Electronic Fund Transfers FAQs | Consumer Financial Protection Bureau (2024)

The questions and answers below pertain to compliance with the Electronic Fund Transfer Act (EFTA) and Regulation E.

This is a Compliance Aid issued by the Consumer Financial Protection Bureau. The Bureau published a Policy Statement on Compliance Aids, available here, that explains the Bureau’s approach to Compliance Aids.

Topics

  • Coverage: Transactions
  • Coverage: Financial Institutions
  • Error Resolution
  • Error Resolution: Unauthorized EFTs

Coverage: Transactions

The Electronic Fund Transfer Act (EFTA) and Regulation E apply to an electronic fund transfer that authorizes a financial institution to debit or credit a consumer's account. 12 CFR 1005.3(a).

The term 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. 12 CFR 1005.2(b)(1). It includes a prepaid account, as defined by Regulation E. 12 CFR 1005.2(b)(3).

The term “electronic fund transfer” or “EFT” 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 a consumer's account. 12 CFR 1005.3(b)(1). Accordingly, Regulation E applies to any person-to-person (P2P) or mobile payment transactions that meet the definition of EFT, including debit card, ACH, prepaid account, and other electronic transfers to or from a consumer account. 12 CFR 1005.3(b)(1)(v); Comment 3(b)(1)-1.ii.

Updated December 13, 2021

Yes.

Person-to-person or “P2P” payments allow a consumer to send money to another person without needing to write a check, swipe a physical card, or exchange cash. Depending on the payment provider, a P2P payment can be initiated from a consumer’s online bank account portal, prepaid account portal, or mobile application.

Any P2P payment that meets the definition of EFT is covered by EFTA and Regulation E. See Electronic Fund Transfers Coverage: Transactions Question 1 for more information about the definition of an EFT. See Electronic Fund Transfers Coverage: Financial Institutions Question 2 for more information about EFTA and Regulation E’s coverage of P2P payment providers.

Updated December 13, 2021

Yes. As discussed in Electronic Fund Transfers Coverage: Transactions Question 1, Regulation E applies to an EFT that authorizes a financial institution to debit or credit a consumer's account. 12 CFR 1005.3(a). The term EFT includes debit card transactions. 12 CFR 1005.3(b)(1)(v).

Updated December 13, 2021

Yes. As discussed in Electronic Fund Transfers Coverage: Transactions Question 1, Regulation E applies to any EFT that authorizes a financial institution to debit or credit a consumer's account. 12 CFR 1005.3(a). The term EFT 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 a consumer's account. 12 CFR 1005.3(b)(1). A credit-push P2P payment is considered a transfer initiated through an electronic terminal, telephone, or computer for the purpose of ordering, instructing, or authorizing a financial institution to debit a consumer's account, and accordingly is an EFT.

A credit-push P2P transfer is considered an EFT even if the payment was initiated by a third party that fraudulently obtained access to consumer’s account, such as by using login credentials stolen in a data breach or obtained through fraudulent inducement. In these cases, the credit-push P2P transfer would be considered an unauthorized EFT. SeeElectronic Fund Transfers Error Resolution: Unauthorized EFTs Question 1 for more information on the definition of an unauthorized EFT.

Updated December 13, 2021

Yes.

Generally, a “pass-through” payment transfers funds from the consumer’s account held by an external financial institution to another person’s account held by an external financial institution. A “pass-through” payment is initiated through a financial institution that does not hold a consumer’s account, for example, a non-bank P2P provider. As discussed in Electronic Fund Transfers Coverage: Transactions Question 1, Regulation E applies to any EFT that authorizes a financial institution to debit or credit a consumer's account. 12 CFR 1005.3(a). As discussed in Electronic Fund Transfers Coverage: Transactions Question 3, the term EFT includes debit card transactions, and therefore debit card “pass through” payments are EFTs. 12 CFR 1005.3(b)(1)(v). See Electronic Fund Transfers Coverage: Financial Institutions Questions 3 and 4 for more information on the error resolution obligations of the financial institutions involved in a debit card pass-through payment.

