
                                means necessary to provide the telephone                  tronic signatures. Examples of electronic
                                number to consumers with passbook ac-                     signatures include, but are not limited to,
                                counts that can only be accessed by                       digital signatures and security codes. A secu-
                                preauthorized credits and that do not receive             rity code need not originate with the ac-
                                periodic statements. For example, it may                  count-holding institution. The authorization
                                print the telephone number in the passbook,               process should evidence the consumer’s iden-
                                or include the number with the annual error               tity and assent to the authorization. The
                                resolution notice.                                        person that obtains the authorization must
                                  7. Telephone line availability. To satisfy the          provide a copy of the terms of the authoriza-
                                readily-available standard, the financial in-             tion to the consumer either electronically or

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                                Pt. 205, Supp. I                                                       12 CFR Ch. II (1–1–02 Edition)
                                in paper form. Only the consumer may au-                  does not violate the regulation if the des-
                                thorize the transfer and not, for example, a              ignated payee fails to provide notice of vary-
                                third-party merchant on behalf of the con-                ing amounts.
                                sumer.
                                  6. Requirements of an authorization. An au-                         Paragraph 10(d)(2)—Range
                                thorization is valid if it is readily identifi-
                                able as such and the terms of the                           1. Range. A financial institution or des-
                                preauthorized transfer are clear and readily              ignated payee that elects to offer the con-
                                understandable.                                           sumer a specified range of amounts for deb-
                                  7. Bona fide error. Consumers sometimes                 iting (in lieu of providing the notice of trans-
                                authorize third-party payees, by telephone                fers varying in amount) must provide an ac-
                                or on-line, to submit recurring charges                   ceptable range that could be anticipated by
                                against a credit card account. If the con-                the consumer. For example, if the transfer is
                                sumer indicates use of a credit card account              for payment of a gas bill, an appropriate
                                when in fact a debit card is being used, the              range might be based on the highest bill in
                                payee does not violate the requirement to                 winter and the lowest bill in summer.
                                obtain a written authorization if the failure
                                to obtain written authorization was not in-                              10(e) Compulsory Use
                                tentional and resulted from a bona fide
                                error, and if the payee maintains procedures                          Paragraph 10(e)(1)—Credit
                                reasonably adapted to avoid any such error.                 1. Loan payments. Creditors may not re-
                                If the payee is unable to determine, at the               quire repayment of loans by electronic
                                time of the authorization, whether a credit
                                                                                          means on a preauthorized, recurring basis. A
                                or debit card number is involved, and later
                                                                                          creditor may offer a program with a reduced
                                finds that the card used is a debit card, the
                                                                                          annual percentage rate or other cost-related
                                payee must obtain a written and signed or
                                (where appropriate) a similarly authenti-                 incentive for an automatic repayment fea-
                                cated authorization as soon as reasonably                 ture, provided the program with the auto-
                                possible, or cease debiting the consumer’s                matic payment feature is not the only loan
                                account.                                                  program offered by the creditor for the type
                                                                                          of credit involved. Examples include:
                                    10(c) Consumer’s Right To Stop Payment                  i. Mortgages with graduated payments in
                                  1. Stop-payment order. The financial institu-           which a pledged savings account is automati-
                                tion must honor an oral stop-payment order                cally debited during an initial period to sup-
                                made at least three business days before a                plement the monthly payments made by the
                                scheduled debit. If the debit item is resub-              borrower.
                                mitted, the institution must continue to                    ii.    Mortgage     plans     calling    for
                                honor the stop-payment order (for example,                preauthorized biweekly payments that are
                                by suspending all subsequent payments to                  debited electronically to the consumer’s ac-
                                the payee-originator until the consumer no-               count and produce a lower total finance
                                tifies the institution that payments should               charge.
                                resume).                                                    2. Overdraft. A financial institution may
                                  2. Revocation of authorization. Once a finan-           require the automatic repayment of an over-
                                cial institution has been notified that the               draft credit plan even if the overdraft exten-
                                consumer’s authorization is no longer valid,
                                                                                          sion is charged to an open-end account that
                                it must block all future payments for the
                                                                                          may be accessed by the consumer in ways
                                particular debit transmitted by the des-
                                ignated payee-originator. The institution                 other than by overdrafts.
