[Federal Register Volume 59, Number 44 (Monday, March 7, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-4680]


[[Page Unknown]]

[Federal Register: March 7, 1994]


FEDERAL RESERVE SYSTEM

12 CFR Part 205

[Regulation E; Docket No. R-0830]

 

Electronic Fund Transfers

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Proposed rule.

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SUMMARY: The Board is publishing for comment a proposal to revise 
Regulation E, which implements the Electronic Fund Transfer Act. The 
proposal stems from the Board's review of Regulation E pursuant to its 
policy of periodically reviewing all of its regulations. The Board's 
review considered ways the regulation could be simplified to ease the 
burdens imposed on financial institutions, consistent with the Board's 
responsibility for implementing the act, and considered also whether 
the regulation could more effectively carry out the purposes of the 
act. The proposal contains several substantive revisions, including 
changes to the existing exemptions for securities or commodities 
transfers and for preauthorized transfers to or from accounts at small 
institutions. In addition, the proposal includes changes intended to 
make Regulation E more consistent with the requirements of other 
regulations governing deposit accounts. The proposal also simplifies 
the language and format of the regulation, deleting obsolete provisions 
and eliminating all of the footnotes. In conjunction with the proposed 
revisions to the regulation, the Board also has proposed revisions to 
the staff commentary published elsewhere in today's Federal Register.

DATES: Comments must be received on or before May 31, 1994.

ADDRESSES: Comments should refer to Docket No. R-0830 and be mailed to 
William W. Wiles, Secretary, Board of Governors of the Federal Reserve 
System, Washington, DC 20551. They may also be delivered to the guard 
station in the Eccles Building Courtyard on 20th Street, NW. (between 
Constitution Avenue and C Street) between 8:45 a.m. and 5:15 p.m. 
weekdays. Except as provided in the Board's rules regarding the 
availability of information (12 CFR 261.8), comments will be available 
for inspection and copying by members of the public in the Freedom of 
Information Office, room MP-500 of the Martin Building between 9:00 
a.m. and 5:00 p.m. weekdays.

FOR FURTHER INFORMATION CONTACT: Jane Jensen Gell, Mary Jane Seebach, 
Staff Attorneys, or John Wood, Senior Attorney, Division of Consumer 
and Community Affairs, at (202) 452-2412 or (202) 452-3667. For the 
hearing impaired only, Telecommunications Device for the Deaf (TDD), 
Dorothea Thompson, at (202) 452-3544.

SUPPLEMENTARY INFORMATION:

(1) Background

    The Electronic Fund Transfer Act (EFTA) (15 U.S.C. 1693), enacted 
in 1978, provides a basic framework establishing the rights, 
liabilities, and responsibilities of participants in electronic fund 
transfer (EFT) systems. The Federal Reserve Board was given rulewriting 
authority to issue implementing regulations. Types of transfers covered 
by the act and regulation include transfers initiated through an 
automated teller machine (ATM), point-of-sale terminal, automated 
clearinghouse, telephone bill-payment system, or home banking program. 
The act and Regulation E (12 CFR part 205) provide rules that govern 
these and other EFTs. The rules prescribe restrictions on the 
unsolicited issuance of ATM cards and other access devices; disclosure 
of terms and conditions of an EFT service; documentation of EFTs by 
means of terminal receipts and periodic account statements; limitations 
on consumer liability for unauthorized transfers; procedures for error 
resolution; and certain rights related to preauthorized EFTs.
    The Board's policy under its Regulatory Planning and Review (RPR) 
program calls for periodic review of each Board regulation. The RPR 
program has four goals: to clarify and simplify the regulatory 
language; to amend the regulation to reflect technological and other 
developments; to reduce undue regulatory burden on the industry; and to 
delete obsolete provisions. In keeping with that policy, the Board has 
made a detailed review of Regulation E to determine whether it can be 
simplified to ease compliance burdens for financial institutions, while 
meeting the Board's responsibility for implementing the consumer 
protections of the EFTA.
    Based on its review, the Board now proposes revisions to Regulation 
E. While certain substantive revisions have been made to the regulation 
(see the section-by-section discussion below), the proposal leaves most 
of the regulatory provisions substantively unchanged. The regulation 
closely follows the language of the statute, which contains detailed 
requirements in most areas, and major changes to the regulation are not 
possible unless the act itself is amended. Therefore, the Board is 
soliciting comment on whether specific legislative revisions to the 
EFTA are necessary and achievable without imposing a significant 
adverse impact on consumer protections.
    The proposal simplifies the language and format of each section of 
the regulation to state the requirements more clearly. All of the 
footnotes have been either integrated into the text of the regulation 
or moved to the proposed staff commentary, making the regulation itself 
less cumbersome to use. The proposed regulation is shorter than current 
Regulation E by about fifteen percent, a reduction largely attributable 
to the deletion of obsolete provisions and to the transfer of 
explanatory material to the commentary. In addition to commenting on 
the proposed changes, the Board requests specific suggestions, as well 
as rationale, for additional changes to the regulation that would 
facilitate compliance.

(2) Proposed Regulatory Revisions

    The following discussion covers the proposed revisions to 
Regulation E section-by-section. In many cases, the proposed changes 
would simplify or clarify the current text, with no substantive change 
in the regulatory requirements; where these changes are self-evident 
from reading the proposed text itself, they are not discussed.

Section 205.1--Authority and Purpose

    The proposal simplifies the current section. Discussion of the 
Congressional findings has been deleted. Coverage issues currently 
addressed in Sec. 205.1(b) have been moved to Sec. 205.3.

Section 205.2--Definitions

Paragraph (b)(2)
    The proposal incorporates the exemption for trust accounts 
(currently Sec. 205.3(f)) into the definition of account. The 
definition more closely tracks the statutory language contained in 
section 903(2) of the EFTA.
Paragraph (d)--Business Day
    The act and regulation define business day as any day on which the 
offices of the consumer's financial institution are open to the public 
for carrying on substantially all business functions. This currently 
requires that each financial institution determine when its offices are 
``carrying on substantially all business functions.'' Using its 
exception authority under section 904(c) of the EFTA, the Board 
proposes to change the definition so that it will mirror that used in 
Regulations CC (12 CFR part 229) and DD (12 CFR part 230). Those 
regulations define a business day as a calendar day other than a 
Saturday, Sunday, or any legal public holiday specified in 5 U.S.C. 
6103(a). The Board believes compliance with the multiple regulations 
that govern deposit accounts would be simplified if similar definitions 
were used and solicits comment on whether such a change will reduce 
burden without adversely affecting consumer protections.
Paragraph (g)--Financial Institution
    The Board proposes to simplify the definition of financial 
institution (currently Sec. 205.2(i)) by eliminating references to both 
state and federal institutions. Instead, the definition would include 
``a bank, savings association, credit union, or any other person that 
directly or indirectly holds an account belonging to a consumer.'' This 
is not intended as a substantive change in coverage.
Paragraph (h)--Person
    The proposal adds a definition of ``person,'' incorporating 
language from Regulations B (12 CFR 202.2(x)) and Z (12 CFR 
226.2(a)(22)). The term is used in several places in the regulation, 
most notably in Sec. 205.3(a), defining the regulation's coverage, and 
in Sec. 205.10(e) on compulsory use.