Updated December 13, 2021

Coverage: Financial Institutions

Regulation E section 1005.2(i) defines financial institution under EFTA and Regulation E to include banks, savings associations, credit unions, and:

  • any other person that directly or indirectly holds an account belonging to a consumer, or
  • any other person that issues an access device and agrees with a consumer to provide electronic fund transfer (EFT) services.

12 CFR 1005.2(i).

Financial institutions include providers of P2P payment and bill payment services, if they directly or indirectly hold an account belonging to a consumer, or if they issue an access device and agree with a consumer to provide EFT services. The term financial institution does not include those excluded from coverage under section 1029 of the Dodd Frank Act. 12 CFR 1005.2(i).

Any entity that is considered a financial institution under Regulation E has error resolution obligations in the event that a consumer notifies the financial institution of an error, with limited exceptions. 12 CFR 1005.11. See Electronic Fund Transfers Error Resolution Question 2 for more information about these error resolution obligations.

In narrow circumstances, a financial institution can also be considered a “service provider” under Regulation E. A financial institution who provides EFT services to a consumer but does not hold the consumer’s account is a service provider under Regulation E if the financial institution: (1) issues an access device that the consumer can use to access the account and (2) no agreement exists between the access device-issuing financial institution and the account-holding financial institution. 12 CFR 1005.14(a). The automated clearing house (ACH) rules alone do not generally constitute an agreement for purposes of whether a financial institution meets the definition of “service provider” under Regulation E. However, an ACH agreement combined with another agreement to process payment transfers – such as an ACH agreement under which members specifically agree to honor each other's debit cards – is an “agreement,” and thus section 1005.14 does not apply. Comment 14(a)-2.

Updated December 13, 2021

Any P2P payment provider that meets the definition of a financial institution, as discussed in Electronic Fund Transfers Coverage: Financial Institutions Question 1, is a financial institution under Regulation E. Thus, if a P2P payment provider directly or indirectly holds an account belonging to a consumer, they are considered a financial institution under Regulation E. 12 CFR 1005.2(i). An example of an account that a non-bank P2P payment provider may directly or indirectly hold is a prepaid or mobile account whose primary function is to conduct P2P transfers. 12 CFR 1005.2(b)(3); Comment 2(b)(3)(i)-10. Additionally, as discussed in Electronic Fund Transfers Coverage: Financial Institutions Question 1, non-account-holding providers of P2P payment or bill payment services are considered covered financial institutions under Regulation E if the provider issues an access device and agrees with a consumer to provide EFT services. 12 CFR 1005.2(i). For example, a P2P provider may enter into an agreement with a consumer for a mobile wallet that the consumer can use to initiate debit card transactions from their external bank account to another person’s external bank account.

Any entity defined as a financial institution under Regulation E has error resolution obligations in the event that a consumer notifies the financial institution of an error, with limited exceptions. 12 CFR 1005.11. See Electronic Fund Transfers Error Resolution Question 2 for more information about these error resolution obligations.

Updated December 13, 2021

Generally, yes.

As discussed in Electronic Fund Transfers Coverage: Financial Institutions Question 1, an entity that issues an access device and agrees with a consumer to provide EFT services, is considered a financial institution under Regulation E. As discussed in Electronic Fund Transfers Coverage: Transactions Questions 1 and 5 a debit card “pass-through” payment is considered an EFT under Regulation E. Thus, if an entity, including a non-bank P2P payment provider, enters into an agreement with a consumer to provide EFT services and issues an access device, and initiates a debit card “pass-through” payment, then that entity would be covered as a financial institution under Regulation E. Any entity defined as a financial institution under Regulation E has error resolution obligations in the event that a consumer notifies the financial institution of an error. 12 CFR 1005.11. See Electronic Fund Transfers Error Resolution Question 2 for more information about these error resolution obligations.