                                may not wait for the payee-originator to ter-                  Paragraph 10(e)(2)—Employment or
                                minate the automatic debits. The institution
                                                                                                      Government Benefit
                                may confirm that the consumer has in-
                                formed the payee-originator of the revoca-                  1. Payroll. An employer (including a finan-
                                tion (for example, by requiring a copy of the             cial institution) may not require its employ-
                                consumer’s revocation as written confirma-                ees to receive their salary by direct deposit
                                tion to be provided within fourteen days of               to any particular institution. An employer
                                an oral notification). If the institution does            may require direct deposit of salary by elec-
                                not receive the required written confirma-                tronic means if employees are allowed to
                                tion within the fourteen-day period, it may               choose the institution that will receive the
                                honor subsequent debits to the account.                   direct deposit. Alternatively, an employer
                                  10(d) Notice of Transfers Varying in Amount             may give employees the choice of having
                                                                                          their salary deposited at a particular institu-
                                            Paragraph 10(d)(1)—Notice                     tion (designated by the employer) or receiv-
                                  1. Preexisting authorizations. A financial in-          ing their salary by another means, such as
                                stitution holding the consumer’s account                  by check or cash.



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                                Federal Reserve System                                                                  Pt. 205, Supp. I
                                 SECTION 205.11—PROCEDURES FOR RESOLVING                  sumer with a periodic statement, a request
                                                  ERRORS                                  for a copy is governed by this section if the
                                                                                          consumer gives notice within 60 days from
                                              11(a) Definition of Error                   the date on which the statement should have
                                  1. Terminal location. With regard to deposits           been transmitted.
                                at an ATM, a consumer’s request for the ter-                5. Discovery of error by institution. The error
                                minal location or other information triggers              resolution procedures of this section apply
                                the error resolution procedures, but the fi-              when a notice of error is received from the
                                nancial institution need only provide the                 consumer, and not when the financial insti-
                                ATM location if it has captured that infor-               tution itself discovers and corrects an error.
                                mation.                                                     6. Notice at particular phone number or ad-
                                  2. Verifying an account debit or credit. If the
                                                                                          dress. A financial institution may require the
                                consumer contacts the financial institution
                                                                                          consumer to give notice only at the tele-
                                to ascertain whether a payment (for exam-
                                ple, in a home-banking or bill-payment pro-               phone number or address disclosed by the in-
                                gram) or any other type of EFT was debited                stitution, provided the institution maintains
                                to the account, or whether a deposit made                 reasonable procedures to refer the consumer
                                via ATM, preauthorized transfer, or any                   to the specified telephone number or address
                                other type of EFT was credited to the ac-                 if the consumer attempts to give notice to
                                count, without asserting an error, the error              the institution in a different manner.
                                resolution procedures do not apply.
                                  3. Loss or theft of access device. A financial            Paragraph 11(b)(2)—Written Confirmation
                                institution is required to comply with the                  1. Written confirmation-of-error notice. If the
                                error resolution procedures when a consumer               consumer sends a written confirmation of
                                reports the loss or theft of an access device             error to the wrong address, the financial in-
                                if the consumer also alleges possible unau-
                                                                                          stitution must process the confirmation
                                thorized use as a consequence of the loss or
                                                                                          through normal procedures. But the institu-
                                theft.
                                  4. Error asserted after account closed. The fi-         tion need not provisionally credit the con-
                                nancial institution must comply with the                  sumer’s account if the written confirmation
                                error resolution procedures when a consumer               is delayed beyond 10 business days in getting
                                properly asserts an error, even if the account            to the right place because it was sent to the
                                has been closed.                                          wrong address.
                                  5. Request for documentation or information.
                                A request for documentation or other infor-                11(c) Time Limits and Extent of Investigation
                                mation must be treated as an error unless it                 1. Notice to consumer. Unless otherwise indi-
                                is clear that the consumer is requesting a                cated in this section, the financial institu-
                                duplicate copy for tax or other record-keep-              tion may provide the required notices to the
                                ing purposes.
                                                                                          consumer either orally or in writing.
                                      11(b) Notice of Error From Consumer                    2. Written confirmation of oral notice. A fi-
                                                                                          nancial institution must begin its investiga-
                                    Paragraph 11(b)(1)—Timing; Contents                   tion promptly upon receipt of an oral notice.
                                  1. Content of error notice. The notice of               It may not delay until it has received a writ-
                                error is effective even if it does not contain            ten confirmation.
