[Federal Register Volume 65, Number 138 (Tuesday, July 18, 2000)]
[Proposed Rules]
[Pages 44481-44484]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-17674]


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FEDERAL RESERVE SYSTEM

12 CFR Part 205

[Regulation E; Docket No. R-1077]


Electronic Fund Transfers

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Proposed rule.

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SUMMARY: The Board is publishing for comment proposed revisions to 
Regulation E, which implements the Electronic Fund Transfer Act (EFTA). 
The proposed revisions implement amendments to the EFTA contained in 
the Gramm-Leach-Bliley Act that require the disclosure of certain fees 
associated with automated teller machine (ATM) transactions. The 
amendments require ATM operators who impose a fee for providing 
electronic fund transfer services to disclose this fact in a prominent 
and conspicuous location on or at the ATM. The operator must also 
disclose that a fee will be imposed and the amount of the fee, either 
on the screen of the machine or on a paper notice before the consumer 
is committed to completing the transaction. In addition, when the 
consumer contracts for an electronic fund transfer service, financial 
institutions are required to disclose that a fee may be imposed for 
electronic fund transfers initiated at an ATM owned by another entity.

DATES: Comments must be received by August 18, 2000.

ADDRESSES: Comments, which should refer to Docket No. R-1077, may be 
mailed to Jennifer J. Johnson, Secretary, Board of Governors of the 
Federal Reserve System, 20th Street and Constitution Avenue, NW, 
Washington, DC 20551 or mailed electronically to 
[email protected]. Comments addressed to Ms. Johnson 
also may be delivered to the Board's mail room between 8:45 a.m. and 
5:15 p.m. weekdays, and to the security control room at all other 
times. The mail room and the security control room, both in the Board's 
Eccles Building, are accessible from the courtyard entrance on 20th 
Street between Constitution Avenue and C Street, NW. Comments may be 
inspected in room MP-500 between 9 a.m. and 5 p.m., pursuant to the 
Board's Rules Regarding the Availability of Information, 12 CFR part 
261.12.

FOR FURTHER INFORMATION CONTACT: Kyung H. Cho-Miller or Natalie E. 
Taylor, Counsel, Division of Consumer and Community Affairs, Board of 
Governors of the Federal Reserve

[[Page 44482]]

System, Washington, D.C. 20551, at (202) 452-2412 or (202) 452-3667. 
For the hearing impaired only, contact Janice Simms, Telecommunications 
Device for the Deaf (TDD), at (202) 872-4984.

SUPPLEMENTARY INFORMATION:

I. The Electronic Fund Transfer Act

    The Electronic Fund Transfer Act (EFTA), 15 U.S.C. 1693 et seq., 
enacted in 1978, provides a basic framework establishing the rights, 
liabilities, and responsibilities of participants in electronic fund 
transfer (EFT) systems. The Board's Regulation E (12 CFR part 205) 
implements the act. 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 plan, or home-banking program. The act and 
regulation prescribe restrictions on the unsolicited issuance of ATM 
cards and other access devices; disclosure of terms and conditions of 
an EFT service; documentation of EFT services 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 EFT services.
    The Official Staff Commentary (12 CFR part 205 (Supp. I)) 
interprets the regulation, and provides guidance to financial 
institutions in applying the regulation to specific transactions. The 
commentary is a substitute for individual staff interpretations; it is 
updated periodically, as necessary, to address significant questions 
that arise.
    EFTA coverage is not limited to traditional financial institutions 
holding consumers' asset accounts. For EFT services made available by 
entities other than an account-holding financial institution, the act 
directs the Board to assure, by regulation, that the provisions of the 
act are made applicable.

II. The Gramm-Leach-Bliley Amendments to the EFTA

    On November 12, 1999, the Gramm-Leach-Bliley Act (GLBA) became law 
(Pub. L. 106-102, 113 Stat. 1338). Sections 702, 703, and 705 of the 
GLBA contain amendments to the EFTA. The amendments require disclosure 
of ATM fees (sometimes referred to as ``surcharges'') imposed by ATM 
operators on consumers who hold accounts at other financial 
institutions. Many ATM operators including financial institutions that 
impose such a fee, currently disclose information about the fee to 
satisfy existing regulatory and network requirements.
    Section 702 of the GLBA amends section 904(d) of the EFTA regarding 
services provided by entities other than the account-holding 
institution. An ATM operator that imposes a fee on a consumer for 
providing EFT services is required to provide notice of that fact in a 
prominent and conspicuous location on or at the ATM on which the EFT is 
initiated. The ATM operator must also disclose that a fee will be 
imposed and the amount of the fee, either on the screen of the ATM or 
on a paper notice, before the consumer is committed to completing the 
transaction. No fee may be imposed unless proper notice is provided and 
the consumer elects to complete the transaction.
    Section 703 of the GLBA amends section 905(a) of the EFTA regarding 
the disclosure of terms and conditions. The financial institution 
holding the consumer's account must include in its initial disclosures 
a notice that a fee may be imposed by (1) An ATM operator not holding 
the consumer's account, or (2) any national, regional, or local network 
used to complete the transaction.
    Section 705 of the GLBA amends section 910 of the EFTA regarding 
liability of financial institutions. ATM operators are not liable for 
failing to comply with the requirement to post notice if the notice 
posted at an ATM is subsequently removed, damaged, or altered by any 
person other than the ATM operator.