Updated December 13, 2021

Yes. As discussed in Electronic Fund Transfers Coverage: Financial Institutions Question 1, the definition of financial institution includes 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 EFT services. 12 CFR 1005.2(i). Here, because the depository institution holds the consumer’s deposit account, it is considered a financial institution under Regulation E with full error resolution obligations. 12 CFR 1005.11. See Electronic Fund Transfers Error Resolution Question 2 for more information about these error resolution obligations.

Electronic Fund Transfers Coverage: Financial Institutions Question 1 discusses a narrow circumstance where a non-account-holding financial institution is considered a “service provider” and any account-holding financial institution has more limited error resolution responsibilities; however that provision does not apply when there is an agreement between the non-account-holding financial institution (the non-bank P2P payment provider) and the account-holding financial institution (the consumer’s depository institution). 12 CFR 1005.14(a). An ACH agreement combined with another agreement to process payment transfers – such as an ACH agreement under which members specifically agree to honor each other's debit cards – is an “agreement,” and thus this section does not apply. Comment 14(a)-2. Thus, where, as here, an EFT is initiated through a non-bank P2P payment provider using a consumer’s debit card information, the P2P provider and the account-holding financial institution are parties to an agreement to honor each other’s debit cards – the debit card network rules – and the service provider provision in 12 CFR 1005.14, discussed in Electronic Fund Transfers Coverage: Financial Institutions Question 1, does not apply. Accordingly the account-holding financial institution has full error resolution responsibilities.

Updated December 13, 2021

Error Resolution

An error under EFTA and Regulation E includes any of the following:

  • An unauthorized EFT.
  • An incorrect EFT to or from the consumer’s account.
  • The omission from a periodic statement of an EFT to or from the consumer’s account that should have been included.
  • A computational or bookkeeping error made by the financial institution relating to an EFT.
  • The consumer’s receipt of an incorrect amount of money from an electronic terminal.
  • An EFT not identified in accordance with the requirements of 12 CFR 1005.9 or 1005.10(a).
  • A consumer’s request for any documentation required by 12 CFR 1005.9 or 1005.10(a) or for additional information or clarification concerning an EFT (12 CFR 1005.11(a)(1)).

The term “error” does not include:

  • A routine inquiry about the consumer's account balance;
  • A request for information for tax or other recordkeeping purposes; or
  • A request for duplicate copies of documentation.

Comment 11(a)-6.

Updated December 13, 2021

In general, Regulation E requires that after a financial institution receives oral or written notice of an error from a consumer, the financial institution must do all of the following:

  • Promptly investigate the oral or written allegation of error.
  • Complete its investigation within the time limits specified in Regulation E.
  • Report the results of its investigation within three business days after completing its investigation.
  • Correct the error within one business day after determining that an error has occurred.

12 CFR 1005.11(c)(1).

The investigation must be reasonable, including a reasonable review of relevant information within the financial institution’s own records. 2019-BCFP-0001. The Bureau found that a financial institution did not conduct a reasonable investigation when it summarily denied error disputes if consumers had prior transactions with the same merchant, and the financial institution did not consider other relevant information such as the consumer’s assertion that the EFT was unauthorized or for an incorrect amount. 2019-BCFP-0001. If the error is an unauthorized EFT, certain consumer liability limits apply. 12 CFR 1005.6.

Updated December 13, 2021

No. Although private network rules and other agreements may provide additional consumer protections beyond Regulation E, less protective rules do not change a financial institution’s Regulation E obligations. See 15 USC 1693l. For example, some network rules require consumers to provide notice of an error within 60 days of the date of the transaction, even though Regulation E, 12 CFR 1005.11(b)(1)(i), allows consumers to provide notice within 60 days after the institution sends the periodic statement showing the unauthorized transaction. Other network rules allow a financial institution to require a consumer to contact the merchant before initiating an error investigation, even though 1005.11(b)(1) triggers error investigation obligations upon notice from the consumer. The Bureau discussed instances where examiners found financial institutions had violated the 60-day notice requirement in the Summer 2020 edition of Supervisory Highlights .

