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Details of Regulation E 
Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel
(We recommend this as work of authority.)                    

The Board of Governors of the Federal Reserve System on January 31, 1980, announced adoption of additional final rules to complete Regulation E of the FEDERAL RESERVE BOARD REGULATIONS and to implement the Electronic Fund Transfer Act.  Sections of Regulation E that were adopted were as follows:

1.  On March 7, 1979, effective February 8, 1979:  establishing the limitations on
     customer liability for unauthorized use of an EFT card, and to specify the
     conditions under which EFT cards may be issued.

2.  On June 6, 1979, effective August 1, 1979:  absolving consumers of liability for
     unauthorized transfers if a credit institution has not made the following
     disclosures, in writing:  (1) the extent of a consumer's financial liability for
     unauthorized use; (2) the institution's telephone number and address for
     reporting a lost or stolen card; and (3) the institution's normal business days for
     reporting a lost or stolen card.

3.  On August 1, 1979, effective September 10, 1979:  limiting the amount for
     which consumers will be liable if their EFT access card is lost, stolen or
     otherwise used in a manner unauthorized by the cardholder.  As stipulated in the
     act, a consumer's liability for unauthorized transfers varies according to the time
     that elapses before the consumer notifies the financial institution of the
     unauthorized use.  Liability rises from $50 to $500 if notification is delayed
     more than 2 business days from the time the customer learns of the loss of theft
     of the card.  It is unlimited for transfers occurring more than 60 days after
     transmittal of the statement showing the unauthorized use, if the consumer fails
     to notify the institution, within the 60-day period.  Written notice of the loss, theft,
     or unauthorized use is made effective at the time it is mailed by the consumer
     rather than upon receipt by the institution.

4.  On October 3, 1979, effective November 15, 1979:  pertaining to exemptions
     for certain types of securities or commodities transfers and for intrainstitutional
     transfers; consumer liability for unauthorized transfers; definitions; and issuance
     of access devices.  The new sections govern special requirements, initial
     disclosures, changes in terms and error resolution notices, preauthorized
     transfers, relation to state law, and administrative enforcement.  These sections
     implement the portions of the Electronic Fund Transfer Act that became
     effective May 10, 1980.  (The board decided on January 31, 1980, to take no
     action at that time on a proposal made in October, 1979, concerning charges
     made by financial institutions in connection with error resolution.  The board
     said it will monitor industry practice regarding such charges and will take action
     if consumers appear to need protection in this area.)

Additional final rules were adopted by the Board of Governors of the Federal Reserve System on January 31,1980, to complete its Regulation E and to implement the Electronic Fund Transfer Act's other provisions which became effective May 10, 1980.  The new rules adopted January 31, 1980, as part of Regulation E included the following details:

1.  Documentation of transfers.  The act requires that financial institutions
     document electronic transfers by making receipts available at automated teller
     machines or point-of-sale terminals, and by sending consumers of EFT services
     periodic statements.  Regulation E includes the following requirements: 
     (1) financial institutions must show on periodic statements the date a transfer
     was debited or credited to the consumer's account; (2) a financial institution
     may show the location of an automated teller terminal in any of three ways: 
     street address; name of an organization, such as the name of a store; or name
     of a readily identifiable location where the terminal is situated.  
     (See, below, further amendments to Regulation E adopted on April 10, 1980.)

2.  Preauthorized credits.  The act requires that financial institutions give either
     positive notice of receipt of preauthorized deposits to a consumer's account
     (such as sending the consumer notice of receipt of a deposit, for instance, of a
     direct electronic deposit of Social Security benefits) or negative notice (sending
     a notice that a scheduled deposit had not been received), unless the payor has
     given the consumer notice that the transfer has been started (such as notice that
     an employer has initiated a payroll deposit).

     As an alternative, the board provided, as it had suggested in a proposal made
     in April, 1979, that institutions may provide customers with a telephone number
     to be used to verify whether a transfer has or has not been made.  Institutions
     that adopt this alternative are required to provide readily available telephone
     service and to inform the consumer of the telephone number as an initial
     disclosure of terms of the institution's EFT service, and also on periodic
     statements to the consumer.

3.  Availability of funds.  Financial institutions must make electronically deposited
     funds available to consumers promptly.