Section 205.3--Coverage

    The proposal includes a new section defining the regulation's 
coverage. The Board solicits comment on whether having a self-contained 
section on coverage would facilitate use of the regulation.
Paragraph (a)--General
    The proposal clarifies that the regulation applies to any EFT that 
authorizes a financial institution to debit or credit a consumer's 
account. It also incorporates the discussion of coverage currently 
addressed in Sec. 205.1(b).
Paragraph (b)--Electronic Fund Transfer
    The definition of ``electronic fund transfer'' (currently 
Sec. 205.2(g)), which is central to determining coverage under the 
regulation, has been moved into the coverage section. A minor change to 
the definition of an EFT makes clear that the term includes transfers 
initiated through a computer or through magnetic tape. This change is 
proposed because a strict reading of the current regulation might lead 
to the unintended conclusion that an EFT does not include transfers 
initiated through a computer not involving tape. The definitions of 
``preauthorized electronic fund transfer'' and ``unauthorized 
electronic fund transfer'' remain in the definitions section.
    Questions have arisen about Regulation E coverage of smart cards. 
Generally, smart cards are plastic cards that have the capacity to 
either compute or communicate information. At one time, it was believed 
that smart card systems were not subject to Regulation E because no 
account existed within the definition of the act or regulation. With 
advances in smart card technology, that assumption is less clear. 
Increasingly more uses are available for smart cards. The Board 
believes that smart cards are subject to Regulation E if the cards are 
used to access an account. A similar analysis might be applied to 
value-added or prepaid cards.
    The determination about whether smart cards and value-added cards 
are subject to the regulation has implications both for the private and 
public sectors. For example, any determination made on coverage of 
smart cards in the review could apply to electronic benefit transfer 
system programs. (See Docket No. R-0829 elsewhere in today's Federal 
Register in which the Board deferred to the review of Regulation E for 
discussion of smart cards and its implication on electronic benefit 
transfer systems.) The Board solicits comment on the coverage of smart 
cards.
Paragraph (c)--Exclusions From Coverage
    The proposal's expanded section on coverage retains the exemptions 
currently contained in Sec. 205.3. Including these exemptions with the 
definition of ``electronic fund transfer'' more closely tracks the 
statutory provisions. In addition, the Board believes having both 
coverage and exemption provisions in one section would facilitate the 
determination of whether compliance with the regulation is required. 
The paragraph contains several proposed revisions to current 
exemptions.
Paragraph (c)(3)--Wire Transfers
    The proposal amends the exemption for wire transfers currently 
contained in Sec. 205.3(b) to clarify that it exempts transfers through 
Fedwire (or similar wire transfer systems) and not all transfers 
through the Federal Reserve Communications System. The proposed 
amendment does not represent a substantive change in the scope of the 
exemption. Rather, it would correct the reference to more accurately 
reflect the statutory intent.
Paragraph (c)(4)--Securities and Commodities Transfers
    The Board proposes to revise the exemption for certain securities 
and commodities transfers. When the current exemption was initially 
adopted, the Board omitted the requirement that the purchase or sale be 
through a broker-dealer registered with the Securities Exchange 
Commission (SEC). The intent of this change was to broaden the scope of 
the exemption to include securities transactions made by mutual funds 
and pension and profit-sharing plans. The Board noted at the time that 
existing federal laws and the regulations of the SEC and the Commodity 
Futures Trading Commission (CFTC), although not specifically 
promulgated for the regulation of payment transfers, provided 
protections to consumers that were consistent with the requirements of 
the EFTA and Regulation E.
    As currently written, however, the exemption does not extend to a 
transfer for the purchase or sale of securities if the securities (for 
example, municipal securities) are not regulated by the SEC, even if 
the transfer is executed by a broker-dealer who is regulated by the 
SEC. In keeping with the statutory language, the proposed change would 
exempt transfers involving unregulated securities if the purchase or 
sale is transacted by a broker-dealer regulated by the SEC or a futures 
commission merchant regulated by the CFTC. The Board believes that the 
regulation of broker-dealers and futures commission merchants offers 
sufficient protection of payment transfers for consumers and that the 
application of the protections in Regulation E would only duplicate 
available safeguards.
    The Board proposes to extend the exemption to all securities or 
commodities held in book-entry form by Federal Reserve Banks on behalf 
of the Treasury Department and other federal agencies (for example, 
Treasury Direct issues). Currently a transfer to purchase Treasury 
securities is technically covered by Regulation E because it is not 
regulated by the SEC or the CFTC and, when purchased from the Federal 
Reserve Banks, is not purchased or sold by a registered broker-dealer. 
The Board believes there is adequate regulation of transfers that 
involve Federal Reserve Banks and federal agencies, offering sufficient 
consumer protection (see 31 CFR part 370, regulations governing 
payments by the automated clearing house method on account of United 
States securities).
    The Board solicits comments on whether these proposed changes 
strike the appropriate balance between facilitating greater use of EFTs 
for securities transactions and providing adequate consumer protection.
Paragraph (c)(7)--Small Institutions
    The Board proposes to increase the current-asset size cutoff of the 
small institution exemption in current Sec. 205.3(g). Section 904(c) of 
the EFTA gives the Board authority to modify the requirements imposed 
by the regulation on small financial institutions if the Board 
determines that such modifications are necessary to alleviate any undue 
compliance burden on small institutions and that such modifications are 
consistent with the purposes and objective of the act. In 1982, the 
Board exempted preauthorized transfers to or from accounts at financial 
institutions with assets of less than $25 million. The regulation 
exempts the preauthorized transfers as a class of transfers, and not 
the financial institutions themselves. A small financial institution 
that provides EFT services besides preauthorized transfers must comply 
with the regulation for those other services. For example, a small 
financial institution that offers ATM services must comply with 
Regulation E in regard to the issuance of debit cards, terminal 
receipts, periodic statements, and other requirements. In addition, the 
institution must comply with provisions of the act that apply to the 
financial institution's conduct rather than to the exempted transfers. 
For example, the prohibition against compulsory use of EFTs in section 
913 of the act--in regard to credit or employment (see discussion below 
in Sec. 205.10(e))--remains applicable.
    When the Board adopted the exemption in 1982, many small 
institutions that did not offer EFT services such as ATM access 
benefitted from the exemption. Given the growth in assets of financial 
institutions in the past ten years, increasing the asset-size cutoff of 
the exemption to $100 million could reduce burden without lessening the 
extent of consumer protection originally provided. Because many small 
institutions now offer a variety of EFT services, it appears that only 
a limited number of institutions would be exempted from Regulation E 
under the proposed increase. The Board solicits comment on the proposed 
increase in the exemption level. In addition, the Board requests 
comment on other ways the burden on small institutions could be reduced 
without sacrificing the consumer protections intended by the act.
    Questions have been raised about the impact of Article 4A of the 
Uniform Commercial Code (UCC) on the small institution exemption. In 
the revised commentary to Regulation E, the Board clarifies that 
Article 4A is not applicable to the preauthorized transfers that 
qualify for the small institution exemption. Article 4A applies 
primarily to large-dollar commercial wire transfers made, for example, 
via Fedwire, CHIPs, SWIFT, and Telex. Section 4A-108 excludes any 
transaction that is subject to the EFTA from coverage under Article 4A. 
The question is whether the transfers initiated by small financial 
institutions that take advantage of the regulatory exemption may be 
subject to the requirements of Article 4A as a consequence. For 
example, would a direct deposit to a consumer account at a small bank 
be covered by Article 4A if exempt from Regulation E? The Board regards 
these preauthorized transfers as remaining subject to certain 
requirements of the EFTA, and therefore not covered by Article 4A. The 
Board solicits comment on whether specific language is needed in the 
regulation to clarify this issue.
    The Board proposes deleting footnote 1a, which refers to sections 
913, 915, and 916 of the EFTA. Section 913 places restrictions on the 
compulsory use of EFTs. For example, an institution may not condition 
the extension of credit on repayment by preauthorized debit. The 
statutory language from section 913 has been incorporated in proposed 
Sec. 205.10(e). Sections 915 and 916 provide for civil and criminal 
liability, respectively, for violations of the EFTA. References to 
sections 915 and 916 are contained in proposed Sec. 205.3(c)(5)(ii). 
The Board has also added cross-references to Sec. 205.10 and sections 
915 and 916 in the appropriate paragraphs to replace footnote 1a.

Section 205.4--General Disclosure Requirements; Jointly Offered 
Services

    Current Sec. 205.4 describes certain requirements under the 
regulation. The Board proposes to consolidate the general disclosure 
requirements currently dispersed throughout the regulation in this 
section. In addition to adding paragraph (a), the proposal contains 
various editorial changes including a reordering of the section; no 
substantive change is intended.
Paragraph (a)--Form of Disclosures
    The proposal incorporates the format requirements for disclosures 
currently found in Secs. 205.7(a) and 205.9. The Board interprets these 
requirements as generally applying to all disclosures, in addition to 
the terminal receipts and periodic statements required by the 
regulation. The phrase ``in a form the consumer may keep'' would 
replace the wording ``the financial institution shall make available to 
the consumer a written receipt of the transfer(s) * * *.'' currently 
contained in Sec. 205.9(a). The proposed change is consistent with 
language in Regulation Z (12 CFR 226.17(a)) and Regulation DD (12 CFR 
230.3(a)), for example. The Board does not consider this to be a 
substantive change, as the proposed language is drawn from the current 
commentary.
    The paragraph also incorporates language currently in Sec. 205.9(e) 
that permits an institution to use commonly accepted or readily 
understandable abbreviations in complying with the documentation 
requirements of the regulation.

Section 205.5--Issuance of Access Devices

    The proposal contains extensive editorial changes to this section, 
including the addition of headings to help distinguish the rules for 
solicited and unsolicited issuance of access devices.
    The proposal deletes the obsolete language in current 
Sec. 205.5(a)(3), a paragraph that grandfathered renewals of pre-1979 
access devices from the requirements of the section. In addition, the 
Board proposes to move the provisions relating to the Truth in Lending 
Act (TILA) contained in current Sec. 205.5(c) to proposed Sec. 205.12 
to simplify the regulation by placing all references to TILA in the 
same section. (See the discussion of Sec. 205.12 below.)
    Footnote 1b, which provides guidance on issuance of an access 
device for a joint account, has been deleted from the regulation and 
moved to the commentary.

Section 205.6--Liability of Consumer for Unauthorized Transfers

    Section 205.6 specifies the rules governing consumer liability for 
unauthorized use. The proposal significantly revises the section in an 
effort to simplify the text and make it easier to understand.
    The Board proposes moving explanatory or illustrative material to 
the commentary. This includes the parenthetical in current 
Sec. 205.6(a)(2), which provides examples of how a financial 
institution may identify the consumer to whom an access device is 
issued; Sec. 205.6(b)(3), which explains the relationship between the 
various tiers of liability; and examples of extenuating circumstances 
that would permit delayed notification by consumers in current 
Sec. 205.6(b)(4). The provisions in current Sec. 205.6(d) concerning 
the relation to the TILA now appear in proposed Sec. 205.12.
Paragraph (a)--Conditions for Liability
    The current regulation appears to condition consumer liability 
solely on the issuance of an accepted access device (Sec. 205.6(a)). 
The commentary, on the other hand, states that if the consumer fails to 
report an unauthorized EFT within 60 days of transmittal of the 
periodic statement reflecting the transfer, the consumer could be 
subject to liability for subsequent transfers (Q6-1). The Board 
interprets section 909 of the EFTA as precluding consumer liability for 
unauthorized transfers not involving an access device until 60 days 
after transmittal of the periodic statement reflecting the transfer. At 
that time, the consumer could be subject to unlimited liability for 
those transfers occurring after the 60 days.
    The proposal incorporates the current commentary position that a 
consumer could be held liable for unauthorized EFTs that did not 
involve an access device. The Board believes a consumer cannot, 
however, be held liable for unauthorized transfers occurring before the 
60-day period expires.
    The proposed section slightly alters the current rule by requiring 
that a financial institution provide all of the disclosures required by 
Sec. 205.7 in order to impose liability on the consumer. Currently 
Sec. 205.6(a)(3) requires that only three of the disclosures from 
Sec. 205.7 be provided before a consumer can be held liable for 
unauthorized transfers. The Board believes this proposed change would 
not impose a significant additional burden as institutions must 
initially provide all of the disclosures to comply with Sec. 205.7(b). 
The Board solicits comment on whether this change increases the risk of 
liability for institutions.
Paragraph (b)--Limitations on Amount of Liability
    Proposed paragraph (b) incorporates the substance of current 
paragraphs (b) (limitations on amount of liability) and (c) (notice to 
financial institution). In addition, the proposal spells out more 
clearly each of the three tiers of a consumer's liability ($50, $500, 
or unlimited). Subheadings provide further clarification.

Section 205.7--Initial Disclosures

    The proposal includes structural and editorial changes to this 
section. To provide greater clarity, text has been organized into 
separate paragraphs on timing and content of disclosures, and 
subheadings have been added to make the section easier to understand. 
Format requirements have been moved to proposed Sec. 205.4(a).
    The provision in current Sec. 205.7(a)(1), giving financial 
institutions the option of informing the consumer about the 
advisability of promptly reporting lost or stolen access devices, has 
been moved to the commentary.
    The Board proposes to move the error resolution notice from current 
Sec. 205.7(a)(10) to appendix A (Model Form A-3), to streamline the 
regulation and place all model disclosures together.
    The proposal deletes as obsolete current Sec. 205.7(b) regarding 
disclosures for accounts that predate the statute.
Paragraph (a)(3)--Business Days
    As described in the supplemental information to paragraph (d), the 
Board proposes to change the definition of business day to mean a 
calendar day other than a Saturday, Sunday, or any legal public holiday 
specified in 5 U.S.C. 6103(a). Accordingly, initial disclosures would 
have to include the revised definition of business day to assist 
consumers in understanding the timing provisions of the liability and 
error resolution rules under the regulation.

Section 205.8--Change in Terms Notice; Error Resolution Notice

    The proposal makes two substantive changes in this section. In 
addition, the Board proposes to restructure the requirements of 
Sec. 205.8 and add subheadings to make it easier to understand.
Paragraph (a)(1)--Prior Notice Required
    Section 905(b) of the EFTA requires a financial institution to 
notify a consumer in writing at least twenty-one days before the 
effective date of certain adverse changes in terms or conditions 
contained in the initial disclosures. The Truth in Savings Act (TISA) 
(12 U.S.C. 4301) also requires institutions to provide a change in 
terms notice for deposit accounts. Section 266(c) of TISA requires a 
notice 30 days before the effective date of any adverse change in terms 
or conditions. In the proposed official staff interpretation of 
Regulation DD, the Board stated that if a financial institution changes 
a term that also triggers a change in terms notice under Regulation E, 
the institution may use the timing rules of Regulation E for sending 
the notice to affected consumers (see 59 FR 5543, February 7, 1994). 
The Board proposes to use its exception authority under the EFTA to 
extend the timing of the change-in-terms notice in Regulation E to 30 
days to coincide with the timing requirements of Regulation DD in order 
to facilitate compliance with the requirements of both regulations. The 
Board solicits comment on whether it is preferable to retain the 
flexibility offered by the two different timing requirements.
Paragraph (a)(2)--Prior Notice Exception
    Currently, prior notice is not required when an immediate change in 
terms is needed to maintain or restore the security of an EFT system or 
account. If a change is made permanent, however, a financial 
institution must notify the consumer ``on or with the next regularly 
scheduled periodic statement or within 30 days'' of the change if 
disclosure would not raise security concerns. In certain circumstances, 
periodic statements are sent on a quarterly basis, and thus the 
consumer might not receive notification for up to ninety days after the 
change. The Board proposes to substitute a more specific timing rule 
for this subsequent notice. Under the proposal, if the change is made 
permanent, a financial institution must provide written notice within 
45 days of the change unless disclosure raised security concerns. The 
Board requests comment on the proposed timing requirement.
Paragraph (b)--Error Resolution Notice
    The Board proposes to move the alternate error resolution notice, 
which an institution may give with each periodic statement in place of 
the longer annual notice, from current Sec. 205.8(b) to appendix A 
(Model Form A-3). This will streamline the regulation and place all 
model disclosures in one location.