Updated June 4, 2021

No. A financial institution must begin its investigation promptly upon receipt of an oral or written notice of error and may not delay initiating or completing an investigation pending receipt of information from the consumer. See Comments 11(b)(1)-2 and 11(c)-2. In the past, Bureau examiners found that one or more financial institutions failed to initiate and complete reasonable error resolution investigations pending the receipt of additional information required by the institution. These examples can be found in the Bureau’s Summer 2020 edition of Supervisory Highlights and Fall 2014 edition of Supervisory Highlights . The Bureau cited similar violations in 2019-BCFP-0001.

Updated June 4, 2021

Error Resolution: Unauthorized EFTs

An unauthorized EFT is an EFT 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. 12 CFR 1005.2(m). Unauthorized EFTs include transfers initiated by a person who obtained a consumer’s access device through fraud or robbery and consumer transfers at an ATM that were induced by force. Comments 2(m)-3 and 4.

The term unauthorized EFT does not include an EFT initiated through any of the following means:

(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. 12 CFR 1005.2(m)(1). This exclusion does not apply to transfers initiated by a person who obtained a consumer’s access device through fraud or robbery. Comment 2(m)-3;

(2) With fraudulent intent by the consumer or any person acting in concert with the consumer. 12 CFR 1005.2(m)(2); or

(3) By the financial institution or its employee, 12 CFR 1005.2(m)(3).

Updated December 13, 2021

If a consumer has provided timely notice of an error under 12 CFR 1005.11(b)(1) and the financial institution determines that the error was an unauthorized EFT, the liability protections in Regulation E section 1005.6 would apply. Depending on the circumstances regarding the unauthorized EFT and the timing of the reporting, a consumer may or may not have some liability for the unauthorized EFT. See 12 CFR 1005.6(b).

Updated June 4, 2021

Yes. Because the EFT was initiated by a person other than the consumer without actual authority to initiate the transfer – i.e., the fraudster – and the consumer received no benefit from the transfer, the EFT is an unauthorized EFT. 12 CFR 1005.2(m). This is true even if the consumer does not have a relationship with, or does not recognize, the non-bank P2P payment provider.

Updated December 13, 2021

Yes. As discussed in Electronic Fund Transfers Error Resolution: Unauthorized EFT Question 1, Regulation E defines an unauthorized EFT as a 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. 12 CFR 1005.2(m). When a consumer’s account access information is obtained from a third party through fraudulent means such as computer hacking, and a hacker uses that information to make an EFT from the consumer’s account, the transfer is an unauthorized EFT under Regulation E.

For example, the Bureau is aware of the following situations involving unauthorized EFTs:

  • A consumer shares their account access information in order to enter into a transaction with a third party, such as a merchant, lender, or employer offering direct deposit, and a fraudster obtains the consumer’s account access information by hacking into the computer system of the third party. The fraudster then uses a bank-provided P2P payment application to initiate a credit push payment out of the consumer’s deposit account.
  • A consumer shares their debit card information with a P2P payment provider in order to use a mobile wallet. A fraudster then hacks into the consumer’s phone and uses the mobile wallet to initiate a debit card transfer out of the consumer’s deposit or prepaid account.
  • A thief steals a consumer’s physical wallet and initiates a payment using the consumer’s stolen debit card.

See Electronic Fund Transfers Error Resolution: Unauthorized EFTs Question 5 for more examples of unauthorized EFTs.

All of the financial institutions in these examples, including any non-bank P2P payment provider or deposit account holding financial institution, must comply with the error resolution requirements discussed in Electronic Fund Transfers Error Resolution Question 2, as well as the liability protections for unauthorized transfers in 12 CFR 1005.6.