4.  Procedures for processing errors.  The act, and Regulation E as adopted,
     require generally that financial institutions resolve asserted errors in electronic
     fund transfers within 10 business days of notification by the consumer, either
     orally or in writing.  Alternatively, institutions may take up to 45 calendar days to
     resolve a complaint, if the account is provisionally recredited within 10 business
     days for the amount in dispute.  Recrediting need not take place unless written
     confirmation of an oral report of error is received within 10 business days of the
     oral report by an institution that has advised the consumer that it requires a
     written report and has provided an address.

     When an institution determines that no error has been committed, it must notify
     the consumer that the account is being debited again for the amount that was
     credited.  It must honor, for the period of investigation and for 5 business days
     after mailing of a redebiting notice,k checks that are payable to third parties up
     to the amount in dispute.

     The institution may limit its investigation to the "four walls" of the institution, when
     a third party with which the institution has no agreement is involved (including
     the Social Security Administration).

5.  If an EFT card is issued by a financial institution not holding the consumer's
     account, the institution offering the services is responsible for compliance, with
     limited exceptions for disclosures having to do with the relationship of the
     institution holding the consumer's account to that consumer.

Amendments on April 10, 1980, related to rules issued by the board on January 31, 1980, and to proposals made then with respect to sections of the act that became effective May 10, 1980:

1.  The board delayed until August 10, 1980, the requirements that a financial
     institution disclose on periodic statements the name of any third party to or from
     whom electronic fund transfers were made and the terminal location for
     transfers initiated at electronic terminals.  All other requirements of the
     regulation went into effect on May 10, 1980, as scheduled.

In taking this action the board made the following statement:

"The Board wishes to insure that consumers enjoy the major protections of the Act and Regulation during the three-month delay.  Consequently, a requirement previously stated in the Federal Register has been incorporated into the Regulation.  When applicable, financial institutions must, upon the consumer's request and without cost, provide the consumer with evidence of proof of payment to another person.  The Board reiterates that financial institutions must treat any request for additional information from the consumer as to an incompletely identified transfer as an "error" and comply with the error resolution procedures."

2.  The board also permanently "grandfathered" cash dispensers that do not
     generate a receipt at the time a withdrawal is made, on the condition that the
     consumer be sent a receipt on the next business day.  This exception is
     available only to terminals that do not perform any electronic transfer function
     other than dispensing cash.  It is also limited to machines that were purchased
     or ordered by the financial institution before February 6, 1980, the date on which
     the board's final documentation rules were published.  The exception was
     intended to permit the continuation of a service that is beneficial to consumers,
     without loss of consumer protection.  It would also enable financial institutions to
     replace these terminals in an orderly and cost-effective manner.

3.  The board also adopted an amendment applying to deposits of cash or checks
     at electronic terminals.  In January, 1980, the board had stated the opinion that
     such deposits are covered by the EFT Act and Regulation E.  In response to
     comments asking that it reconsider the matter, the board reiterated its position,
     but exempted deposits made at electronic terminals from the requirement that
     the terminal location be shown on the periodic statement.

4.  The board also adopted an amendment relating to the charges that must be
     disclosed on the periodic statement.  Under a rule adopted in January, 1980,
     institutions were required to disclose separately the total of charges related to
     electronic transfers, even if the costs were identical for electronic and paper
     transfers.  The amendment now gives institutions the option of disclosing
     instead the total charges for account maintenance, including any pretransaction
     charges.  This change conforms to the statutory language and was made in
     response to comments pointing to the operational difficulty in segregating EFT
     charges, particularly with respect to accounts on which charges are based on
     minimum balances and may involve rebates.  Customers will continue to receive
     information about specific EFT charges on initial disclosures required by the
     regulation.

As of 1989, the Fed's network was the only functioning national electronic funds transfer system.  However, the linking of regional and statewide electronic funds transfer systems of all major types of depository financial institutions should accelerate, so that as early as 1990, a nationwide and even international EFT network could be operational.

The board's Division of Consumer and Community Affairs points out that Regulation E applies not only to commercial banks but also to SAVINGS AND LOAN ASSOCIATIONS, Credit Unions, and even nonfinancial entities that offer EFT services to consumers.

BIBLIOGRAPHY

PHILLIPS PUBLISHING, INC. Corporate EFT Report.  Biweekly.

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