[Federal Register Volume 66, Number 44 (Tuesday, March 6, 2001)]
[Rules and Regulations]
[Pages 13409-13413]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-5295]


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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: Final rule.

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SUMMARY: The Board is publishing revisions to Regulation E, which 
implements the Electronic Fund Transfer Act. The revisions implement 
amendments to the act 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 that 
impose a fee for providing electronic fund transfer services to post a 
notice 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 provide initial 
disclosures, including a notice that a fee may be imposed for 
electronic fund transfers initiated at an ATM operated by another 
entity.

DATES: This rule is effective March 9, 2001; however, to provide 
adequate time to make any necessary systems changes, mandatory 
compliance date is delayed until October 1, 2001.

FOR FURTHER INFORMATION CONTACT: John C. Wood, Counsel, or David A. 
Stein, Attorney, Division of Consumer and Community Affairs, Board of 
Governors of the Federal Reserve System, Washington, DC 20551, at (202) 
452-2412 or (202) 452-3667.

SUPPLEMENTARY INFORMATION:

I. The Electronic Fund Transfer Act

    The Electronic Fund Transfer Act (EFTA or Act), 15 U.S.C. 1693 et 
seq.,

[[Page 13410]]

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 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

    The Gramm-Leach-Bliley Act (GLBA), Pub. L. 106-102, 113 Stat. 1338, 
amended the EFTA. Sections 702, 703, and 705 of the GLBA require 
disclosure of ATM fees (sometimes referred to as ``surcharges'') 
imposed by ATM operators. 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 EFT 
services is required to post a notice of that fact in a prominent and 
conspicuous location on or at the ATM. 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 at the time a consumer signs up 
for EFT services. 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. Revisions to Regulation E Implementing the GLBA Amendments to 
the EFTA

    In July 2000, the Board published proposed revisions to Regulation 
E to implement the EFTA amendments made by the GLBA. (65 FR 44481, July 
18, 2000.) The proposal paralleled the statutory provisions for the 
most part. The Board received approximately 50 comment letters. The 
majority of comments on the proposed revisions were from financial 
institutions and industry associations. Several commenters requested 
action outside the scope of the Board's authority, such as deleting the 
statutory requirement to post a sign about fees at the ATM as 
unnecessary and burdensome or prohibiting ATM surcharges.
    In general, most commenters supported the Board's proposed 
revisions. Many industry commenters, however, requested a longer period 
than 30 days after issuance to comply with a final rule. They stated 
that while the proposed revisions will not require extensive software 
or other system changes, ATM operators will need more than 30 days to 
implement them. In response to comments received, the mandatory 
compliance date for the final rule is October 1, 2001.
    Pursuant to its authority under section 904(a) of the EFTA, the 
Board is adopting a final rule amending Regulation E to implement 
sections 702 and 703 of the GLBA. The final rule is substantially 
similar to the proposal with some technical and editorial revisions. To 
facilitate compliance, a new Sec. 205.16 addresses in a single location 
most of the rules related to disclosure of fees by ATM operators. Below 
is a section-by-section analysis of the final rule.

IV. Section-by-Section Analysis of the Final Rule

Section 205.3--Coverage

3(b) Electronic Fund Transfer
    Section 205.3(b) generally defines the term ``electronic fund 
transfer.'' The GLBA treats a balance inquiry as an EFT for purposes of 
the ATM fee disclosure requirement. Therefore, the proposed rule added 
balance inquiries at ATMs to the list of examples of an EFT in 
paragraph (b), but only for purposes of ATM fee disclosure 
requirements. Based on comments, the final rule does not include a 
balance inquiry as an example of an ``electronic fund transfer,'' since 
such an inquiry does not fit within the literal definition of a ``fund 
transfer.''

Section 205.7--Initial Disclosures

7(b) Content of Disclosures
    Section 205.7(b) is revised substantially as proposed 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 
imposed 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 notice that a fee may be imposed 
for an EFT or balance inquiry at an ATM by an ATM operator or by a 
national, regional, or local network used to complete the transfer.
    The Board solicited 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. Many 
commenters, including network owners, indicated that while networks 
currently charge an interchange fee to a financial institution whose 
customers use the network, they do not separately impose a fee on the 
consumer.
    Commenters requested clarification that reference to network-
imposed fees may be excluded from the disclosure in paragraph 
Sec. 205.7(b)(11), if networks are not imposing fees on consumers. 
Disclosures are generally required only to the extent applicable. 
Therefore, an institution may omit any reference to a network fee if 
the disclosure does not apply to the consumer's account. Model language 
in appendix A-2 regarding ATM fees is amended to reflect this 
flexibility. If networks begin to impose

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fees on consumers to complete an EFT or a balance inquiry, institutions 
that choose to exclude the reference to network fees from their section 
7(b) disclosures will be required to send a change-in-terms notice to 
account holders who contract for EFT services on or after October 1, 
2001.