III. Proposed Revisions to Regulation E

    Pursuant to its authority under section 904(a) of the EFTA, the 
Board is proposing amendments to Regulation E to implement sections 702 
and 703 of the GLBA. Section 705, like other statutory provisions 
regarding liability, would not be made part of the regulation.
    To ease compliance, the Board proposes to add a new Sec. 205.16 to 
address in a single location the rules related to disclosure of 
surcharges by ATM operators. Below is a section-by-section analysis of 
the proposed amendments including proposed revisions to Secs. 205.3 and 
205.7. A cross-reference would also be added to the Official Staff 
Commentary to existing Sec. 205.9(a)(1). The Board contemplates issuing 
a final rule in early fall that would be effective 30 days thereafter.

Section 205.3--Coverage

3(b) Electronic Fund Transfer
    Section 205.3(b) generally defines the term ``electronic fund 
transfer.'' Proposed paragraph (b)(6) would add balance inquiries at 
ATMs to the list of examples of an EFT. A balance inquiry would only be 
considered an EFT for purposes of proposed Sec. 205.16. Thus, balance 
inquiries at ATMs would be subject to the new ATM fee disclosure 
requirements, but would not otherwise be subject to Regulation E 
requirements.

Section 205.7--Initial Disclosures

7(b) Content of Disclosures
    Section 205.7(b) would be revised to implement section 703 of the 
GLBA. At the time a consumer contracts for an EFT service or before the 
first EFT, a financial institution is required to provide initial 
disclosures related to the EFT service, such as fees and a summary of 
the consumer's liability for unauthorized transfers. Section 703 of the 
GLBA amends section 905(a) of the EFTA by adding to the initial 
disclosures a provision that a fee may be imposed by an ATM operator 
not holding the consumer's account and by a national, regional, or 
local network used to complete the transfer. If a financial 
institution's disclosures do not currently include such a provision, it 
may comply with the new requirement by including an insert regarding 
ATM surcharges. The Board solicits specific comment on whether 
national, regional, or local networks separately impose fees and, thus, 
should be distinguished or whether it is sufficient to refer to ``any 
network'' in the disclosures as an alternative to the statutory 
language, as the proposal provides. In addition, the proposed language 
would capture national networks that impose a surcharge and that 
operate internationally.

Section 205.16--Disclosures at Automatic Teller Machines

    A new Sec. 205.16 would be added to implement generally section 702 
of the GLBA. Proposed Sec. 205.16 (a) defines ATM operator and 
provides, for purposes of this section, that a balance inquiry is an 
EFT. The proposal does not incorporate the definition for host transfer 
services contained in section 702 of the GLBA, as it seems unnecessary 
to do so.
    Proposed Secs. 205.16(b) and (c) set forth the ATM disclosure 
requirements. The disclosure required on the screen or on a paper 
notice does not apply to any ATM operator that lacks the technical 
capability to provide such information.

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

    Model language that reflects the new disclosure in proposed 
Sec. 205.7(b)(11)

[[Page 44483]]

regarding fees that may be imposed by an ATM operator and by any 
network would be added to appendix A-2.

IV. Proposed Revisions to the Official Staff Commentary

Section 205.9--Receipts at Electronic Terminals; Periodic Statements

    Section 205.9(a)(1) requires financial institutions that include in 
the transaction amount a fee for completing an EFT at an electronic 
terminal to disclose the amount of the fee on the receipt and to 
display it on or at the terminal. Comment 9(a)(1)-1, which provides 
guidance on complying with the disclosure requirement, would be revised 
to provide a cross-reference to the notice requirements in proposed 
Sec. 205.16(b) for ATM operators.