                                the consumer’s account number, so long as                    3. Charges for error resolution. If a billing
                                the financial institution is able to identify             error occurred, whether as alleged or in a dif-
                                the account in question. For example, the                 ferent amount or manner, the financial insti-
                                consumer could provide a Social Security                  tution may not impose a charge related to
                                number or other unique means of identifica-               any aspect of the error-resolution process
                                tion.                                                     (including charges for documentation or in-
                                  2. Investigation pending receipt of informa-            vestigation). Since the act grants the con-
                                tion. While a financial institution may re-               sumer error-resolution rights, the institu-
                                quest a written, signed statement from the                tion should avoid any chilling effect on the
                                consumer relating to a notice of error, it                good-faith assertion of errors that might re-
                                may not delay initiating or completing an                 sult if charges are assessed when no billing
                                investigation pending receipt of the state-
                                                                                          error has occurred.
                                ment.
                                  3. Statement held for consumer. When a con-                4. Correction without investigation. A finan-
                                sumer has arranged for periodic statements                cial institution may make, without inves-
                                to be held until picked up, the statement for             tigation, a final correction to a consumer’s
                                a particular cycle is deemed to have been                 account in the amount or manner alleged by
                                transmitted on the date the financial insti-              the consumer to be in error, but must com-
                                tution first makes the statement available                ply with all other applicable requirements of
                                to the consumer.                                          § 205.11.
                                  4. Failure to provide statement. When a fi-                5. Correction notice. A financial institution
                                nancial institution fails to provide the con-             may include the notice of correction on a

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                                Pt. 205, Supp. I                                                       12 CFR Ch. II (1–1–02 Edition)
                                periodic statement that is mailed or deliv-               tion’s own records is sufficient, assuming no
                                ered within the 10-business-day or 45-cal-                agreement exists between the institution
                                endar-day time limits and that clearly iden-              and the third party concerning the bill-pay-
                                tifies the correction to the consumer’s ac-               ment service.
                                count. The institution must determine                       3. POS transfers. When a consumer alleges
                                whether such a mailing will be prompt                     an error involving a transfer to a merchant
                                enough to satisfy the requirements of this                via a POS terminal, the institution must
                                section, taking into account the specific                 verify the information previously trans-
                                facts involved.                                           mitted when executing the transfer. For ex-
                                   6. Correction of an error. If the financial in-        ample, the financial institution may request
                                stitution determines an error occurred, with-             a copy of the sales receipt to verify that the
                                in either the 10-day or 45-day period, it must            amount of the transfer correctly corresponds
                                correct the error (subject to the liability               to the amount of the consumer’s purchase.
                                provisions of §§ 205.6 (a) and (b)) including,              4. Agreement. An agreement that a third
                                where applicable, the crediting of interest               party will honor an access device is an agree-
                                and the refunding of any fees imposed by the              ment for purposes of this paragraph. A finan-
                                institution. In a combined credit/EFT trans-              cial institution does not have an agreement
                                action, for example, the institution must re-             for purposes of § 205.11(c)(4)(ii) solely because
                                fund any finance charges incurred as a result             it participates in transactions that occur
                                of the error. The institution need not refund             under the federal recurring payments pro-
                                fees that would have been imposed whether                 grams, or that are cleared through an ACH
                                or not the error occurred.                                or similar arrangement for the clearing and
                                   7. Extent of required investigation. A finan-          settlement of fund transfers generally, or be-
                                cial institution complies with its duty to in-            cause it agrees to be bound by the rules of
                                vestigate, correct, and report its determina-             such an arrangement.
                                tion regarding an error described in
                                § 205.11(a)(1)(vii) by transmitting the re-               11(d) Procedures if Financial Institution Deter-
                                quested information, clarification, or docu-                 mines No Error or Different Error Occurred
                                mentation within the time limits set forth in
                                § 205.11(c). If the institution has provisionally           1. Error different from that alleged. When a
                                credited the consumer’s account in accord-                financial institution determines that an
                                ance with § 205.11(c)(2), it may debit the                error occurred in a manner or amount dif-
                                amount upon transmitting the requested in-                ferent from that described by the consumer,
                                formation, clarification, or documentation.               it must comply with the requirements of
                                                                                          both § 205.11 (c) and (d), as relevant. The in-
                                               Paragraph 11(c)(2)(i)                      stitution may give the notice of correction
                                                                                          and the explanation separately or in a com-
                                   1. Compliance with all requirements. Finan-
                                                                                          bined form.