Section 205.16--Disclosures at Automated Teller Machines

    A new Sec. 205.16 is added, as proposed, to implement section 702 
of the GLBA. Section 205.16(a) defines ATM operator. The ATM disclosure 
requirements are set forth in Secs. 205.16(b) and (c).
    Some ATM operators only impose a fee for a specific type of 
transfer such as a cash withdrawal, and not for a balance inquiry. In 
such cases, the notice in Sec. 205.16(b)(1) may contain a general 
statement that a fee will be imposed for providing EFT services or may 
specify the type of service for which a fee is imposed. If a financial 
institution provides a specific notice, and subsequently imposes fees 
on a broader category of transactions, the notice must be revised to 
reflect changes in an ATM operator's practice. Comment 16(b)(1)-1 is 
added to provide this guidance.
    Several commenters requested guidance on how the requirements in 
Sec. 205.4(a), that disclosures be clear and readily understandable and 
in a form the consumer may keep, apply to the ATM disclosure 
requirements. The notice required to be posted on or at the ATM under 
Sec. 205.16(c)(1) must be placed in a prominent and conspicuous 
location. The ``clear and readily understandable'' standard applies to 
the content of the notice.
    Regulation E provides that disclosures required to be given to a 
consumer must generally be in a retainable format. The notices posted 
on the screen (and, of course, those provided on or at the ATM) need 
not be in retainable format. If a paper notice is provided to comply 
with Sec. 205.16(c)(2), the notice must be provided in a form that may 
be retained by the consumer.
    Based on the comments received, Sec. 205.16(c) is revised from the 
proposed language to clarify that two notices are required--one on or 
at the ATM and another on the screen or in paper form. Editorial 
changes are for clarity; no substantive change is intended.
    Section 205.16(d) provides, in accordance with the statute, that 
the requirement for a disclosure on the screen or on a paper notice 
does not apply--through December 31, 2004--to any ATM that lacks the 
technical capability to provide such information. Commenters noted that 
many ATM operators are already providing notices about ATM fees in 
compliance with state law or network rules and guidelines. A few 
commenters urged the Board to eliminate the temporary exemption. The 
exemption is statutory and is adopted as proposed. The burden of proof 
rests on any ATM operator relying on the temporary exemption.

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

    Model language added to Appendix A-2 reflects the new disclosure in 
Sec. 205.7(b)(11) regarding fees that may be imposed by an ATM operator 
and by any network. Brackets indicate that institutions may omit terms 
and conditions not applicable to the consumer's account, such as fees 
imposed directly by networks.

V. Revisions to the Official Staff Commentary

Section 205.7--Initial Disclosures
    Comment 7(b)(5)-3 to Sec. 205.7(b)(5), which addresses interchange 
system fees, is revised to provide a cross-reference to 
Sec. 205.7(b)(11).

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, is revised to 
provide a cross-reference to the notice requirements in Sec. 205.16 for 
ATM operators. The cross-reference is intended to alert financial 
institutions of additional requirements in Sec. 205.16. In addition, a 
new comment 9(a)(1)-2 is added to give guidance on the relationship 
between Sec. 205.9(a)(1) and Sec. 205.16.

Section 205.16--Disclosures at Automated Teller Machines

    Comment 16(b)(1)-1 is added to clarify that an institution may 
state generally that a fee will be imposed for providing EFT services 
or may specify the type of service for which a fee is imposed.

VI. 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 
amendments to Regulation E. The amendments impose disclosure 
requirements on ATM operators and account-holding financial 
institutions about ATM fees. In accordance with the GLBA, the final 
rule exempts ATMs lacking technical capabilities from certain notice 
requirements until December 31, 2004.
    The amendments are not expected to have any significant impact on 
small entities. Many financial institutions that impose a fee for 
carrying out a transaction at an ATM already disclose the fee to 
satisfy existing requirements under Sec. 205.9(a)(1). The amendment 
would require that a disclosure regarding the fee be posted at the 
terminal and on the screen. The notice is generic, however, and can 
easily be programmed for display on the screen and at the terminal.

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 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, an information collection 
unless it displays a currently valid OMB number. The OMB control number 
for Regulation E is 7100-0200.
    The information collection requirements relevant to this rulemaking 
are in 12 CFR part 205 and Appendix A. This information collection 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 help 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 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 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 884 respondents/recordkeepers and an average 
frequency of about 85,800 responses per respondent each year. The 
current annual burden is estimated to be approximately 480,786 hours. 
The Federal Reserve estimates that there

[[Page 13412]]

would be associated start-up cost of $3,500 with a range 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 on or at the ATM and 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 Board has a continuing interest in the public's opinion of the 
Federal Reserve's collections of information. Comments regarding the 
burden estimates, or any other aspect of this collection of 
information, including suggestions for reducing the burden estimate, 
may be sent at any time to: Secretary, Board of Governors of the 
Federal Reserve System, 20th and C Streets, NW., Washington, DC 20551; 
and to the Office of Management and Budget, Paperwork Reduction Project 
(7100-0200), Washington, DC 20503.

List of Subjects in 12 CFR Part 205

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

    For the reasons set forth in the preamble, the Board amends 
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. Section 205.7 is amended by adding a new paragraph (b)(11) to 
read as follows:


Sec. 205.7  Initial disclosures.

