The Electronic Funds Transfer Act clarifies the rights and responsibilities of those involved in electronic fund transfers, with a focus on protecting individual consumers. It covers transactions made through electronic devices and requires clear communication of fees and terms. Consumers can stop pre-authorized transfers and have limited liability for unauthorized transfers. The Act also provides a protocol for troubleshooting and clarifies the liability of financial institutions.
The Electronic Funds Transfer Act, also known as the EFT Act or Regulation E, is a 1978 United States piece of legislation intended to clarify the rights and responsibilities of those involved in the transfer of electronic funds, including consumers. It was passed by Congress with the express purpose of clarifying rights and responsibilities that were determined to be unclear under consumer protection legislation in effect at the time. Thus, while the rights and responsibilities of everyone who transfers electronic funds are touched upon, protecting the rights of individual consumers has been at the heart of the Electronic Funds Transfer Act.
Within the EFT Act, transactions originating with a check, a bill of exchange, or any other type of paper instrument are not considered. Instead, the focus is on transactions that originate through a telephone device, an electronic terminal, a computer or a magnetic tape; for example, an ATM transaction, a point-of-sale transfer, a telephone transfer, or a direct deposit or withdrawal. The type of transaction considered is one that authorizes, directs or instructs a financial institution to credit or debit an account.
Some of the mandates of the Electronic Funds Transfer Act clearly benefit the consumer. For example, notice requirements state that any fee associated with a transaction must be prominently and prominently displayed on or through an ATM prior to the time the consumer irrevocably commits to complete the transaction. Any fees not disclosed in this way are prohibited.
For electronic funds transfers where a consumer’s account is involved, the EFT Act stipulates that terms and conditions must be communicated to the consumer at the time the contract is made. Additionally, disclosures must be written in understandable language and include information such as contact information in the event of an unauthorized funds transfer, the right to stop payment on a pre-authorized electronic funds transfer and how to do so, and the fees for the transfer. Electronic Funds Services. Any modification of the conditions by the consumer’s financial institution must be communicated to the consumer in writing at least 21 days before the effective date of the modification. Financial institutions are also required to document electronic funds transfers for consumers with periodic returns. Reports must include rates and consumer balances at the beginning and end of the period in question.
Pre-authorisation of electronic funds transfers from a consumer’s account can only be authorized by a consumer in writing, according to the Electronic Funds Transfer Act. The consumer can stop payment on a pre-authorised electronic funds transfer orally or in writing. The limitation is that notification of a stop must be provided at least three business days before the date on which the transfer is scheduled. The financial institution may require a confirmatory written authorization following an oral notification, in which case it must inform the consumer of the requirement and where to send the written notification to fulfill it.
The Electronic Funds Transfer Act also provides a protocol for troubleshooting and limits consumer liability for unauthorized transfers. Clarifies the liability of financial institutions in the event that they fail to make properly set up electronic funds transfers without extenuating reason or for failing to credit a deposit, or failing to stop payment when duly requested. It also describes situations, such as acts of God, in which the financial institution is not responsible.
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