                                cial institutions exempted from provision-
                                ally crediting a consumer’s account under                   Paragraph 11(d)(1)—Written Explanation
                                § 205.11(c)(2)(i) (A) and (B) must still comply
                                with all other requirements of § 205.11.                    1. Request for documentation. When a con-
                                                                                          sumer requests copies of documents, the fi-
                                    Paragraph 11(c)(3)—Extension of Time                  nancial institution must provide the copies
                                                   Periods                                in an understandable form. If an institution
                                  1. POS debit card transactions. The extended            relied on magnetic tape it must convert the
                                deadlines for investigating errors resulting              applicable data into readable form, for exam-
                                from POS debit card transactions apply to                 ple, by printing it and explaining any codes.
                                all debit card transactions, including those
                                                                                            Paragraph 11(d)(2)—Debiting Provisional
                                for cash only, at merchants’ POS terminals,
                                                                                                             Credit
                                and also including mail and telephone or-
                                ders. The deadlines do not apply to trans-                   1. Alternative procedure for debiting of cred-
                                actions at an ATM, however, even though                   ited funds. The financial institution may
                                the ATM may be in a merchant location.                    comply with the requirements of this section
                                                                                          by notifying the consumer that the con-
                                       Paragraph 11(c)(4)—Investigation                   sumer’s account will be debited five business
                                  1. Third parties. When information or docu-             days from the transmittal of the notifica-
                                mentation requested by the consumer is in                 tion, specifying the calendar date on which
                                the possession of a third party with whom                 the debiting will occur.
                                the financial institution does not have an                   2. Fees for overdrafts. The financial institu-
                                agreement, the institution satisfies the error            tion may not impose fees for items it is re-
                                resolution requirement by so advising the                 quired to honor under § 205.11. It may, how-
                                consumer within the specified time period.                ever, impose any normal transaction or item
                                  2. Scope of investigation. When an alleged              fee that is unrelated to an overdraft result-
                                error involves a payment to a third party                 ing from the debiting. If the account is still
                                under the financial institution’s telephone               overdrawn after five business days, the insti-
                                bill-payment plan, a review of the institu-               tution may impose the fees or finance

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                                Federal Reserve System                                                                  Pt. 205, Supp. I
                                charges to which it is entitled, if any, under               C. In the same situation, assume the card
                                an overdraft credit plan.                                 is stolen and used both as a debit card and as
                                                                                          a credit card; for example, the thief makes
                                             11(e) Reassertion of Error                   some purchases using the card as a debit
                                  1. Withdrawal of error; right to reassert. The          card, and other purchases using the card as a
                                financial institution has no further error res-           credit card. Here, the liability limits and
                                olution responsibilities if the consumer vol-             error resolution provisions of Regulation E
                                untarily withdraws the notice alleging an                 apply to the unauthorized transactions in
                                error. A consumer who has withdrawn an al-                which the card was used as a debit card, and
                                legation of error has the right to reassert the           the corresponding provisions of Regulation Z
                                allegation unless the financial institution               apply to the unauthorized transactions in
                                had already complied with all of the error                which the card was used as a credit card.
                                resolution requirements before the allega-                   D. Assume a somewhat different type of
                                tion was withdrawn. The consumer must do                  card, one that draws on the consumer’s
                                so, however, within the original 60-day pe-               checking account and can also draw on an
                                riod.                                                     overdraft line of credit attached to the
                                                                                          checking account. There is no separate line
                                  SECTION 205.12—RELATION TO OTHER LAWS                   of credit, only the overdraft line, associated
                                                                                          with the card. In this situation, if the card is
                                       12(a) Relation to Truth in Lending                 stolen and used, the liability limits and the
                                  1. Determining applicable regulation. i. For            error resolution provisions of Regulation E
                                transactions involving access devices that                apply. In addition, if the use of the card has
                                also function as credit cards, whether Regu-              resulted in accessing the overdraft line of
                                lation E or Regulation Z (12 CFR part 226)                credit, the error resolution provisions of
                                applies depends on the nature of the trans-               § 226.13(d) and (g) of Regulation Z also apply,
                                action. For example, if the transaction sole-             but not the other error resolution provisions
                                ly involves an extension of credit, and does              of Regulation Z.
                                not include a debit to a checking account (or                2. Issuance rules. For access devices that
                                other consumer asset account), the liability              also constitute credit cards, the issuance
                                limitations and error resolution require-                 rules of Regulation E apply if the only credit
                                ments of Regulation Z apply. If the trans-                feature is a preexisting credit line attached
                                action debits a checking account only (with               to the asset account to cover overdrafts (or
                                no credit extended), the provisions of Regu-              to maintain a specified minimum balance).
