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Electronic Fund Transfer
Act
Source: Encyclopedia of Banking & Finance (9h Edition) by Charles
J Woelfel
(We recommend this as work of authority.)
Title XX of the FINANCIAL INSTITUTIONS
REGULATORY AND INTEREST RATE CONTROL ACT OF 1978, which was signed by
the President on November 10, 1978 (P.L. 95-630).
It became effective 18 months after enactment except for its provisions
on consumer liability and unsolicited card distribution, which became
effective 90 days after enactment.
The Board of Governors of the
Federal Reserve System summarized the following provisions of the act,
among others:
1.
Requires disclosure of the terms and conditions of electronic fund transfers
(defined to exclude, among other things, wire
transfers of funds, telephone
transfers not pursuant to an agreement, and
transfers made pursuant to an
automatic transfer service program) at the
time the consumer contracts for an
electronic fund transfer (EFT) service.
2. Requires that the consumer be
afforded written documentation for each fund
transfer made from an electronic terminal,
notice as to whether preauthorized
transfers were completed, and a periodic statement
of account.
3. Requires financial institutions to
establish procedures for correcting errors for
electronic fund transfers.
4. Provides limitations on the maximum
liability of a consumer for unauthorized
transfers from his or her account, subject,
in part, to whether the consumer
reports to the financial institution within
prescribed time periods either
unauthorized transfers appearing on the periodic
account statement or the loss
or theft of an electronic fund transfer card.
(Note: A consumer
who notifies the
issuer within two business days of learning
that a card has been lost or stolen
can be held liable for no more than $50.
A consumer who waits longer to notify
the institution risks liability of up to $500
for losses that occur after the two
business days.
But to impose such liability greater than $50, the institution
must
establish that the subsequent losses could
have been prevented if the consumer
had given notice within two business days.)
5. Imposes liability on the financial
institution under certain circumstances for all
damages proximately caused by the institution's
failure to make an electronic
fund transfer or failure to stop payment of
a preauthorized transfer when
instructed to do so in accordance with the
terms and conditions of the accounts.
6. Permits unsolicited distribution
only for unvalidated debit cards.
7. Provides that Title XX does not annul,
alter, or affect the laws of any state
relating to electronic funds transfers, except
to the extent that those laws are
inconsistent with Title XX.
8. Authorizes the Board of Governors
of the Federal Reserve System to exempt
from coverage electronic funds transfers within
any state that imposes
requirements substantially similar to Title
XX.
9. In connection with promulgating regulations
to carry out the act, requires the
Board of Governors of the Federal Reserve System
to prepare a statement on
economic impact, to issue model clauses to facilitate
compliance, and, if
necessary, to modify its regulations to ease
the compliance burden on small
financial institutions.
(Note: In the
case of an unauthorized EFT that is reflected
on a periodic statement, a consumer has 60 days
from the institution's
transmittal of a statement to examine it and
report any unauthorized transfer,
and doing so will limit liability of the customer
to $50. But failure to report
unauthorized transfers occurring after the 60
days have elapsed.
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