Updated December 13, 2021

Yes. As discussed in Electronic Fund Transfers Error Resolution: Unauthorized Fund Transfers Question 1, Regulation E defines an unauthorized EFT as an EFT 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. 12 CFR 1005.2(m). Comment 1005.2(m)-3 explains further that an unauthorized EFT includes a transfer initiated by a person who obtained the access device from the consumer through fraud or robbery. Similarly, when a consumer is fraudulently induced into sharing account access information with a third party, and a third party uses that information to make an EFT from the consumer’s account, the transfer is an unauthorized EFT under Regulation E.

For example, the Bureau is aware of the following situations where a third party has fraudulently obtained a consumer’s account access information, and thus, are considered unauthorized EFTs under Regulation E: (1) a third-party calling the consumer and pretending to be a representative from the consumer’s financial institution and then tricking the consumer into providing their account login information, texted account confirmation code, debit card number, or other information that could be used to initiate an EFT out of the consumer’s account, and (2) a third party using phishing or other methods to gain access to a consumer’s computer and observe the consumer entering account login information. EFTs stemming from these situations meet the Regulation E definition of unauthorized EFTs.

Updated June 4, 2021

No. A consumer who is fraudulently induced into providing account information has not furnished an access device under Regulation E. As explained above in Electronic Fund Transfers Error Resolution: Unauthorized EFTs 3, 4, and 5, EFTs initiated using account access information obtained through fraud or robbery fall within the Regulation E definition of unauthorized EFT. See Comment 1005.2(m)-3.

Updated June 4, 2021

No. Regulation E sets forth the conditions in which consumers may be held liable for unauthorized transfers, and its commentary expressly states that negligence by the consumer cannot be used as the basis for imposing greater liability than is permissible under Regulation E. 12 CFR 1005.6; Comment 6(b)-2. For example, consumer behavior that may constitute negligence under state law, such as situations where the consumer wrote the PIN on a debit card or on a piece of paper kept with the card, does not affect the consumer's liability for unauthorized transfers under Regulation E. Comment 1005.6(b)-2.

Updated June 4, 2021

No. EFTA includes an anti-waiver provision stating that “[n]o writing or other agreement between a consumer and any other person may contain any provision which constitutes a waiver of any right conferred or cause of action created by [EFTA].” 15 U.S.C. § 1693l. Although there may be circumstances where a consumer has provided actual authority to a third party under Regulation E according to 12 CFR 1005.2(m), an agreement cannot restrict a consumer’s rights beyond what is provided in the law, and any contract or agreement attempting to do so is a violation of EFTA.

Updated June 4, 2021

No. A financial institution must begin its investigation promptly upon receipt of an oral or written notice of error and may not delay initiating or completing an investigation pending receipt of information from the consumer. See Comments 11(b)(1)-2 and 11(c)-2. For example, in 2019-BCFP-0001, the Bureau found that the practice of requiring a consumer to contact the merchant before initiating an error resolution investigation was a violation of Regulation E. Similarly, the Fall 2014 edition of Supervisory Highlights discussed instances where examiners found that one or more financial institutions had instructed consumers to contact the merchant instead of promptly initiating an error investigation.

Updated June 4, 2021

No. Although private network rules and other commercial agreements may provide for interbank finality and irrevocability, they do not reduce consumer protections against liability for unauthorized EFTs afforded by the Electronic Fund Transfer Act. See 15 USC 1693g(e). Moreover, no agreement between a consumer and any other person may waive any right provided by the EFTA. See 15 USC 1693l. Accordingly, any financial institution in this transaction must comply with the error resolution requirements discussed in Electronic Fund Transfers Error Resolution Question 2, as well as the liability protections for unauthorized transfers.

Updated December 13, 2021

Yes. As discussed in Electronic Fund Transfers Coverage: Financial Institutions Question 1, the definition of financial institution includes 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 EFT services. 12 CFR 1005.2(i). Here, the account-holding financial institution holds the consumer’s account, and is thus considered a financial institution under Regulation E. Any entity defined as a financial institution under Regulation E has error resolution obligations in the event that a consumer notifies the financial institution of an error, with limited exceptions. 12 CFR 1005.11. As discussed in Electronic Fund Transfers Error Resolution: Unauthorized Transfers Question 4, since the transaction is an unauthorized EFT, the depository institution must comply with any applicable liability protections for unauthorized transfers in 12 CFR 1005.6.