Section 205.9--Receipts at Electronic Terminals; Periodic Statements

    The proposed section contains a number of editorial revisions and 
two substantive changes. New paragraphs and headings have been added to 
better organize the text concerning the timing and contents of 
disclosures. As noted earlier, disclosure format requirements have been 
moved to Sec. 205.4. Current paragraph (e), concerning use of 
abbreviations, was also moved to Sec. 205.4.
    The Board proposes to move footnote 2, which permits a financial 
institution to make receipts available through a third party, to the 
commentary.
    The proposal deletes two obsolete paragraphs, (f) and (g), which 
dealt with receipts from terminals purchased prior to 1980 and delayed 
effective dates for certain periodic statements.
Paragraph (a)(1)--Amount
    The current regulation allows financial institutions other than the 
account-holding institution to include a charge for the transfer in the 
total amount of the transfer, provided the amount of the charge is 
disclosed on the receipt and on a sign posted on or at the terminal. 
The proposal makes two changes. First, it would permit all financial 
institutions (including the account-holding institution) to include the 
charge in the total amount of the transfer, if the appropriate 
disclosures are made. Second, it would permit institutions to display 
the fee on or at the terminal--meaning either on a sign or on the ATM 
screen itself. The Board solicits comment on whether consumers would 
need added protections if the fee is displayed on the screen, for 
example, allowing the consumer to cancel the transaction after the fee 
is disclosed.
Paragraph (a)(3)--Type
    This paragraph corresponds to current paragraph (a)(3) regarding 
disclosure of types of transfer and accounts. The examples included in 
the current paragraph have been moved to the proposed commentary.
    Currently the regulation requires that a financial institution 
uniquely identify each account on the terminal receipt if more than one 
account of the same type may be accessed by a single access device. 
Footnote 3 provided an exception for instances in which the terminal is 
incapable of uniquely identifying each account, as well as for 
transactions at terminals purchased or ordered by the financial 
institution prior to 1980. The portion of the footnote which permits 
financial institutions to exclude identification of the type of account 
if the access device may access only one account at a terminal has been 
incorporated into the text of the proposed regulation at 
Sec. 205.9(a)(3). The remainder of the footnote has been deleted as 
obsolete.
Paragraph (a)(4)--Identification
    Currently, the regulation requires that financial institutions 
disclose on terminal receipts a number or code that uniquely identifies 
the consumer initiating the transfer, the consumer's account(s), or the 
access device used to initiate the transfer (Sec. 205.9(a)(4)). The 
Board proposes to delete the reference to a number or code that 
uniquely identifies the ``consumer initiating the transfer'' as 
superfluous. The Board believes that the remaining identification 
requirements sufficiently identify the consumer.
Paragraph (a)(5)--Terminal Location
    This paragraph incorporates the substance of current 
Sec. 205.9(b)(1)(iv). The detail contained in the current regulation 
which specifies appropriate location descriptions has been moved to the 
commentary.
    The proposal deletes footnotes 5, 6, and 8 from the regulation. 
Footnote 5 allows institutions to omit the name of the state on 
terminal receipts for transfers occurring at terminals within 50 miles 
of the institution's main office. Footnotes 6 and 8 refer back to the 
text of footnote 5. The proposal incorporates this exception into the 
regulatory text. Footnote 5 also allows institutions to omit the name 
of the city and state if all of the terminals are located in the same 
city, and to omit the name of the state if all of the terminals are 
located in the same state. These exceptions have been deleted as 
obsolete, since most institutions that offer ATM access belong to 
networks operating on an interstate basis. Accordingly, few if any 
financial institutions are able to take advantage of the exception 
provided by the footnote. The Board solicits comment on whether these 
latter exceptions are still used by institutions.
    The rules regarding terminal identification on the receipt have 
been slightly modified. Section 205.9(b)(1)(iv)(C) allows financial 
institutions to identify the terminal location by using the name of the 
entity at whose place of business the terminal is located, including 
identifying the name of the financial institution. Footnote 7 requires, 
however, that if the institution owns or operates terminals at more 
than one location, the terminal location must be identified on the 
periodic statement. Therefore, if an institution owns only one terminal 
(and does not belong to a network) it could identify the terminal using 
its own name. The proposal provides that the receipt and the periodic 
statement may provide the terminal location by giving the name of the 
institution if it is other than the account-holding institution. In the 
previous example, the institution would have to provide either a street 
address or a generally accepted name for the location. The Board 
believes this change makes the provision available to more 
institutions, since very few institutions own and operate only one 
terminal and do not belong to a network. The Board solicits comment on 
whether this imposes a burden on small institutions, and also on 
whether the change adversely reduces consumer information.
Paragraph (a)(6)--Third Party Transfer
    Proposed paragraph (a)(6) incorporates the substance of current 
paragraph (a)(6). The excluded language, describing the use of codes or 
circumstances when the name of the payee cannot be duplicated by the 
terminal, has been incorporated into the proposed commentary.
Paragraph (b)--Periodic Statements
Paragraph (b)(1)--Transaction Information
    The regulation requires financial institutions to disclose on the 
periodic statement either the location of the terminal as it appeared 
on the receipt or, if a code or terminal number was used to identify 
the location, both the code and a description of the location as 
specified in the regulation (Sec. 205.9(b)(1)(iv)). The proposed 
regulation simplifies the rule by not requiring a restatement of the 
code in addition to the location description (see the discussion in 
paragraph (a)(5) above). Proposed paragraph (b)(1)(iv) also 
incorporates the substance of footnote 4a, which provides that a 
financial institution need not identify the terminal location for 
transactions that involve the deposit of cash, checks, drafts, or 
similar paper instruments at electronic terminals.
    Footnote 4 currently permits financial institutions to provide 
certain information on documents that accompany the periodic statement; 
and it permits the use of codes, if explained on either the statement 
or the accompanying documents. The footnote has been deleted and the 
substance moved to the proposed commentary. Footnote 9 allows an 
institution to omit the identification of third parties from periodic 
statements if their names appear on checks, drafts, or similar paper 
instruments deposited to the consumer's account at an electronic 
terminal. The footnote has been deleted and the substance moved to the 
proposed commentary.
Paragraph (b)(3)--Fees
    Currently, Sec. 205.9(b)(3) makes clear that a periodic statement 
required by Regulation E need not disclose any finance charge imposed 
under 12 CFR 226.7(f). The proposal eliminates the reference from the 
regulation, and moves the substance to the commentary.
    Regulation DD requires institutions that provide periodic 
statements to itemize by type and amount certain fees imposed during 
the statement period (Sec. 230.6(a)(3)). Currently, Sec. 205.9(b)(3) of 
Regulation E requires the disclosure of any fee that was assessed 
against the account during the period for EFTs. The commentary to 
Regulation E (Q9-31) allows fees to be shown as a total dollar figure 
or to be itemized in part or in full, at the institution's option. 
Under Regulation DD, the Board has provided that institutions may 
follow the more flexible rules in Regulation E for fees associated with 
EFTs even though Regulation DD otherwise requires a more specific 
disclosure. The Board solicits comment on whether regulatory burden 
would be eased if the disclosure requirement in Regulation E mirrored 
the requirement in Regulation DD (see 12 CFR 230.6(a)(3)).
Paragraph (c)--Exceptions to the Periodic Statement Requirements for 
Certain Accounts
    The proposal incorporates current paragraphs (c), (d), (h), and 
footnote 9a in revised Sec. 205.9(c), pertaining to those circumstances 
in which a periodic statement is not required (for example, for a 
passbook account that can be accessed electronically only by 
preauthorized transfers to the account). No substantive change is 
intended.
Paragraph (d)--Documentation for Foreign-Initiated Transfers
    Proposed paragraph (d) incorporates the essence of current 
paragraph (i) without substantive change.

Section 205.10--Preauthorized Transfers

    The Board has reformatted this section and has added subheadings. 
The proposed section contains a substantive change from the current 
regulation and a new paragraph on compulsory use.
Paragraph (a)--Preauthorized Transfers to Consumer's Account
    Section 205.10 sets forth general requirements for preauthorized 
transfers. The regulation currently requires that when a consumer's 
account will be credited by a preauthorized transfer from the same 
payor at least once every 60 days, the institution must credit the 
funds to the account as of the day the funds are received; this 
requirement would be deleted from the regulation as obsolete. The Board 
believes that mandating when funds must be credited to an account is no 
longer necessary since other regulations address both when funds must 
be made available to the consumer and when interest must be paid on the 
deposit (see Regulation CC, 12 CFR part 229; Treasury regulations, 31 
CFR part 210; and ACH association rules). The Board solicits comment on 
whether there is a need to maintain the requirement in the regulation.
Paragraph (b)--Written Authorization for Preauthorized Transfers From 
Consumer's Account
    The requirement that preauthorized EFTs from a consumer's account 
be authorized by the consumer only in writing has been revised. The 
requirement for the consumer's authorization to be a writing has been 
expanded to include authorizations which are ``similarly 
authenticated'' by the consumer. This proposed expansion addresses 
developments in electronic services, such as home banking. The broader 
interpretation of a ``writing'' would include, for example, electronic 
authorization by the consumer recorded on a computer memory unit. The 
Board believes this broader interpretation is consistent with the 
requirement in section 907 of the EFTA that the authorization be in 
writing. The Board solicits comment on whether additional safeguards 
are necessary to protect consumers in this situation. In addition, the 
Board solicits comment on other examples that might constitute 
``similarly authenticated'' for purposes of this section. The Board 
notes that the revised requirement for a signed writing makes clear 
that only the consumer could produce the written authorization and not, 
for example, a third-party merchant on behalf of the consumer.
Paragraph (e)--Compulsory Use
    Section 913 of the statute places certain restrictions on 
compulsory use of EFTs as a condition of credit, employment, or receipt 
of government benefits. The current regulation mentions the prohibition 
against compulsory use in footnote 1a, which references a financial 
institution's continuing duty to comply with section 913. The proposed 
paragraph is a counterpart to the statutory provision and would clarify 
that the provision applies to other persons (such as employers) and not 
just to financial institutions.