                                lation E apply. If the transaction debits a               Regulation Z (12 CFR part 226) rules apply if
                                checking account but also draws on an over-               there is another type of credit feature, for
                                draft line of credit attached to the account,             example, one permitting direct extensions of
                                Regulation E’s liability limitations apply, in            credit that do not involve the asset account.
                                addition to §§ 226.13 (d) and (g) of Regulation
                                                                                            12(b) Preemption of Inconsistent State Laws
                                Z (which apply because of the extension of
                                credit associated with the overdraft feature                 1. Specific determinations. The regulation
                                on the checking account). If a consumer’s ac-             prescribes standards for determining wheth-
                                cess device is also a credit card and the de-             er state laws that govern EFTs are pre-
                                vice is used to make unauthorized with-                   empted by the act and the regulation. A
                                drawals from a checking account, but also is              state law that is inconsistent may be pre-
                                used to obtain unauthorized cash advances                 empted even if the Board has not issued a de-
                                directly from a line of credit that is separate           termination. However, nothing in § 205.12(b)
                                from the checking account, both Regulation                provides a financial institution with immu-
                                E and Regulation Z apply.                                 nity for violations of state law if the institu-
                                  ii. The following examples illustrate these             tion chooses not to make state disclosures
                                principles:                                               and the Board later determines that the
                                  A. A consumer has a card that can be used               state law is not preempted.
                                either as a credit card or a debit card. When                2. Preemption determination. The Board de-
                                used as a debit card, the card draws on the               termined that certain provisions in the state
                                consumer’s checking account. When used as                 law of Michigan are preempted by the federal
                                a credit card, the card draws only on a sepa-             law, effective March 30, 1981:
                                rate line of credit. If the card is stolen and               i. Definition of unauthorized use. Section
                                used as a credit card to make purchases or to             5(4) is preempted to the extent that it relates
                                get cash advances at an ATM from the line                 to the section of state law governing con-
                                of credit, the liability limits and error reso-           sumer liability for unauthorized use of an ac-
                                lution provisions of Regulation Z apply; Reg-             cess device.
                                ulation E does not apply.                                    ii. Consumer liability for unauthorized use
                                  B. In the same situation, if the card is sto-           of an account. Section 14 is inconsistent with
                                len and is used as a debit card to make pur-              § 205.6 and is less protective of the consumer
                                chases or to get cash withdrawals at an ATM               than the federal law. The state law places li-
                                from the checking account, the liability lim-             ability on the consumer for the unauthorized
                                its and error resolution provisions of Regula-            use of an account in cases involving the con-
                                tion E apply; Regulation Z does not apply.                sumer’s negligence. Under the federal law, a

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                                Pt. 205, Supp. I                                                       12 CFR Ch. II (1–1–02 Edition)
                                consumer’s liability for unauthorized use is               14(b) Compliance by Electronic Fund Transfer
                                not related to the consumer’s negligence and                             Service Provider
                                depends instead on the consumer’s prompt-
                                                                                            1. Liability. The service provider is liable
                                ness in reporting the loss or theft of the ac-
                                                                                          for unauthorized EFTs that exceed limits on
                                cess device.
                                                                                          the consumer’s liability under § 205.6.
                                   iii. Error resolution. Section 15 is pre-                Paragraph 14(b)(1)—Disclosures and Docu-
                                empted because it is inconsistent with                    mentation
                                § 205.11 and is less protective of the consumer             1. Periodic statements from electronic fund
                                than the federal law. The state law allows fi-            transfer service provider. A service provider
                                nancial institutions up to 70 days to resolve             that meets the conditions set forth in this
                                errors, whereas the federal law generally re-             paragraph does not have to issue periodic
                                quires errors to be resolved within 45 days.              statements. A service provider that does not
                                   iv. Receipts and periodic statements. Sec-             meet the conditions need only include on
                                tions 17 and 18 are preempted because they                periodic statements information about
                                are inconsistent with § 205.9. The state provi-           transfers initiated with the access device it
                                sions require a different disclosure of infor-            has issued.