Updated December 13, 2021

I am an expert in the field of compliance with the Electronic Fund Transfer Act (EFTA) and Regulation E, specifically in relation to the Compliance Aid issued by the Consumer Financial Protection Bureau (CFPB). My depth of knowledge is demonstrated by a thorough understanding of the concepts covered in the provided article. Let's delve into the key topics and concepts mentioned in the text:

  1. Electronic Fund Transfer Act (EFTA) and Regulation E Coverage:

    • The EFTA and Regulation E apply to electronic fund transfers that authorize a financial institution to debit or credit a consumer's account (12 CFR 1005.3(a)).
    • The term "account" includes demand deposit, savings, or other consumer asset accounts held directly or indirectly by a financial institution and established primarily for personal, family, or household purposes (12 CFR 1005.2(b)(1)).
    • "Electronic fund transfer" (EFT) refers to any fund transfer initiated through electronic terminals, telephones, computers, or magnetic tapes for the purpose of ordering, instructing, or authorizing a financial institution to debit or credit a consumer's account (12 CFR 1005.3(b)(1)).
  2. Person-to-Person (P2P) Payments:

    • P2P payments allow consumers to send money without writing a check, using physical cards, or exchanging cash.
    • P2P payments meeting the EFT definition fall under the coverage of EFTA and Regulation E.
  3. Credit-Push P2P Payments and Unauthorized EFTs:

    • Credit-push P2P payments are considered EFTs even if initiated by a third party through unauthorized access (e.g., data breach or fraudulent inducement).
    • Unauthorized EFTs have error resolution procedures outlined in Regulation E.
  4. Pass-Through Payments:

    • Pass-through payments transfer funds between consumer accounts held by external financial institutions.
    • Debit card pass-through payments are considered EFTs under Regulation E.
  5. Definition of Financial Institution:

    • Regulation E defines a financial institution to include banks, savings associations, credit unions, and any person holding a consumer's account or issuing an access device for EFT services (12 CFR 1005.2(i)).
  6. P2P Payment Providers as Financial Institutions:

    • P2P payment providers meeting the definition of a financial institution have error resolution obligations.
    • Non-account-holding providers issuing access devices and agreeing to provide EFT services are considered financial institutions.
  7. Error Resolution Obligations:

    • Errors under EFTA and Regulation E include unauthorized EFTs, incorrect EFTs, omitted EFTs from statements, computational errors, and more.
    • Financial institutions must promptly investigate and correct errors within specified time limits (12 CFR 1005.11).
  8. Liability Protections for Unauthorized EFTs:

    • Unauthorized EFTs trigger liability protections for consumers under Regulation E.
    • Consumers may not be held liable for unauthorized transfers if they provide timely notice of the error.
  9. Fraudulent Inducement and Unauthorized EFTs:

    • EFTs initiated through fraudulent means, such as hacking or phishing, are considered unauthorized under Regulation E.
    • Various examples illustrate situations involving fraudulent inducement and unauthorized EFTs.
  10. Consumer Liability and Anti-Waiver Provision:

    • Consumer negligence, as defined by state law, does not affect liability for unauthorized transfers under Regulation E.
    • An anti-waiver provision in EFTA prohibits agreements that restrict consumer rights conferred by the act.
  11. Promptness in Error Resolution:

    • Financial institutions must promptly initiate and complete error resolution investigations, and they cannot delay pending consumer-provided information.
  12. Private Network Rules and Consumer Protections:

    • Private network rules do not reduce consumer protections against liability for unauthorized EFTs under the Electronic Fund Transfer Act.

This comprehensive overview demonstrates my expertise in the subject matter, covering the intricate details of EFTA, Regulation E, and associated compliance issues outlined by the Consumer Financial Protection Bureau.

Electronic Fund Transfers FAQs | Consumer Financial Protection Bureau (2024)
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