Section 205.11--Procedures for Resolving Errors

    The Board proposes to reformat this section and add subheadings to 
facilitate compliance. The editorial revisions, with one exception, are 
not intended to make substantive changes.
    Provisions contained in three footnotes have been moved to the 
proposed commentary: Footnote 10, which permits an institution to 
prescribe procedures for giving an error notice; footnote 11, which 
defines an agreement for purposes of Sec. 205.14; and footnote 12, 
which allows institutions to use a periodic statement to inform 
consumers that no error has occurred.
    The provisions in current paragraph (i) relating to the TILA have 
been moved to proposed Sec. 205.12.
Paragraph (c)--Time Limits and Extent of Investigation
    Proposed paragraph (c) combines current paragraphs (c) and (d)(2) 
of Sec. 205.11 concerning investigation of errors. The regulation 
currently requires a financial institution to provide the consumer with 
a written explanation, within the prescribed time period (either 10 
business days or 45 calendar days), if an error occurred. If an error 
did not occur and the financial institution is operating under the 45-
calendar-day rule, the institution has three additional days to notify 
the consumer of its findings. Section 908 of the EFTA makes clear the 
extra time is available when no error occurred, but is silent on the 
availability of extra time when an error is found (see the discussion 
in paragraph (e) below).
    To facilitate compliance, the Board proposes to use its exception 
authority under section 904(c) to permit institutions to give notice 
within three business days of concluding its investigation regardless 
of the procedure being followed and whether or not an error has been 
found. The statutory language contained in section 908(d) lends itself 
to such an interpretation, and the Board believes the change will 
facilitate compliance with the section without any significant loss of 
consumer protection.
Paragraph (d)--Procedures if Financial Institution Determines No Error 
or Different Error Occurred
    As discussed in the preceding paragraph, the Board proposes to 
allow institutions to provide notice within three business days of 
concluding an investigation, regardless of which time period is being 
followed.

Section 205.12--Relation to Other Laws

    The proposed section contains the various references to the TILA 
and Regulation Z currently dispersed throughout Regulation E. The 
section also includes the standards applied by the Board in granting a 
state law preemption or in making an exemption determination.
Paragraph (a)--Relation to Truth in Lending
    The Board proposes to consolidate all references from Secs. 205.5, 
205.6, and 205.11 to compliance with both the TILA and the EFTA in a 
single paragraph. The Board believes consolidating these references in 
one section will facilitate compliance.
Paragraph (b)--Preemption of Inconsistent State Laws
    Current Sec. 205.12(a) and (b) are incorporated in proposed 
paragraph (b), with numerous editorial revisions.
Paragraph (c)--State Exemptions
    Proposed paragraph (c) contains the rules the Board applies in 
granting a state exemption.

Section 205.13--Administrative Enforcement; Record Retention

    Current Sec. 205.13 contains information about administrative 
enforcement, issuance of staff interpretations, and record retention. 
With the exception of the record retention requirements, the proposal 
moves much of this information to the appendices.
Paragraph (b)--Record Retention
    Certain provisions of the act and regulation apply to persons other 
than financial institutions (for example, the compulsory use provisions 
of section 913, which apply to all employers). The proposal differs 
from the current rule by limiting the record retention requirements to 
financial institutions, rather than covering ``any person subject to 
the act and regulation.'' The Board solicits comment on whether this 
proposed change will produce an adverse impact on enforcement 
activities.

Section 205.14--Electronic Fund Transfer Service Provider Not Holding 
Consumer's Account

    The Board proposes substantial editorial revisions to this section 
to simplify the text. Text has been reorganized into appropriate 
categories and subheadings added for greater clarity. Footnote 13 
regarding delayed effective dates has been deleted as obsolete. The 
Board solicits comment on other ways the section could be simplified to 
facilitate compliance with the regulation.

Section 205.15--Electronic Fund Transfer of Government Benefits

    The Board has issued a final rule in regard to the coverage by the 
EFTA and Regulation E of government benefits that federal, state, and 
local governments disburse to recipients by means of electronic benefit 
transfer (EBT) programs. (See Docket No. R-0829 elsewhere in today's 
Federal Register.) Having just issued that final rule, the Board is not 
incorporating the provisions governing EBT programs, contained in a new 
Sec. 205.15, in this proposal.

Appendix A--Model Disclosure Clauses and Forms

    Most of the model disclosure clauses contained in appendix A remain 
unchanged. As noted earlier, the error resolution notices currently 
contained in Secs. 205.7 and 205.8 have been moved from the regulation 
into appendix A to streamline the regulation (see Model Form A-3).

Appendix B--Administrative Enforcement

    Appendix B lists the federal enforcement agencies responsible for 
enforcing Regulation E for particular classes of institutions.

Appendix C--Issuance of Staff Interpretations

    The proposal includes a new appendix to replace current 
Sec. 205.13(b) pertaining to requests for and issuance of staff 
interpretations of Regulation E. Much of the information contained in 
the current regulation, describing issuance of staff interpretations, 
has been deleted. The Board will continue to rely on the publication of 
interpretations in the official staff commentary as the primary means 
of interpreting the regulation. Specifically, and in keeping with the 
practice that has been in place for years, the proposal deletes any 
reference to unofficial staff interpretations that are in writing, 
limiting written interpretations to those that appear in the staff 
commentary, as revised. The Board believes this to be the most 
efficient and useful way to facilitate compliance.

(3) Form of Comment Letters

    Comment letters should refer to Docket No. R-0830. The Board 
requests that, when possible, comments be prepared using a standard 
typeface with a type size of 10 or 12 characters per inch. This will 
enable the Board to convert the text into machine-readable form through 
electronic scanning, and will facilitate automated retrieval of 
comments for review. Comments may also be submitted on computer 
diskettes, using either the 3.5'' or 5.25'' size, in any DOS-compatible 
format. Comments on computer diskettes must be accompanied by a hard 
copy version.

(4) Economic Impact Statement

    The Board's Division of Research and Statistics has prepared an 
economic impact statement on the proposed regulation. A copy of the 
analysis may be obtained from Publications Services, Board of Governors 
of the Federal Reserve System, Washington, DC 20551, or by telephone at 
(202) 452-3245.

List of Subjects in 12 CFR Part 205

    Banks, banking, Consumer protection, Electronic fund transfers, 
Reporting and recordkeeping requirements.

Text of Proposed Revisions

    For the reasons set forth in the preamble, the Board proposes to 
amend 12 CFR part 205 as follows:

PART 205--ELECTRONIC FUND TRANSFERS (REGULATION E)

    1. The authority citation for part 205 would be revised to read as 
follows:

    Authority: 15 U.S.C. 1693.

    2. Sections 205.1 through 205.14 are revised to read as follows:


Sec. 205.1  Authority and purpose.

    (a) Authority. This part is issued by the Board of Governors of the 
Federal Reserve System pursuant to the Electronic Fund Transfer Act (15 
U.S.C. 1693 et seq.). The information-collection requirements have been 
approved by the Office of Management and Budget under 44 U.S.C. 3501 et 
seq. and have been assigned OMB No. 7100-0200.
    (b) Purpose. This part carries out the purposes of the Electronic 
Fund Transfer Act, which establishes the basic rights, liabilities, and 
responsibilities of consumers who use electronic fund transfer services 
and of financial institutions that offer these services. The primary 
objective of the act and this regulation is the protection of 
individual consumers engaging in electronic fund transfers.


Sec. 205.2  Definitions.

    For purposes of this part, the following definitions apply:
    (a)(1) Access device means a card, code, or other means of access 
to a consumer's account, or any combination thereof, that may be used 
by the consumer to initiate electronic fund transfers.
    (2) An access device becomes an accepted access device when the 
consumer:
    (i) Requests and receives, or signs, or uses (or authorizes another 
to use) the access device to transfer money between accounts or to 
obtain money, property, or services;
    (ii) Requests validation of an access device issued on an 
unsolicited basis; or
    (iii) Receives an access device in renewal of, or in substitution 
for, an accepted access device from either the financial institution 
that initially issued the device or a successor.
    (b)(1) Account means a demand deposit (checking), savings, or other 
consumer asset account (other than an occasional or incidental credit 
balance in a credit plan) held directly or indirectly by a financial 
institution and established primarily for personal, family, or 
household purposes.
    (2) The term does not include an account held by a financial 
institution under a bona fide trust agreement.
    (c) Act means the Electronic Fund Transfer Act (title IX of the 
Consumer Credit Protection Act, 15 U.S.C. 1693 et seq.).
    (d) Business day means any day other than a Saturday, a Sunday, or 
any of the legal public holidays specified in 5 U.S.C. 6103(a).
    (e) Consumer means a natural person.
    (f) Electronic terminal means an electronic device, other than a 
telephone operated by a consumer, through which a consumer may initiate 
an electronic fund transfer. The term includes, but is not limited to, 
point-of-sale terminals, automated teller machines, and cash dispensing 
machines.
    (g) Financial institution means a bank, savings association, credit 
union, or any other person that directly or indirectly holds an account 
belonging to a consumer, or that issues an access device and agrees 
with a consumer to provide electronic fund transfer services.
    (h) Person means a natural person or an organization, including a 
corporation, government agency, estate, trust, partnership, 
proprietorship, cooperative, or association.
    (i) Preauthorized electronic fund transfer means an electronic fund 
transfer authorized in advance to recur at substantially regular 
intervals.
    (j) State means any state, territory, or possession of the United 
States, the District of Columbia, the Commonwealth of Puerto Rico, or 
any political subdivision of the above.
    (k) Unauthorized electronic fund transfer means an electronic fund 
transfer from a consumer's account initiated by a person other than the 
consumer without actual authority to initiate the transfer and from 
which the consumer receives no benefit. The term does not include an 
electronic fund transfer initiated:
    (1) By a person who was furnished the access device to the 
consumer's account by the consumer, unless the consumer has notified 
the financial institution that transfers by that person are no longer 
authorized;
    (2) With fraudulent intent by the consumer or any person acting in 
concert with the consumer; or
    (3) By the financial institution or its employees.


Sec. 205.3  Coverage.