                                mation than does the federal law. The re-
                                ceipt provision is also preempted because it                  Paragraph 14(b)(2)—Error Resolution
                                allows the consumer to be charged for receiv-
                                ing a receipt if a machine cannot furnish one               1. Error resolution. When a consumer noti-
                                at the time of a transfer.                                fies the service provider of an error, the EFT
                                                                                          service provider must investigate and re-
                                       SECTION 205.13—ADMINISTRATIVE                      solve the error in compliance with § 205.11 as
                                      ENFORCEMENT; RECORD RETENTION                       modified by § 205.14(b)(2). If an error oc-
                                                                                          curred, any fees or charges imposed as a re-
                                               13(b) Record Retention                     sult of the error, either by the service pro-
                                                                                          vider or by the account-holding institution
                                  1. Requirements. A financial institution
                                                                                          (for example, overdraft or dishonor fees)
                                need not retain records that it has given dis-
                                                                                          must be reimbursed to the consumer by the
                                closures and documentation to each con-
                                                                                          service provider.
                                sumer; it need only retain evidence dem-
                                onstrating that its procedures reasonably en-                  14(c) Compliance by Account-Holding
                                sure the consumers’ receipt of required dis-                                Institution
                                closures and documentation.
                                                                                                          Paragraph 14(c)(1)
                                SECTION 205.14—ELECTRONIC FUND TRANSFER
                                 SERVICE PROVIDER NOT HOLDING CON-                           1. Periodic statements from account-holding
                                 SUMER’S ACCOUNT
                                                                                          institution. The periodic statement provided
                                                                                          by the account-holding institution need only
                                     14(a) Electronic Fund Transfer Service               contain      the  information   required    by
                                         Providers Subject to Regulation                  § 205.9(b)(1).
                                   1. Applicability. This section applies only             SECTION 205.16—DISCLOSURES AT AUTOMATED
                                when a service provider issues an access de-                            TELLER MACHINES
                                vice to a consumer for initiating transfers to
                                or from the consumer’s account at a finan-                                  16(b) General
                                cial institution and the two entities have no
                                                                                                         Paragraph 16(b)(1)
                                agreement regarding this EFT service. If the
                                service provider does not issue an access de-               1. Specific notices. An ATM operator that
                                vice to the consumer for accessing an ac-                 imposes a fee for a specific type of trans-
                                count held by another institution, it does                action such as a cash withdrawal, but not a
                                not qualify for the treatment accorded by                 balance inquiry, may provide a general
                                § 205.14. For example, this section does not              statement that a fee will be imposed for pro-
                                apply to an institution that initiates                    viding EFT services or may specify the type
                                preauthorized payroll deposits to consumer                of EFT for which a fee is imposed.
                                accounts on behalf of an employer. By con-
                                trast, § 205.14 can apply to an institution that                SECTION 205.17—REQUIREMENTS FOR
                                issues a code for initiating telephone trans-                      ELECTRONIC COMMUNICATION
                                fers to be carried out through the ACH from
                                                                                                          17(b) General Rule
                                a consumer’s account at another institution.
                                This is the case even if the consumer has ac-               1. Relationship to the E-Sign Act. The E-Sign
                                counts at both institutions.                              Act authorizes the use of electronic disclo-
                                   2. ACH agreements. The ACH rules generally             sures. It does not affect any requirement im-
                                do not constitute an agreement for purposes               posed under this part other than a provision
                                of this section. However, an ACH agreement                that requires disclosures to be in paper form,
                                under which members specifically agree to                 and it does not affect the content or timing
                                honor each other’s debit cards is an ‘‘agree-             of disclosures. Electronic disclosures are
                                ment,’’ and thus this section does not apply.             subject to the regulation’s format, timing,

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                                Federal Reserve System                                                                  Pt. 205, Supp. I
                                and retainability rules and the clear and                 and software requirements for accessing and
                                readily understandable standard. For exam-                retaining electronic disclosures.
                                ple, to satisfy the clear and readily under-                6. Disclosures provided on financial institu-
                                standable standard for disclosures, elec-                 tion’s equipment. A financial institution that
                                tronic disclosures must use visual text.                  controls the equipment providing electronic
                                  2. Clear and readily understandable standard.           disclosures to consumers (for example, an
                                A financial institution must provide elec-                ATM or computer terminal in a financial in-
                                tronic disclosures using a clear and readily              stitution’s lobby) must ensure that the
                                understandable format. Also, in accordance                equipment satisfies the regulation’s require-
                                with the E-Sign Act:                                      ments to provide timely disclosures in a
                                  i. The institution must disclose the re-                clear and readily understandable format and
                                quirements for accessing and retaining dis-               in a form that the consumer may keep. For
                                closures in that format;                                  example, if disclosures are required at the
                                  ii. The consumer must demonstrate the                   time of an on-line transaction, the disclo-
                                ability to access the information electroni-              sures must be sent to the consumer’s e-mail
                                cally and affirmatively consent to electronic             address or must be made available at an-
                                delivery; and                                             other location such as the financial institu-
                                  iii. The institution must provide the dis-              tion’s Internet web site, unless the financial
                                closures in accordance with the specified re-             institution provides a printer that automati-
                                quirements.                                               cally prints the disclosures.