V. Form of Comment Letters

    Comment letters should refer to Docket No. R-1077, and, when 
possible, should use a standard typeface with a type size of 10 or 12 
characters per inch. This will enable the Board to convert the text to 
machine-readable form through electronic scanning, and will facilitate 
automated retrieval of comments for review. Also, if accompanied by an 
original document in paper form, comments may be submitted on 3 \1/2\ 
inch computer diskettes in any IBM-compatible DOS- or Windows-based 
format.

VI. Initial Regulatory Flexibility Analysis

    In accordance with section 3(a) of the Regulatory Flexibility Act 
and section 904(a)(2) of the EFTA, the Board has reviewed the proposed 
amendments to Regulation E. The proposal would impose a disclosure 
requirement on account-holding financial institutions with respect to 
ATM surcharges and a notice requirement on ATM operators. The proposal 
exempts ATMs lacking technical capabilities from certain notice 
requirements until December 31, 2004.
    The proposed amendments are not expected to have any significant 
impact on small entities. Many financial institutions that impose a fee 
for carrying out an EFT at an ATM already disclose the fee on a receipt 
and on the screen of a terminal or at the electronic terminal to 
satisfy existing requirements under Sec. 205.9(a)(1). The proposed 
amendment would require that the notification regarding the fee be 
posted at the terminal and on the screen. The notice, however, is 
generic and can easily be programmed to be viewed on the screen and 
posted once at the terminal. A final regulatory flexibility analysis 
will be conducted after consideration of comments received during the 
public comment period.

VII. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3506; 5 CFR 1320 Appendix A.1), the Board reviewed the proposed rule 
under the authority delegated to the Board by the Office of Management 
and Budget (OMB). The Federal Reserve may not conduct or sponsor, and 
an organization is not required to respond to, this information 
collection unless it displays a currently valid OMB number. The OMB 
control number is 7100-0200.
    The collection of information requirements that are relevant to 
this proposed rulemaking are in 12 CFR part 205 and in Appendix A. This 
information is mandatory (15 U.S.C. 1693 et seq.) to evidence 
compliance with the requirements of Regulation E and the Electronic 
Fund Transfer Act (EFTA). The revised requirements would be used to 
ensure adequate disclosure of fees imposed for electronic fund 
transfers at ATMs owned by a party other than the account-holding 
financial institution. The respondents/recordkeepers are for-profit 
financial institutions, including small businesses. Institutions are 
also required to retain records for 24 months. This regulation applies 
to all types of financial institutions, not just state member banks; 
however, under Paperwork Reduction Act regulations, the Federal Reserve 
accounts for the burden of the paperwork associated with the regulation 
only for state member banks. Other agencies account for the paperwork 
burden on their respective constituencies under this regulation.
    The proposed revisions are not expected to increase the ongoing 
annual burden of Regulation E. With respect to state member banks, it 
is estimated that there are 851 respondents/recordkeepers and an 
average frequency of about 85,800 responses per respondent each year. 
Therefore the current amount of annual burden is estimated to be 
approximately 462,800 hours. Using the same hourly cost, the Federal 
Reserve estimates that there would be associated start up cost ranging 
from $1,600 to $5,000 per respondent, depending on size and location, 
for changing disclosures (or disclosure producing software) to include 
disclosures relating to ATM surcharges and for posting a notice 
regarding the surcharge at either the ATM or on the screen of the ATM.
    Because the records would be maintained at state member banks and 
the notices are not provided to the Federal Reserve, no issue of 
confidentiality under the Freedom of Information Act arises; however, 
any information obtained by the Federal Reserve may be protected from 
disclosure under exemptions (b)(4), (6), and (8) of the Freedom of 
Information Act (5 U.S.C. 522 (b)(4), (6) and (8)). The disclosures and 
information about error allegations are confidential between 
institutions and the customer.
    The Federal Reserve requests comments from institutions, especially 
state member banks, that will help to estimate the number and burden of 
the various disclosures that would be made in the first year this 
proposed regulation would be effective. Comments are invited on: (a) 
The cost of compliance; (b) ways to enhance the quality, utility, and 
clarity of the information to be disclosed; (c) ways to minimize the 
burden of disclosure on respondents, including through the use of 
automated disclosure techniques or other forms of information 
technology; and (d) capital and start up costs and costs of operations, 
maintenance, and purchase of services to provide information. Comments 
on the collection of information should be sent to the Office of 
Management and Budget, Paperwork Reduction Project (7100-0200), 
Washington, DC 20503, with copies of such comments sent to Mary M. 
West, Federal Reserve Board Clearance Officer, Division of Research and 
Statistics, Mail Stop 97, Board of Governors of the Federal Reserve 
System, Washington, DC 20551.