    (a) General. This part applies to any electronic fund transfer that 
authorizes a financial institution to debit or credit a consumer's 
account. Generally, the part applies to financial institutions. For 
purposes of Secs. 205.10(b), (d), (e) and 205.13 of this part, the part 
applies to any person.
    (b) Electronic fund transfer. The term electronic fund transfer 
means any transfer of funds that is initiated through an electronic 
terminal, telephone, computer, or magnetic tape for the purpose of 
ordering, instructing, or authorizing a financial institution to debit 
or credit an account. The term includes, but is not limited to:
    (1) Point-of-sale transfers;
    (2) Automated teller machine transfers;
    (3) Direct deposits or withdrawals of funds;
    (4) Transfers initiated by telephone; and
    (5) Transfers resulting from debit card transactions, whether or 
not initiated through an electronic terminal.
    (c) Exclusions from coverage. The term electronic fund transfer 
does not include:
    (1) Checks. Any transfer of funds originated by check, draft, or 
similar paper instrument; or any payment made by check, draft, or 
similar paper instrument at an electronic terminal.
    (2) Check guarantee or authorization services. Any transfer of 
funds that guarantees payment or authorizes acceptance of a check, 
draft, or similar paper instrument which does not directly result in a 
debit or credit to a consumer's account.
    (3) Wire transfers. Any transfer of funds through Fedwire or 
through a similar wire transfer system that is used primarily for 
transfers between financial institutions or between businesses.
    (4) Securities and commodities transfers. Any transfer of funds the 
primary purpose of which is the purchase or sale of a security or 
commodity, if the security or commodity is:
    (i) Regulated by the Securities and Exchange Commission or the 
Commodity Futures Trading Commission;
    (ii) Purchased or sold through a broker-dealer regulated by the 
Securities and Exchange Commission or through a futures commission 
merchant regulated by the Commodity Futures Trading Commission; or
    (iii) Held in book-entry form by a Federal Reserve Bank or federal 
agency.
    (5) Automatic transfers by account-holding institution. Any 
transfer of funds under an agreement between a consumer and a financial 
institution which provides that the institution will initiate 
individual transfers without a specific request from the consumer:
    (i) Between a consumer's accounts within the financial institution;
    (ii) From a consumer's account to an account of a member of the 
consumer's family held in the same financial institution; or
    (iii) Between a consumer's account and an account of the financial 
institution, except that these transfers remain subject to 
Sec. 205.10(e) of this part regarding compulsory use and sections 915 
and 916 of the act regarding civil and criminal liability.
    (6) Telephone-initiated transfers. Any transfer of funds that:
    (i) Is initiated by a telephone conversation between a consumer and 
an officer or employee of a financial institution; and
    (ii) Does not take place under a telephone bill-payment plan or 
other written agreement in which periodic or recurring transfers are 
contemplated.
    (7) Small institutions. Any preauthorized transfer to or from an 
account if the assets of the account-holding financial institution are 
$100 million or less on the preceding December 31. If assets of the 
account-holding institution subsequently exceed $100 million, the 
institution's exemption for preauthorized transfers terminates one year 
from the end of the calendar year in which the assets exceed $100 
million. Preauthorized transfers exempt under this paragraph remain 
subject to Sec. 205.10(e) of this part regarding compulsory use and 
sections 915 and 916 of the act regarding civil and criminal liability.


Sec. 205.4  General disclosure requirements; jointly offered services.

    (a) Form of disclosures. Disclosures required under this part shall 
be clear and readily understandable, in writing, and in a form the 
consumer may keep. A financial institution may use commonly accepted or 
readily understandable abbreviations in complying with the disclosure 
requirements of the part.
    (b) Additional information; disclosures required by other laws. 
Information or disclosures required by other laws (such as the Truth in 
Lending Act or the Truth in Savings Act) may be combined with the 
disclosures required by this part.
    (c) Multiple accounts and account holders--(1) Multiple accounts. 
If a consumer holds more than one account at a financial institution, 
the institution may combine the required disclosures into a single 
statement.
    (2) Multiple account holders. For joint accounts held by two or 
more consumers, the financial institution need provide only one set of 
the required disclosures and it may provide them to any of the account 
holders.
    (d) Services offered jointly. Financial institutions that provide 
electronic fund transfer services jointly may contract among themselves 
to comply with the requirements that this regulation imposes on any or 
all of them. An institution that provides electronic fund transfer 
services under an agreement with other institutions need make only 
those disclosures required by Secs. 205.7 and 205.8 of this part that 
are within the purview of its relationship with the consumer for whom 
it holds an account.


Sec. 205.5  Issuance of access devices.

    (a) Solicited issuance. A financial institution may issue an access 
device to a consumer only:
    (1) In response to an oral or written request for the device; or
    (2) As a renewal of, or in substitution for, an accepted access 
device whether issued by the institution or a successor.
    (b) Unsolicited issuance. A financial institution may distribute an 
access device to a consumer on an unsolicited basis if the access 
device is:
    (1) Not validated, which means the institution has not yet 
performed all the procedures that would enable a consumer to initiate 
an electronic fund transfer using the access device;
    (2) Accompanied by a clear explanation that the access device is 
not validated and how the consumer may dispose of it if validation is 
not desired;
    (3) Accompanied by a complete disclosure, in accordance with 
Sec. 205.7 of this part, of the consumer's rights and liabilities that 
will apply if the access device is validated; and
    (4) Validated only in response to the consumer's oral or written 
request for validation, after the institution verifies the consumer's 
identity by a reasonable means (such as by photograph, fingerprint, 
personal visit, or signature comparison).


Sec. 205.6  Liability of consumer for unauthorized transfers.

    (a) Conditions for liability. A consumer may be held liable, within 
the limitations described in paragraph (b) of this section, for an 
unauthorized electronic fund transfer involving the consumer's account 
only if the financial institution has provided the disclosures required 
by Sec. 205.7(b) of this part. If the unauthorized transfer involved an 
access device, it must be an accepted access device and the financial 
institution must have provided a means to identify the consumer to whom 
it was issued.
    (b) Limitations on amount of liability. The extent of a consumer's 
liability for an unauthorized electronic fund transfer or a series of 
related unauthorized transfers shall be determined as follows:
    (1) Timely notice given. If the consumer notifies the financial 
institution within two business days after learning of the loss or 
theft of the access device, the consumer's liability shall not exceed 
the lesser of $50 or the amount of unauthorized transfers that occur 
before notice to the financial institution.
    (2) Timely notice not given. If the consumer fails to notify the 
financial institution within two business days after learning of the 
loss or theft of the access device, the consumer's liability shall not 
exceed the lesser of $500 or the sum of:
    (i) $50 or the amount of unauthorized transfers that occur within 
the two business days, whichever is less; and
    (ii) The amount of unauthorized transfers that occur after the 
close of two business days and before notice to the institution and 
that the institution establishes would not have occurred had the 
consumer notified the institution within that time.
    (3) Periodic statement; timely notice not given. If the consumer 
fails to report an unauthorized electronic fund transfer that appears 
on a periodic statement within 60 days of the financial institution's 
transmittal of the statement, the consumer's liability shall not exceed 
the amount of the unauthorized transfers that occur after the close of 
the 60 days and before notice to the institution and that the 
institution establishes would not have occurred had the consumer 
notified the institution within that time. If an access device is 
involved, the consumer's liability may also extend to the amounts set 
forth in paragraphs (b)(1) or (b)(2) of this section, as applicable.
    (4) Extension of time limits. If the consumer's delay in notifying 
the financial institution was due to extenuating circumstances, the 
institution shall extend the times specified above to a reasonable 
period.
    (5) Notice to financial institution--(i) Notice to a financial 
institution is given when a consumer takes steps reasonably necessary 
to provide the institution with the pertinent information, whether or 
not an employee or agent of the institution actually receives the 
information.
    (ii) The consumer may notify the institution in person, by 
telephone, or in writing.
    (iii) Written notice is considered given at the time the consumer 
mails the notice or delivers it for transmission by any other usual 
means to the institution. Notice may be considered constructively given 
when the institution becomes aware of circumstances leading to the 
reasonable belief that an unauthorized transfer involving the 
consumer's account has been or may be made.
    (6) Liability under state law or agreement. If state law or an 
agreement between the consumer and the financial institution imposes 
less liability than is provided by this section, the consumer's 
liability shall not exceed the amount imposed under the state law or 
the agreement.


Sec. 205.7  Initial disclosures.

    (a) Timing of disclosures. A financial institution shall make the 
disclosures required by this section at the time a consumer contracts 
for an electronic fund transfer service or before the first electronic 
fund transfer is made involving the consumer's account.
    (b) Content of disclosures. The following disclosures shall be 
provided, as applicable:
    (1) Liability of consumer. A summary of the consumer's liability, 
under Sec. 205.6 of this part or under state or other applicable law or 
agreement, for unauthorized electronic fund transfers.
    (2) Telephone number and address. The telephone number and address 
of the person or office to be notified when the consumer believes that 
an unauthorized electronic fund transfer has been or may be made.
    (3) Business days. The financial institution's business days.
    (4) Types of transfers; limitations. The type of electronic fund 
transfers that the consumer may make and any limitations on the 
frequency and dollar amount of transfers. The details of the 
limitations need not be disclosed if confidentiality is essential to 
maintain the security of the electronic fund transfer system.
    (5) Fees. Any fees imposed by the financial institution for 
electronic fund transfers or for the right to make transfers.
    (6) Documentation. A summary of the consumer's right to receive 
documentation of electronic fund transfers, as provided in Secs. 205.9, 
205.10(a), and 205.10(d) of this part.
    (7) Stop payment. A summary of the consumer's right to stop payment 
of a preauthorized electronic fund transfer and the procedure for 
placing a stop-payment order, as provided in Sec. 205.10(c) of this 
part.
    (8) Liability of institution. A summary of the financial 
institution's liability to the consumer under section 910 of the act 
for failure to make or to stop certain transfers.
    (9) Confidentiality. The circumstances under which, in the ordinary 
course of business, the financial institution may provide information 
concerning the consumer's account to third parties.
    (10) Error resolution. A notice that is substantially similar to 
the notice concerning error resolution contained in appendix A of this 
part.


Sec. 205.8  Change in terms notice; error resolution notice.

    (a) Change in terms notice--(1) Prior notice required. A financial 
institution shall mail or deliver a written notice to the consumer at 
least 30 days before the effective date of any change in a term or 
condition required to be disclosed under Sec. 205.7(b) of this part if 
the change would result in:
    (i) Increased fees;
    (ii) Increased liability for the consumer;
    (iii) Fewer types of available electronic fund transfers; or
    (iv) Stricter limitations on the frequency or dollar amount of 
transfers.
    (2) Prior notice exception. A financial institution need not give 
prior notice if an immediate change in terms or conditions is necessary 
to maintain or restore the security of an electronic fund transfer 
system or an account. If such a change is made permanent and disclosure 
would not jeopardize the security of the system or account, the 
financial institution shall notify the consumer in writing within 45 
days of the change.
    (b) Error resolution notice. For accounts to or from which 
electronic fund transfers can be made, a financial institution shall 
mail or deliver to the consumer, at least once each calendar year, the 
error resolution notice set forth in appendix A of this part. 
Alternatively, an institution may include an abbreviated notice 
substantially similar to the error resolution notice set forth in 
appendix A on or with each periodic statement required by Sec. 205.9(b) 
of this part.


Sec. 205.9  Receipts at electronic terminals; periodic statements.