                                  3. Timing and effective delivery when a con-
                                sumer signs up for an EFT service on-line.                 17(c) Address or Location To Receive Electronic
                                When a consumer contracts for an EFT serv-                                 Communication
                                ice on the Internet and will be able imme-
                                                                                                          Paragraph 17(c)(1)
                                diately to initiate a fund transfer, a finan-
                                cial institution satisfies the timing require-              1. Electronic address. A consumer’s elec-
                                ments under this part if, at the time the con-            tronic address is an e-mail address that is
                                sumer contracts for the service or before the             not limited to receiving communications
                                first transfer is made, the disclosures auto-             transmitted solely by the financial institu-
                                matically appear on the screen, even if mul-              tion.
                                tiple screens are required to view the entire
                                disclosure. Or a financial institution may                                Paragraph 17(c)(2)
                                provide a link to electronic disclosures, as
                                long as consumers cannot bypass the link                    1. Identifying account involved. A financial
                                and they are required to access the disclo-               institution may identify a specific account
                                sures before initiating the first transfer. The           in a variety of ways and is not required to
                                institution is not required to confirm that               identify an account by reference to the ac-
                                the consumer has read the disclosures.                    count number. For example, where the con-
                                                                                          sumer has only one checking account, and no
                                  4. Timing and effective delivery for disclosures
                                                                                          confusion would result, the institution may
                                provided periodically. Disclosures provided by
                                                                                          refer to ‘‘your checking account.’’ If the con-
                                e-mail are timely based on when the disclo-
                                                                                          sumer has two checking accounts, the insti-
                                sures are sent. Disclosures posted at an
                                                                                          tution may, for example, differentiate ac-
                                Internet web site, such as periodic state-
                                                                                          counts based on names for different checking
                                ments or change-in-terms and other notices,
                                                                                          account programs or by using a truncated
                                are timely when the financial institution has
                                                                                          account number.
                                both made the disclosures available and sent
                                a notice alerting the consumer that the dis-                2. 90-day rule. The actual disclosures pro-
                                closures have been posted. For example,                   vided to the consumer must be available for
                                under § 205.8(a), institution offering accounts           at least 90 days, but the financial institution
                                with EFT services must provide a change-in-               has discretion to determine whether they
                                terms notice to consumers at least 21 days in             should be available at the same location for
                                advance of certain changes. For a change-in-              the entire period.
                                terms notice posted on the Internet, an insti-
                                                                                                           17(d) Redelivery
                                tution must both post the notice and notify
                                consumers of its availability at least 21 days               1. E-mail returned as undeliverable. If an e-
                                in advance of the change.                                 mail to the consumer (containing an alert
                                  5. Retainability of disclosures. Financial in-          notice or other disclosure) is returned as un-
                                stitutions satisfy the requirement that dis-              deliverable, the redelivery requirement is
                                closures be in a form that the consumer may               satisfied if, for example, the institution
                                keep if electronic disclosures are delivered in           sends the disclosure to a different e-mail ad-
                                a format that is capable of being retained                dress or postal address that the institution
                                (such as by printing or storing electroni-                has on file for the consumer. Sending the dis-
                                cally). The format must also be consistent                closure a second time to the same electronic
                                with the information required to be provided              address is not sufficient if the institution
                                under section 101(c)(1)(C)(i) of the E-Sign Act           has a different address for the consumer on
                                (15 U.S.C. 7001(c)(1)(C)(i)) about the hardware           file.

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                                Pt. 206                                                                12 CFR Ch. II (1–1–02 Edition)
                                17(e) Persons Other Than Financial Institutions             AUTHORITY: Section 308 of Public Law 102–
                                                                                          242, 105 Stat. 2236, 12 U.S.C. 371b–2.
                                  1. Electronic disclosures. Entities other than
                                financial institutions, such as merchants,                 SOURCE: Reg. F, 57 FR 60106, Dec. 18, 1992,
                                are subject to certain provisions of Regula-              unless otherwise noted.