List of Subjects in 12 CFR Part 205

    Consumer protection, Electronic fund transfers, Federal Reserve 
System, Reporting and record keeping requirements.

Text of Proposed Revisions

    Certain conventions have been used to highlight proposed changes to 
Regulation E. New language is shown inside bold-faced arrows, deletions 
inside bold-faced brackets.
    For the reasons set forth in the preamble, the Board proposes to 
amend Regulation E, 12 CFR part 205, as set forth below:

PART 205--ELECTRONIC FUND TRANSFERS (REGULATION E)

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

    Authority: 15 U.S.C. 1693-1693r.

    2. Under Sec. 205.3--Coverage, paragraph (b) would be revised to 
read as follows:


Sec. 205.3  Coverage.

* * * * *

[[Page 44484]]

    (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[.]; and
    (6) Balance inquiries at automated teller machines for purposes of 
Sec. 205.16.
* * * * *
    3. Under Sec. 205.7--Initial Disclosures, new paragraph (b)(11) 
would be added to read as follows:


Sec. 205.7  Initial disclosures.

* * * * *
    (b) Content of disclosures. * * *
    (11) ATM surcharge. A notice that a fee may be imposed 
by an automated teller machine operator as defined in 
Sec. 205.16(a)(1), when the consumer initiates an electronic fund 
transfer or makes a balance inquiry at an automated teller machine 
operated by a non-accountholding financial institution, and by any 
network used to complete the transaction.
* * * * *
    4. A new Sec. 205.16-Disclosures at Automatic Teller Machines, 
would be added to read as follows:

Sec. 205.16 Disclosures at automatic teller machines.

    (a) Definitions. (1) Automated teller machine operator means any 
person that operates an automated teller machine at which a consumer 
initiates an electronic fund transfer as defined in Sec. 205.3(b), and 
that does not hold the account from which the transfer is made.
    (2) Balance inquiry as EFT. For purposes of this section, the term 
electronic fund transfer includes a transaction that involves a balance 
inquiry initiated by a consumer.
    (b) General. An automated teller machine operator that imposes a 
fee on a consumer for initiating an electronic fund transfer shall:
    (1) Provide notice that a fee will be imposed; and
    (2) Disclose the amount of the fee.
    (c) Notice requirement. (1) On the machine. Notice required by 
paragraph (b)(1) of this section shall be posted in a prominent and 
conspicuous location on or at the automatic teller machine.
    (2) Screen or paper notice. The notice required by paragraph (b) of 
this section shall be given to the consumer, either by showing it on 
the screen of the automatic teller machine or by printing out a paper 
notice, before the consumer is irrevocably committed to completing the 
transaction.
    (d) Temporary exemption. The notice requirement in paragraph (c)(2) 
of this section does not apply to any automated teller machine that 
lacks the technical capability to provide such information until 
December 31, 2004.
    (e) Imposition of fee. An automated teller machine operator may 
impose a fee on a consumer for initiating an electronic fund transfer 
only if
    (1) The consumer receives the notice required under paragraph (c) 
of this section, and
    (2) The consumer elects to continue the transaction after receiving 
such notice.
* * * * *
    5. Under Appendix A, in A-2 a new paragraph (j) would be added to 
read as follows:

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

* * * * *

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

* * * * *
    (j) ATM surcharges (Sec. 205.7(b)(11)). When you use 
an ATM not owned by us, you may be charged a fee by the ATM operator 
or any network used to complete the transfer (and you may be charged 
a fee for a balance inquiry).
* * * * *
    6. In Supplement I to Part 205, under Section 205.9--Receipts at 
Electronic Terminals; Periodic Statements, under Paragraph 9(a)(1)--
Amount, paragraph 1. would be revised to read as follows:

Supplement I to Part 205--Official Staff Interpretations

Section 205.9--Receipts at Electronic Terminals; Periodic 
Statements

* * * * *

Paragraph 9(a)(1)--Amount

    1. Disclosure of transaction fee. The required display of a fee 
amount on or at the terminal may be accomplished by displaying the 
fee on a sign at the terminal or on the terminal screen for a 
reasonable duration. Displaying the fee on a screen provides 
adequate notice, as long as consumers are given the option to cancel 
the transaction after receiving notice of a fee. (See 
Sec. 205.16(c) for the notice requirements applicable to ATM 
operators that impose a fee for providing EFT services.)
* * * * *

    By order of the Board of Governors of the Federal Reserve 
System, July 7, 2000.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 00-17674 Filed 7-17-00; 8:45 am]
BILLING CODE 6210-01-P