    (a) Receipts at electronic terminals. A financial institution shall 
make a receipt available to a consumer at the time the consumer 
initiates an electronic fund transfer at an electronic terminal. The 
receipt shall set forth the following information, as applicable:
    (1) Amount. The amount of the transfer. A transaction fee may be 
included in this amount, provided the amount of the fee is disclosed on 
the receipt and displayed on or at the terminal.
    (2) Date. The date the consumer initiates the transfer.
    (3) Type. The type of transfer and the type of the consumer's 
account or accounts to or from which funds are transferred. The type of 
account may be omitted if the access device used may access only one 
account at that terminal.
    (4) Identification. A number or code that uniquely identifies the 
consumer's account or the access device used to initiate the transfer.
    (5) Terminal location. The location or an identification of the 
terminal where the transfer is initiated (such as a code or terminal 
number). The location shall include the city and state (the state may 
be omitted for terminals that are within 50 miles of the account-
holding institution's main office) or foreign country and one of the 
following:
    (i) The street address;
    (ii) A generally accepted name for the specific location; or
    (iii) The name of the owner or operator of the terminal if other 
than the account-holding institution.
    (6) Third party transfer. The name of any third party to or from 
whom funds are transferred.
    (b) Periodic statements. For accounts to or from which electronic 
fund transfers can be made, a financial institution shall send a 
periodic statement for each monthly cycle in which an electronic fund 
transfer has occurred; and shall send a periodic statement at least 
quarterly if no transfer has occurred. The statement shall set forth 
the following information, as applicable:
    (1) Transaction information. For each electronic fund transfer 
occurring during the cycle:
    (i) The amount of the transfer;
    (ii) The date the transfer was credited or debited to the 
consumer's account;
    (iii) The type of transfer and type of account or accounts to or 
from which funds were transferred;
    (iv) For a transfer initiated by the consumer at an electronic 
terminal (except for a deposit of cash or a check, draft, or similar 
paper instrument), the terminal location in a form set forth in 
paragraph (a)(5) of this section; and
    (v) The name of any third party to or from whom funds were 
transferred.
    (2) Account number. The number of the account to which the 
statement pertains.
    (3) Fees. The amount of any fees assessed against the account 
during the statement period for electronic fund transfers, for the 
right to make transfers, or for account maintenance.
    (4) Account balances. The balance in the account at the beginning 
and at the close of the statement period.
    (5) Address and telephone number for inquiries. The address and 
telephone number to be used for inquiries or notice of errors, preceded 
by ``Direct inquiries to'' or similar language. The address and 
telephone number provided on an error resolution notice given on or 
with the statement satisfies this requirement.
    (6) Telephone number for preauthorized transfers. A telephone 
number the consumer may call to ascertain whether preauthorized 
transfers to the consumer's account have occurred, if the financial 
institution uses the telephone-notice option under 
Sec. 205.10(a)(1)(iii) of this part.
    (c) Exceptions to the periodic statement requirements for certain 
accounts--(1) Preauthorized transfers to accounts. A financial 
institution need not send a monthly periodic statement for accounts 
that may only be accessed by preauthorized transfers to the account if:
    (i) Passbook accounts. The financial institution updates the 
passbook upon presentation or enters on a separate document the amount 
and date of each electronic fund transfer since the passbook was last 
presented.
    (ii) Other accounts. For accounts other than passbook accounts, the 
institution sends the periodic statement quarterly.
    (2) Intra-institutional transfers. If an electronic fund transfer 
is initiated by the consumer between two accounts of the consumer in 
the same institution, documenting the transfer on a periodic statement 
for one of the two accounts satisfies the statement requirement.
    (3) Relationship between paragraphs (c)(1) and (c)(2) of this 
section. An account that is accessed by preauthorized transfers to the 
account and by intra-institutional transfers described in paragraph 
(c)(2), but by no other type of electronic fund transfers, qualifies 
for the exceptions provided by paragraph (c)(1).
    (d) Documentation for foreign-initiated transfers. The failure by a 
financial institution to provide a terminal receipt for an electronic 
fund transfer or to document the transfer on a periodic statement does 
not violate this regulation if:
    (1) The transfer is not initiated within a state; and
    (2) The financial institution treats an inquiry for clarification 
or documentation as a notice of error in accordance with Sec. 205.11 of 
this part.


Sec. 205.10  Preauthorized transfers.

    (a) Preauthorized transfers to consumer's account--(1) Notice by 
financial institution. When a person initiates preauthorized electronic 
fund transfers to a consumer's account at least once every 60 days, the 
account-holding institution shall provide notice to the consumer by:
    (i) Positive notice. Providing oral or written notice of the 
transfer within two business days after it occurs;
    (ii) Negative notice. Providing oral or written notice, within two 
business days after the date on which the transfer was scheduled to 
occur, that the transfer did not occur; or
    (iii) Telephone. Providing a readily available telephone line that 
the consumer may call to determine whether the transfer occurred and 
disclosing the telephone number on the initial disclosure of account 
terms and on each periodic statement.
    (2) Notice by payor. A financial institution need not provide 
notice if the payor gives the consumer positive notice that the 
transfer has been initiated.
    (b) Written authorization for preauthorized transfers from 
consumer's account. Preauthorized electronic fund transfers from a 
consumer's account may be authorized only by a writing signed or 
similarly authenticated by the consumer. The person that obtains the 
authorization shall provide a copy to the consumer.
    (c) Consumer's right to stop payment--(1) Notice. A consumer may 
stop payment of a preauthorized electronic fund transfer from the 
consumer's account by notifying the financial institution orally or in 
writing at least three business days before the scheduled date of the 
transfer.
    (2) Written confirmation. The financial institution may require the 
consumer to give written confirmation of a stop-payment order within 14 
days of an oral notification. An institution that requires written 
confirmation shall inform the consumer of the requirement and provide 
the address where confirmation must be sent when the consumer gives the 
oral notification. An oral stop-payment order ceases to be binding 
after 14 days if the consumer fails to provide the required written 
confirmation.
    (d) Notice of transfers varying in amount--(1) Notice. When a 
preauthorized electronic fund transfer from the consumer's account will 
vary in amount from the previous transfer under the same authorization 
or from the preauthorized amount, the designated payee or the financial 
institution shall send written notice of the amount and date of the 
transfer to the consumer at least 10 days before the scheduled date of 
transfer.
    (2) Range. The designated payee or the institution shall inform the 
consumer of the right to receive notice of all varying transfers, but 
may give the consumer the option of receiving notice only when a 
transfer falls outside a specified range of amounts or only when a 
transfer differs from the most recent transfer by more than an agreed-
upon amount.
    (e) Compulsory use--(1) Credit. No financial institution or other 
person may condition the extension of credit to a consumer on the 
consumer's repayment by preauthorized electronic fund transfers, except 
for credit that is extended under an overdraft credit plan or that is 
extended to maintain a specified minimum balance in the consumer's 
account.
    (2) Employment or government benefit. No financial institution or 
other person may require a consumer to establish an account for receipt 
of electronic fund transfers with a particular institution as a 
condition of employment or receipt of a government benefit.


Sec. 205.11  Procedures for resolving errors.

    (a) Definition of error--(1) Types included. The term ``error'' 
means:
    (i) An unauthorized electronic fund transfer;
    (ii) An incorrect electronic fund transfer to or from the 
consumer's account;
    (iii) The omission of an electronic fund transfer from a periodic 
statement;
    (iv) A computational or bookkeeping error made by the financial 
institution relating to an electronic fund transfer;
    (v) The consumer's receipt of an incorrect amount of money from an 
electronic terminal;
    (vi) An electronic fund transfer not identified in accordance with 
Sec. 205.9 or Sec. 205.10(a) of this part; or
    (vii) The consumer's request for documentation required by 
Sec. 205.9 or Sec. 205.10(a) of this part or for additional information 
or clarification concerning an electronic fund transfer, including a 
request the consumer makes to determine whether an error exists under 
paragraphs (a)(1) (i) through (vi) of this section.
    (2) Exclusions. The term ``error'' does not include:
    (i) A routine inquiry about the consumer's account balance;
    (ii) A request for information for tax or other recordkeeping 
purposes; or
    (iii) A request for duplicate copies of documentation.
    (b) Notice of error from consumer--(1) Timing; contents. A 
financial institution shall comply with the requirements of this 
section with respect to any oral or written notice of error from the 
consumer that:
    (i) Is received by the institution no later than 60 days after the 
institution sends the periodic statement or provides the passbook 
documentation on which the alleged error is first reflected;
    (ii) Enables the institution to identify the consumer's name and 
account number; and
    (iii) Indicates why the consumer believes an error exists and 
includes to the extent possible the type, date, and amount of the 
error, except for requests described in paragraph(a)(1)(vii) of this 
section.
    (2) Written confirmation. A financial institution may require the 
consumer to give written confirmation of an error within 10 business 
days of an oral notice. An institution that requires written 
confirmation shall inform the consumer of the requirement and provide 
the address where confirmation must be sent when the consumer gives the 
oral notification.
    (3) Request for documentation or clarifications. When a notice of 
error is based on documentation or clarification that was requested 
under paragraph (a)(1)(vii) of this section, the notice is timely if 
received by the financial institution within 60 days of transmitting 
the requested information.
    (c) Time limits and extent of investigation--(1) Ten-day period. A 
financial institution shall promptly investigate and determine whether 
an error occurred within 10 business days of receiving a notice of 
error. The institution shall report the results to the consumer within 
three business days after completing its investigation. The institution 
shall correct the error within one business day after determining that 
an error occurred.
    (2) Forty-five day period. If the financial institution is unable 
to complete its investigation within 10 business days, the institution 
may take up to 45 days after receiving a notice of error, provided the 
institution:
    (i) Provisionally credits the consumer's account in the amount of 
the alleged error (including interest where applicable) within 10 
business days after receiving the error notice. If the financial 
institution has a reasonable basis for believing that an unauthorized 
electronic fund transfer has occurred and it has satisfied the 
requirements of Sec. 205.6(a) of this part, the institution may 
withhold a maximum of $50 from the amount credited. An institution need 
not provisionally credit the consumer's account if:
    (A) It requires but does not receive written confirmation within 10 
business days of an oral notice of error; or
    (B) The alleged error involves an account that is subject to 
Regulation T (credit by brokers and dealers, 12 CFR part 220);
    (ii) Informs the consumer, within two business days after the 
provisional crediting, of the amount and date of crediting and gives 
the consumer full use of the funds during the investigation;
    (iii) Corrects the error, if any, within one business day after 
determining that an error occurred; and
    (iv) Reports the results to the consumer within three business days 
of completing its investigation (including, if applicable, notice that 
a provisional credit has been made final).
    (3) Extension of time periods. The applicable time periods in this 
subsection shall be 20 business days in place of 10 business days, and 
90 days in place of 45 days, if a notice of error involves an 
electronic fund transfer that:
    (i) Was not initiated within a state; or
    (ii) Resulted from a point-of-sale debit card transaction.
    (4) Investigation. With the exception of transfers covered by 
Sec. 205.14 of this part, a financial institution's review of its own 
records regarding an alleged error satisfies the requirements of this 
section if:
    (i) The alleged error concerns a transfer to or from a third party; 
and
    (ii) There is no agreement between the institution and the third 
party for the type of electronic fund transfer involved.
    (d) Procedures if financial institution determines no error or 
different error occurred. In addition to the procedures specified in 
paragraph (c) of this section, the financial institution shall follow 
the procedures set forth in this paragraph if it determines that no 
error occurred or that an error occurred in a different manner or 
amount from that described by the consumer:
    (1) Written explanation. The institution's report of the results of 
the investigation shall include a written explanation of the 
institution's findings and shall note the consumer's right to request 
the documents that the institution relied on in making its 
determination. The institution shall, upon request, promptly provide 
copies of the documents.
    (2) Debiting provisional credit. Upon debiting a provisionally 
credited amount, the financial institution shall:
    (i) Notify the consumer of the date and amount of the debiting;
    (ii) Notify the consumer that the institution will honor checks, 
drafts, or similar instruments payable to third parties and 
preauthorized transfers from the consumer's account (without charge to 
the consumer as a result of an overdraft) for five business days after 
the notice; and honor items as specified in the notice. The institution 
need only honor items that it would have paid if the provisionally 
credited funds had not been debited.
    (e) Reassertion of error. A financial institution that has fully 
complied with the error resolution requirements has no further 
responsibilities under this section should the consumer later reassert 
the same error, except that the institution shall investigate an error 
asserted by the consumer following receipt of information requested 
under paragraph (a)(1)(vii) of this section.