* * * * *
    (b) Content of disclosures. * * *
    (11) ATM fees. 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, and by any network used to complete the transaction.
* * * * *

    3. A new Sec. 205.16 is added to read as follows:


Sec. 205.16  Disclosures at automated teller machines.

    (a) Definition. Automated teller machine operator means any person 
that operates an automated teller machine at which a consumer initiates 
an electronic fund transfer or a balance inquiry and that does not hold 
the account to or from which the transfer is made, or about which an 
inquiry is made.
    (b) General. An automated teller machine operator that imposes a 
fee on a consumer for initiating an electronic fund transfer or a 
balance inquiry shall:
    (1) Provide notice that a fee will be imposed for providing 
electronic fund transfer services or a balance inquiry; and
    (2) Disclose the amount of the fee.
    (c) Notice requirement. An automated teller machine operator must 
comply with the following:
    (1) On the machine. Post the notice required by paragraph (b)(l) of 
this section in a prominent and conspicuous location on or at the 
automated teller machine; and
    (2) Screen or paper notice. Provide the notice required by 
paragraphs (b)(1) and (b)(2) of this section either by showing it on 
the screen of the automated teller machine or by providing it on paper, 
before the consumer is committed to paying a fee.
    (d) Temporary exemption. Through December 31, 2004, 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.
    (e) Imposition of fee. An automated teller machine operator may 
impose a fee on a consumer for initiating an electronic fund transfer 
or a balance inquiry only if
    (1) The consumer is provided the notices required under paragraph 
(c) of this section, and
    (2) The consumer elects to continue the transaction or inquiry 
after receiving such notices.
    4. Under Appendix A, A-2 is amended by adding a new paragraph (j) 
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 fees (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] (and you may be charged a fee for a balance inquiry even if 
you do not complete a fund transfer).
* * * * *

    5. In Supplement I to Part 205, the following amendments would be 
made:
    a. Under Section 205.7--Initial Disclosures, under Paragraph 
7(b)(5)--Fees, paragraph 3. is revised;
    b. Under Section 205.9--Receipts at Electronic Terminals; Periodic 
Statements, under Paragraph 9(a)(1)--Amount, paragraph 1. is revised 
and a new paragraph 2 is added; and
    c. A new Section 205.16--Disclosures at Automated Teller Machines 
is added.
    The additions and revision read as follows:

Supplement I to Part 205--Official Staff Interpretations

* * * * *

Section 205.7--Initial Disclosures

* * * * *

7(b) Content of Disclosures

* * * * *

Paragraph 7(b)(5)--Fees

* * * * *
    3. Interchange system fees. Fees paid by the account-holding 
institution to the operator of a shared or interchange ATM system 
need not be disclosed, unless they are imposed on the consumer by 
the account-holding institution. Fees for use of an ATM that are 
debited directly from the consumer's account by an institution other 
than the account-holding institution (for example, fees included in 
the transfer amount) need not be disclosed. (See Sec. 205.7(b)(11) 
for the general notice requirement regarding fees that may be 
imposed by ATM operators and by a network used to complete the 
transfer.)
* * * * *

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 a consumer is given the option to cancel 
the transaction after receiving notice of a fee. (See Sec. 205.16 
for the notice requirements applicable to ATM operators that impose 
a fee for providing EFT services.)
    2. Relationship between Sec. 205.9(a)(1) and Sec. 205.16. The 
requirements of Secs. 205.9(a)(1) and 205.16 are similar but not 
identical.
    i. Section 205.9(a)(1) requires that if the amount of the 
transfer as shown on the receipt will include the fee, then the fee 
must be disclosed either on a sign on or at the terminal, or on the 
terminal screen. Section 205.16 requires disclosure both on a sign 
on or at the terminal (in a prominent and conspicuous location) and 
on the terminal

[[Page 13413]]

screen. Section 205.16 permits disclosure on a paper notice as an 
alternative to the on-screen disclosure.
    ii. The disclosure of the fee on the receipt under 
Sec. 205.9(a)(1) cannot be used to comply with the alternative paper 
disclosure procedure under Sec. 205.16, if the receipt is provided 
at the completion of the transaction because, pursuant to the 
statute, the paper notice must be provided before the consumer is 
committed to paying the fee.
    iii. Section 205.9(a)(1) applies to any type of electronic 
terminal as defined in Regulation E (for example, to POS terminals 
as well as to ATMs), while Sec. 205.16 applies only to ATMs.
* * * * *

Section 205.16--Disclosures at Automated Teller Machines

16(b) General

Paragraph 16(b)(1)

    1. Specific notices. An ATM operator that imposes a fee for a 
specific type of transaction such as a cash withdrawal, but not a 
balance inquiry, may provide a general statement that a fee will be 
imposed for providing EFT services or may specify the type of EFT 
for which a fee is imposed.
* * * * *

    By order of the Board of Governors of the Federal Reserve 
System, February 28, 2001.
Jennifer J. Johnson,
Secretary to the Board.
[FR Doc. 01-5295 Filed 3-5-01; 8:45 am]
BILLING CODE 6210-01-P