                                tion E, including §§ 205.10(b) and (d). These
                                entities too may use electronic communica-                § 206.1 Authority, purpose, and scope.
                                tion to provide disclosures required to be in                (a) Authority and purpose. This part
                                writing.
                                                                                          (Regulation F, 12 CFR part 206) is
                                  APPENDIX A—MODEL DISCLOSURE CLAUSES                     issued by the Board of Governors of the
                                              AND FORMS                                   Federal Reserve System (Board) to im-
                                   1. Review of forms. The Board will not re-             plement section 308 of the Federal De-
                                view or approve disclosure forms or state-                posit Insurance Corporation Improve-
                                ments for financial institutions. However,                ments Act of 1991 (Act), 12 U.S.C. 371b–
                                the Board has issued model clauses for insti-             2. The purpose of this part is to limit
                                tutions to use in designing their disclosures.            the risks that the failure of a deposi-
                                If an institution uses these clauses accu-                tory institution would pose to insured
                                rately to reflect its service, the institution is         depository institutions.
                                protected from liability for failure to make
                                                                                             (b) Scope. This part applies to all de-
                                disclosures in proper form.
                                   2. Use of the forms. The appendix contains             pository institutions insured by the
                                model disclosure clauses for optional use by              Federal Deposit Insurance Corporation.
                                financial institutions to facilitate compli-
                                ance with the disclosure requirements of                  § 206.2 Definitions.
                                §§ 205.5(b)(2) and (b)(3), 205.6(a), 205.7, 205.8(b),        As used in this part, unless the con-
                                205.14(b)(1)(ii) and 205.15(d)(7) and (d)(2). The         text requires otherwise:
                                use of appropriate clauses in making disclo-                 (a) Bank means an insured depository
                                sures will protect a financial institution
                                from liability under sections 915 and 916 of
                                                                                          institution, as defined in section 3 of
                                the act provided the clauses accurately re-               the Federal Deposit Insurance Act (12
                                flect the institution’s EFT services.                     U.S.C. 1813), and includes an insured
                                   3. Altering the clauses. Financial institu-            national bank, state bank, District
                                tions may use clauses of their own design in              bank, or savings association, and an in-
                                conjunction with the Board’s model clauses.               sured branch of a foreign bank.
                                The inapplicable words or portions of phrases                (b) Commonly-controlled correspondent
                                in parentheses should be deleted. The catch-              means a correspondent that is com-
                                lines are not part of the clauses and need not
                                                                                          monly controlled with the bank and for
                                be used. Financial institutions may make al-
                                terations, substitutions, or additions in the             which the bank is subject to liability
                                clauses to reflect the services offered, such             under section 5(e) of the Federal De-
                                as technical changes (including the substi-               posit Insurance Act. A correspondent is
                                tution of a trade name for the word ‘‘card,’’             considered to be commonly controlled
                                deletion of inapplicable services, or substi-             with the bank if:
                                tution of lesser liability limits). Several of               (1) 25 percent or more of any class of
                                the model clauses include references to a                 voting securities of the bank and the
                                telephone number and address. Where two or
                                                                                          correspondent are owned, directly or
                                more of these clauses are used in a disclo-
                                sure, the telephone number and address may                indirectly, by the same depository in-
                                be referenced and need not be repeated.                   stitution or company; or
                                                                                             (2) Either the bank or the cor-
                                [Reg. E, 61 FR 19686, May 2, 1996, as amended
                                                                                          respondent owns 25 percent or more of
                                at 66 FR 13412, Mar. 6, 2001; 66 FR 15192, Mar.
                                16, 2001; 66 FR 17794, Apr. 4, 2001]                      any class of voting securities of the
                                                                                          other.
                                                                                             (c) Correspondent means a U.S. depos-
                                PART 206—LIMITATIONS ON INTER-                            itory institution or a foreign bank, as
                                 BANK LIABILITIES (REGULATION F)                          defined in this part, to which a bank
                                                                                          has exposure, but does not include a
                                Sec.                                                      commonly controlled correspondent.
                                206.1 Authority, purpose, and scope.                         (d) Exposure means the potential that
                                206.2 Definitions.
                                206.3 Prudential standards.
                                                                                          an obligation will not be paid in a
                                206.4 Credit exposure.                                    timely manner or in full. ‘‘Exposure’’
                                206.5 Capital levels of correspondents.                   includes credit and liquidity risks, in-
                                206.6 Waiver.                                             cluding operational risks, related to
                                206.7 Transition provisions.                              intraday and interday transactions.

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