Sec. 205.12  Relation to other laws.

    (a) Relation to Truth in Lending. (1) The Electronic Fund Transfer 
Act and this part govern:
    (i) The addition to an accepted credit card, as defined under 
Regulation Z (12 CFR 226.12(a)(2), footnote 21), of the capability to 
initiate electronic fund transfers;
    (ii) The issuance of an access device that permits credit 
extensions only under a preexisting agreement between a consumer and a 
financial institution to extend credit when the consumer's account is 
overdrawn or to maintain a specified minimum balance in the consumer's 
account; and
    (iii) A consumer's liability for an unauthorized electronic fund 
transfer and the investigation of an alleged error that involves an 
extension of credit, if the extension of credit occurs under an 
agreement between the consumer and a financial institution to extend 
credit when the consumer's account is overdrawn or to maintain a 
specified minimum balance in the consumer's account.
    (2) The Truth in Lending Act and Regulation Z, which prohibit the 
unsolicited issuance of credit cards, govern:
    (i) The addition of a credit feature to an accepted access device; 
and
    (ii) The issuance of a credit card that is also an access device, 
except as provided in paragraph (a)(1)(ii) of this section.
    (b) Preemption of inconsistent state laws--(1) Inconsistent 
requirements. The Board shall determine, upon its own motion or upon 
the request of any state, financial institution, or other interested 
party, whether the act and this regulation preempt state law relating 
to electronic fund transfers. Only those state laws that are 
inconsistent with the act and this regulation shall be preempted and 
then only to the extent of the inconsistency. A state law is not 
inconsistent with the act and this regulation if it is more protective 
of consumers.
    (2) Standards for determination. State law is inconsistent with the 
requirements of the act and the regulation if it:
    (i) Requires or permits a practice or act prohibited by the federal 
law;
    (ii) Provides for consumer liability for unauthorized electronic 
fund transfers that exceed the limits imposed by the federal law;
    (iii) Allows longer time periods than the federal law for the 
investigation and correction of errors alleged by a consumer, or fails 
to require the crediting of the consumer's account during the 
investigation of errors as set forth in Sec. 205.11(c)(2)(i) of this 
part; or
    (iv) Requires initial disclosures, periodic statements, or receipts 
that are different in content from those required by the federal law 
except to the extent that the disclosures relate to rights granted to 
consumers by the state law and not by the federal law.
    (c) State exemptions--(1) General rule. Any state may apply to the 
Board for an exemption from the requirements of the federal law for any 
class of electronic fund transfers within the state. The Board shall 
grant an exemption if the Board determines that:
    (i) Under state law that class of electronic fund transfers is 
subject to requirements substantially similar to those imposed by the 
federal law; and
    (ii) There is adequate provision for state enforcement.
    (2) Exception. To assure that the federal and state courts will 
continue to have concurrent jurisdiction, and to aid in implementing 
the act:
    (i) No exemption shall extend to the civil liability provisions of 
section 915 of the act; and
    (ii) When an exemption has been granted, the requirements of the 
applicable state law shall constitute the requirements of the federal 
law, for the purposes of section 915 of the act, except for state law 
requirements not imposed by the federal law.


Sec. 205.13  Administrative enforcement; record retention.

    (a) Enforcement by federal agencies. Compliance with this part is 
enforced by the agencies listed in appendix B of this part.
    (b) Record retention--(1) A financial institution shall retain 
evidence of compliance with the requirements imposed by the act and 
this regulation for a period of not less than two years. Records may be 
stored by use of microfiche, microfilm, magnetic tape, or any other 
method capable of accurately retaining and reproducing information.
    (2) A financial institution having actual notice that it is the 
subject of an investigation or an enforcement proceeding by an agency 
charged with monitoring compliance with the act and this regulation, or 
having been served with notice of an action filed under sections 910, 
915, or 916(a) of the act, shall retain the records that pertain to the 
action or proceeding until final disposition of the matter, unless an 
earlier time is allowed by court or agency order.


Sec. 205.14  Electronic fund transfer service provider not holding 
consumer's account.

    (a) Electronic fund transfer service providers subject to 
regulation. An electronic fund transfer service provider that does not 
hold the consumer's account qualifies as a financial institution 
subject to this regulation if it:
    (1) Issues an access device to a consumer;
    (2) Provides electronic fund transfer service to the consumer by 
allowing the access device to be used to access the consumer's account 
held by another financial institution; and
    (3) Has no agreement with the account-holding institution regarding 
service involving that access device.
    (b) Compliance by electronic fund transfer service provider. In 
addition to the requirements generally applicable under this part, the 
service provider shall comply with the following special rules:
    (1) Disclosures and documentation. The electronic fund transfer 
service provider shall provide the disclosures and documentation 
required by Secs. 205.7, 205.8, and 205.9 of this part that are within 
the purview of its relationship with the consumer, but need not furnish 
a periodic statement to the consumer under Sec. 205.9(b) of this part 
if the service provider:
    (i) Issues a debit card (to be used by the consumer to initiate 
electronic fund transfers) bearing the service provider's name and an 
address or telephone number for consumer inquiries or for consumers to 
give notice of error;
    (ii) Provides the consumer a notice concerning transactions made 
with the debit card that is substantially similar to the notice 
contained in appendix A of this part;
    (iii) Provides, on or with the receipts required by Sec. 205.9(a) 
of this part, the address and telephone number to be used for an 
inquiry, or to give notice of an error, to report the loss or theft of 
the debit card;
    (iv) Transmits to the account-holding institution the information 
specified in Sec. 205.9(b)(1) of this part in the format prescribed by 
the automated clearinghouse system used to clear the fund transfers;
    (v) Extends the time period set forth in Sec. 205.6(b) (1) and (2) 
of this part for notice of loss or theft of a debit card, from two 
business days to four business days after the consumer learns of the 
loss or theft; and
    (vi) Extends the time periods set forth in Secs. 205.6(b)(3) and 
205.11(b)(1)(i) of this part for reporting unauthorized transfers or 
errors, from 60 days to 90 days following the transmittal of a periodic 
statement by the account-holding institution.
    (2) Error resolution--(i) Extension of error notification period. 
The electronic fund transfer service provider shall extend by a 
reasonable time the period specified in Sec. 205.11(b)(1)(i) of this 
part in which notice of an error must be received if a delay resulted 
from the initial attempt by the consumer to notify the account-holding 
institution.
    (ii) Disclosure of provisional credit. The service provider shall 
disclose to the consumer the date on which it initiates a transfer to 
effect a provisional credit in accordance with Sec. 205.11(c)(2)(ii) of 
this part.
    (iii) Error occurred. If the service provider determines an error 
occurred, it shall transfer funds to or from the consumer's account, in 
the appropriate amount and within the applicable time period, in 
accordance with Sec. 205.11(c)(2)(i) of this part.
    (iv) No error occurred. If funds were provisionally credited and 
the service provider determines no error occurred, it may reverse the 
credit. The service provider shall then notify the account-holding 
institution of the period during which the account-holding institution 
must honor debits to the account in accordance with 
Sec. 205.11(d)(2)(ii) of this part. If an overdraft results, the 
service provider shall promptly reimburse the account-holding 
institution in the amount of the overdraft.
    (c) Compliance by account-holding institution. The account-holding 
institution need not comply with the requirements of the act and this 
regulation with respect to electronic fund transfers made by the 
electronic fund transfer service provider except as follows:
    (1) The account-holding institution shall provide a periodic 
statement describing each electronic fund transfer involving 
transactions initiated by the consumer with the access device issued by 
the service provider. The account-holding institution has no liability 
for failure to comply with this requirement if the service provider did 
not provide the necessary information; and
    (2) The account-holding institution shall provide, upon request, 
information or copies of documents needed by the service provider to 
investigate errors or to furnish copies of documents to the consumer. 
The account-holding institution shall also honor debits to the account 
in accordance with Sec. 205.11(d)(2)(ii) of this part.
    3. Appendices A and B are revised, and Appendix C is added to part 
205 to read as follows:

Appendix A to Part 205--Model Disclosure Clauses and Forms

A-1--Model Clauses for Unsolicited Issuance (Sec. 205.5(b)(2))
A-2--Model Clauses for Initial Disclosures (Sec. 205.7(b))
A-3--Model Forms for Error Resolution Notice (Secs. 205.7(b)(10) and 
205.8(b))
A-4--Model Form for Service-Providing Institutions 
(Sec. 205.14(b)(1)(ii))

A-1--Model Clauses for Unsolicited Issuance (Sec. 205.5(b)(2))

    (a) Accounts using cards. You cannot use the enclosed card to 
transfer money into or out of your account until we have validated 
it. If you do not want to use the card, please (destroy it at once 
by cutting it in half).
Financial institution may add validation instructions here
    (b) Accounts using codes. You cannot use the enclosed code to 
transfer money into or out of your account until we have validated 
it. If you do not want to use the code, please (destroy this notice 
at once).
Financial institution may add validation instructions here

 A-2--Model Clauses for Initial Disclosures (Sec. 205.7(b))

    (a) Consumer Liability (Sec. 205.7(b)(1)). (Tell us AT ONCE if 
you believe your [card] [code] has been lost or stolen. Telephoning 
is the best way of keeping your possible losses down. You could lose 
all the money in your account (plus your maximum overdraft line of 
credit). If you tell us within 2 business days, you can lose no more 
the $50 if someone used your [card][code] without your permission. 
(If you believe your [card] [code] has been lost or stolen, and you 
tell us within 2 business days after you learn of the loss or theft, 
you can lose no more than $50 if someone used your [card] [code] 
without your permission.)
    If you do NOT tell us within 2 business days after you learn of 
the loss or theft of your [card] [code], and we can prove we could 
have stopped someone from using your [card] [code] without your 
permission if you had told us, you could lose as much as $500.
    Also, if your statement shows transfers that you did not make, 
tell us at once. If you do not tell us within 60 days after the 
statement was mailed to you, you may not get back any money you lost 
after the 60 days if we can prove that we could have stopped someone 
from taking the money if you had told us in time.
    If a good reason (such as a long trip or a hospital stay) kept 
you from telling us, we will extend the time periods.
    (b) Contact in event of unauthorized transfer 
(Sec. 205.7(b)(2)). If you believe your [card] [code] has been lost 
or stolen or that someone has transferred or may transfer money from 
your account without your permission, call:

----------------------------------------------------------------------
[Telephone number]

or write:

----------------------------------------------------------------------
[Name of person or office to be notified]

----------------------------------------------------------------------
[Address]
    (c) Business days (Sec. 205.7(b)(3)). For purposes of these 
disclosures, our business days include every day other than 
Saturday, Sunday or one of the federal holidays.
    (d) Transfer types and limitations (Sec. 205.7(b)(4))--(1) 
Account access. You may use your [card][code] to:
    (i) Withdraw cash from your [checking] [or] [savings] account.
    (ii) Make deposits to your [checking] [or] [savings] account.
    (iii) Transfer funds between your checking and savings accounts 
whenever you request.
    (iv) Pay for purchases at places that have agreed to accept the 
[card] [code].
    (v) Pay bills directly [by telephone] from your [checking] [or] 
[savings] account in the amounts and on the days you request.
    Some of these services may not be available at all terminals.
    (2) Limitations on frequency of transfers.--(i) You may make 
only [insert number, e.g., 3] cash withdrawals from our terminals 
each [insert time period, e.g., week].
    (ii) You can use your telephone bill-payment service to pay 
[insert number] bills each [insert time period] [telephone call].
    (iii) You can use our point-of-sale transfer service for [insert 
number] transactions each [insert time period].
    (iv) For security reasons, there are limits on the number of 
transfers you can make using our [terminals] [telephone bill-payment 
service] [point-of-sale transfer service].
    (3) Limitations on dollar amounts of transfers--(i) You may 
withdraw up to [insert dollar amount] from our terminals each 
[insert time period] time you use the [card] [code].
    (ii) You may buy up to [insert dollar amount] worth of goods or 
services each [insert time period] time you use the [card] [code] in 
our point-of-sale transfer service.
    (e) Fees (Sec. 205.7(b)(5))--(1) Per transfer charge. We will 
charge you [insert dollar amount] for each transfer you make using 
our [automated teller machines] [telephone bill-payment service] 
[point-of-sale transfer service].
    (2) Fixed charge. We will charge you [insert dollar amount] each 
[insert time period] for our [automated teller machine service] 
[telephone bill-payment service] [point-of-sale transfer service].
    (3) Average or minimum balance charge. We will only charge you 
for using our [automated teller machines] [telephone bill-payment 
service] [point-of-sale transfer service] if the [average] [minimum] 
balance in your [checking account] [savings account] [accounts] 
falls below [insert dollar amount]. If it does, we will charge you 
[insert dollar amount] each [transfer] [insert time period].
    (f) Confidentiality (Sec. 205.7(b)(9)). We will disclose 
information to third parties about your account or the transfers you 
make:
    (1) Where it is necessary for completing transfers, or
    (2) In order to verify the existence and condition of your 
account for a third party, such as a credit bureau or merchant, or
    (3) In order to comply with government agency or court orders, 
or
    (4) If you give us your written permission.
    (g) Documentation (Sec. 205.7(b)(6))--(1) Terminal transfers. 
You can get a receipt at the time you make any transfer to or from 
your account using one of our [automated teller machines] [or] 
[point-of-sale terminals].
    (2) Preauthorized credits. If you have arranged to have direct 
deposits made to your account at least once every 60 days from the 
same person or company, (we will let you know if the deposit is 
[not] made.) [the person or company making the deposit will tell you 
every time they send us the money] [you can call us at (insert 
telephone number) to find out whether or not the deposit has been 
made].
    (3) Periodic statements. You will get a [monthly] [quarterly] 
account statement (unless there are no transfers in a particular 
month. In any case you will get the statement at least quarterly).
    (4) Passbook account where the only possible electronic fund 
transfers are preauthorized credits. If you bring your passbook to 
us, we will record any electronic deposits that were made to your 
account since the last time you brought in your passbook.
    (h) Preauthorized payments (Sec. 205.7(b)(6), (7) and (8))--(1) 
Right to stop payment and procedure for doing so. If you have told 
us in advance to make regular payments out of your account, you can 
stop any of these payments. Here's how:
    Call us at [insert telephone number], or write us at [insert 
address], in time for us to receive your request 3 business days or 
more before the payment is scheduled to be made. If you call, we may 
also require you to put your request in writing and get it to us 
within 14 days after you call. (We will charge you [insert amount] 
for each stop-payment order you give.)
    (2) Notice of varying amounts. If these regular payments may 
vary in amount, [we] [the person you are going to pay] will tell 
you, 10 days before each payment, when it will be made and how much 
it will be. (You may choose instead to get this notice only when the 
payment would differ by more than a certain amount from the previous 
payment, or when the amount would fall outside certain limits that 
you set.)
    (3) Liability for failure to stop payment of preauthorized 
transfer. If you order us to stop one of these payments 3 business 
days or more before the transfer is scheduled, and we do not do so, 
we will be liable for your losses or damages.
    (i) Financial institution's liability (Sec. 205.7(b)(8)). If we 
do not complete a transfer to or from your account on time or in the 
correct amount according to our agreement with you, we will be 
liable for your losses or damages. However, there are some 
exceptions. We will not be liable, for instance:
     If, through no fault of ours, you do not have enough 
money in your account to make the transfer.
     If the transfer would go over the credit limit on your 
overdraft line.
     If the automated teller machine where you are making 
the transfer does not have enough cash.
     If the [terminal] [system] was not working properly and 
you knew about the breakdown when you started the transfer.
     If circumstances beyond our control (such as fire or 
flood) prevent the transfer, despite reasonable precautions that we 
have taken.
     There may be other exceptions stated in our agreement 
with you.

A-3--Model Forms for Error Resolution Notice

1. Initial and annual error resolution notice Secs. 205.7(b)(10) 
and 205.8(b))

    In Case of Errors or Questions About Your Electronic Transfers, 
Telephone us at [insert telephone number] or Write us at [insert 
address] as soon as you can, if you think your statement or receipt 
is wrong or if you need more information about a transfer listed on 
the statement or receipt. We must hear from you no later than 60 
days after we sent the FIRST statement on which the problem or error 
appeared.
    (1) Tell us your name and account number (if any).
    (2) Describe the error or the transfer you are unsure about, and 
explain as clearly as you can why you believe it is an error or why 
you need more information.
    (3) Tell us the dollar amount of the suspected error.
    If you tell us orally, we may require that you send us your 
complaint or question in writing within 10 business days.
    We will tell you the results of our investigation within 10 
business days after we hear from you and will correct any error 
promptly. If we need more time, however, we may take up to 45 days 
to investigate your complaint or question. If we decide to do this, 
we will credit your account within 10 business days for the amount 
you think is in error, so that you will have the use of the money 
during the time it takes us to complete our investigation. If we ask 
you to put your complaint or question in writing and we do not 
receive it within 10 business days, we may not credit your account.
    If we decide that there was no error, we will send you a written 
explanation within three business days after we finish our 
investigation. You may ask for copies of the documents that we used 
in our investigation.

2. Error resolution notice on periodic statements Sec. 205.8(b)

    In Case of Errors or Questions About Your Electronic Transfers, 
Telephone us at [insert telephone number] or Write us at [insert 
address] as soon as you can, if you think your statement or receipt 
is wrong or if you need more information about a transfer on the 
statement or receipt. We must hear from you no later than 60 days 
after we sent you the FIRST statement on which the error or problem 
appeared.
    (1) Tell us your name and account number (if any).
    (2) Describe the error or the transfer you are unsure about, and 
explain as clearly as you can why you believe it is an error or why 
you need more information.
    (3) Tell us the dollar amount of the suspected error.
    We will investigate your complaint and will correct any error 
promptly. If we take more than 10 business days to do this, we will 
credit your account for the amount you think is in error, so that 
you will have the use of the money during the time it takes us to 
complete our investigation.

A-4--Model Form for Service-Providing Institutions 
Sec. 205.14(b)(1)(ii)

    ALL QUESTIONS ABOUT TRANSACTIONS MADE WITH YOUR (NAME OF CARD) 
CARD MUST BE DIRECTED TO US (NAME OF SERVICE PROVIDER), AND NOT TO 
THE BANK OR OTHER FINANCIAL INSTITUTION WHERE YOU HAVE YOUR ACCOUNT. 
We are responsible for the [name of service] service and for 
resolving any errors in transactions made with your [name of card] 
card.
    We will not send you a periodic statement listing transactions 
that you make using your [name of card] card. The transactions will 
appear only on the statement issued by your bank or other financial 
institution. SAVE THE RECEIPTS YOU ARE GIVEN WHEN YOU USE YOUR [NAME 
OF CARD] CARD, AND CHECK THEM AGAINST THE ACCOUNT STATEMENT YOU 
RECEIVE FROM YOUR BANK OR OTHER FINANCIAL INSTITUTION. If you have 
any questions about one of these transactions, call or write us at 
[telephone number and address] [the telephone number and address 
indicated below].
    IF YOUR [NAME OF CARD] CARD IS LOST OR STOLEN, NOTIFY US AT ONCE 
by calling or writing to us at [telephone number and address].

Appendix B to Part 205--Federal Enforcement Agencies

    The following list indicates which Federal agency enforces 
Regulation E for particular classes of institutions. Any questions 
concerning compliance by a particular institution should be directed 
to the appropriate enforcing agency. Terms that are not defined in 
the Federal Deposit Insurance Act (12 U.S.C. 1813(s)) shall have the 
meaning given to them in the International Banking Act of 1978 (12 
U.S.C. 3101).

National banks, and Federal branches and Federal agencies of 
foreign banks

    District office of the Office of the Comptroller of the Currency 
where the institution is located.

State member banks, branches and agencies of foreign banks (other 
than Federal branches, Federal agencies, and insured state branches 
of foreign banks), commercial lending companies owned or controlled 
by foreign banks, and organizations operating under section 25 or 
25(a) of the Federal Reserve Act

    Federal Reserve Bank serving the District in which the 
institution is located.

Nonmember insured banks and insured state branches of foreign banks

    Federal Deposit Insurance Corporation regional director for the 
region in which the institution is located.

Savings institutions insured under the Savings Association 
Insurance Fund of the FDIC and federally-chartered savings banks 
insured under the Bank Insurance Fund of the FDIC (but not 
including state-chartered savings banks insured under the Bank 
Insurance Fund)

    Office of Thrift Supervision Regional Director for the region in 
which the institution is located.

Federal Credit Unions

    Division of Consumer Affairs, National Credit Union 
Administration, 1775 Duke Street, Alexandria, Virginia 22314-3428

Air Carriers

    Assistant General Counsel for Aviation Enforcement and 
Proceedings, Department of Transportation, 400 Seventh Street, SW., 
Washington, DC 20590.

Brokers and Dealers

    Division of Market Regulation, Securities and Exchange 
Commission, Washington, DC 20549.

Retailers, Consumer Finance Companies, Certain Other Financial 
Institutions, and all others not covered above

    Federal Trade Commission, Electronic Fund Transfers, Washington, 
DC 20580.

Appendix C to Part 205--Issuance of Staff Interpretations

Official Staff Interpretations

    Pursuant to section 915(d) of the act, the Board has designated 
the director and other officials of the Division of Consumer and 
Community Affairs as officials ``duly authorized'' to issue, at 
their discretion, official staff interpretations of this regulation. 
Except in unusual circumstances, such interpretations will not be 
issued separately but will be incorporated in an official commentary 
to the regulation, which will be amended periodically.

Requests for Issuance of Official Staff Interpretations

    A request for an official staff interpretation shall be in 
writing and addressed to the Director, Division of Consumer and 
Community Affairs, Board of Governors of the Federal Reserve System, 
Washington, DC 20551. The request shall contain a complete statement 
of all relevant facts concerning the issue, including copies of all 
pertinent documents.

Scope of Interpretations

    No staff interpretations will be issued approving financial 
institutions' forms or statements. This restriction does not apply 
to forms or statements whose use is required or sanctioned by a 
government agency.

    By order of the Board of Governors of the Federal Reserve 
System, February 24, 1994.
William W. Wiles,
Secretary of the Board.
[FR Doc. 94-4680 Filed 3-2-94; 12:38 pm]
BILLING CODE 6210-01-P