Electronic Fund Transfers

SUMMARY: The Board is publishing for comment a proposal to revise

Regulation E, which implements the Electronic Fund Transfer Act. The

proposal stems from the Board's review of Regulation E pursuant to its

policy of periodically reviewing all of its regulations. The Board's

review considered ways the regulation could be simplified to ease the

burdens imposed on financial institutions, consistent with the Board's

responsibility for implementing the act, and considered also whether

the regulation could more effectively carry out the purposes of the

act. The proposal contains several substantive revisions, including

changes to the existing exemptions for securities or commodities

transfers and for preauthorized transfers to or from accounts at small

institutions. In addition, the proposal includes changes intended to

make Regulation E more consistent with the requirements of other

regulations governing deposit accounts. The proposal also simplifies

the language and format of the regulation, deleting obsolete provisions

and eliminating all of the footnotes. In conjunction with the proposed

revisions to the regulation, the Board also has proposed revisions to

the staff commentary published elsewhere in today's Federal Register.

DATES: Comments must be received on or before May 31, 1994.

ADDRESSES: Comments should refer to Docket No. R-0830 and be mailed to

William W. Wiles, Secretary, Board of Governors of the Federal Reserve

System, Washington, DC 20551. They may also be delivered to the guard

station in the Eccles Building Courtyard on 20th Street, NW. (between

Constitution Avenue and C Street) between 8:45 a.m. and 5:15 p.m.

weekdays. Except as provided in the Board's rules regarding the

availability of information (12 CFR 261.8), comments will be available

for inspection and copying by members of the public in the Freedom of

Information Office, room MP-500 of the Martin Building between 9:00

a.m. and 5:00 p.m. weekdays.

FOR FURTHER INFORMATION CONTACT: Jane Jensen Gell, Mary Jane Seebach,

Staff Attorneys, or John Wood, Senior Attorney, Division of Consumer

and Community Affairs, at (202) 452-2412 or (202) 452-3667. For the

hearing impaired only, Telecommunications Device for the Deaf (TDD),

Dorothea Thompson, at (202) 452-3544.

SUPPLEMENTARY INFORMATION:

(1) Background

The Electronic Fund Transfer Act (EFTA) (15 U.S.C. 1693), enacted

in 1978, provides a basic framework establishing the rights,

liabilities, and responsibilities of participants in electronic fund

transfer (EFT) systems. The Federal Reserve Board was given rulewriting

authority to issue implementing regulations. Types of transfers covered

by the act and regulation include transfers initiated through an

automated teller machine (ATM), point-of-sale terminal, automated

clearinghouse, telephone bill-payment system, or home banking program.

The act and Regulation E (12 CFR part 205) provide rules that govern

these and other EFTs. The rules prescribe restrictions on the

unsolicited issuance of ATM cards and other access devices; disclosure

of terms and conditions of an EFT service; documentation of EFTs 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 EFTs.

The Board's policy under its Regulatory Planning and Review (RPR)

program calls for periodic review of each Board regulation. The RPR

program has four goals: to clarify and simplify the regulatory

language; to amend the regulation to reflect technological and other

developments; to reduce undue regulatory burden on the industry; and to

delete obsolete provisions. In keeping with that policy, the Board has

made a detailed review of Regulation E to determine whether it can be

simplified to ease compliance burdens for financial institutions, while

meeting the Board's responsibility for implementing the consumer

protections of the EFTA.

Based on its review, the Board now proposes revisions to Regulation

E. While certain substantive revisions have been made to the regulation

(see the section-by-section discussion below), the proposal leaves most

of the regulatory provisions substantively unchanged. The regulation

closely follows the language of the statute, which contains detailed

requirements in most areas, and major changes to the regulation are not

possible unless the act itself is amended. Therefore, the Board is

soliciting comment on whether specific legislative revisions to the

EFTA are necessary and achievable without imposing a significant

adverse impact on consumer protections.

The proposal simplifies the language and format of each section of

the regulation to state the requirements more clearly. All of the

footnotes have been either integrated into the text of the regulation

or moved to the proposed staff commentary, making the regulation itself

less cumbersome to use. The proposed regulation is shorter than current

Regulation E by about fifteen percent, a reduction largely attributable

to the deletion of obsolete provisions and to the transfer of

explanatory material to the commentary. In addition to commenting on

the proposed changes, the Board requests specific suggestions, as well

as rationale, for additional changes to the regulation that would

facilitate compliance.

(2) Proposed Regulatory Revisions

The following discussion covers the proposed revisions to

Regulation E section-by-section. In many cases, the proposed changes

would simplify or clarify the current text, with no substantive change

in the regulatory requirements; where these changes are self-evident

from reading the proposed text itself, they are not discussed.

Section 205.1--Authority and Purpose

The proposal simplifies the current section. Discussion of the

Congressional findings has been deleted. Coverage issues currently

addressed in Sec. 205.1(b) have been moved to Sec. 205.3.

Section 205.2--Definitions

Paragraph (b)(2)

The proposal incorporates the exemption for trust accounts

(currently Sec. 205.3(f)) into the definition of account. The

definition more closely tracks the statutory language contained in

section 903(2) of the EFTA.

Paragraph (d)--Business Day

The act and regulation define business day as any day on which the

offices of the consumer's financial institution are open to the public

for carrying on substantially all business functions. This currently

requires that each financial institution determine when its offices are

``carrying on substantially all business functions.'' Using its

exception authority under section 904(c) of the EFTA, the Board

proposes to change the definition so that it will mirror that used in

Regulations CC (12 CFR part 229) and DD (12 CFR part 230). Those

regulations define a business day as a calendar day other than a

Saturday, Sunday, or any legal public holiday specified in 5 U.S.C.

6103(a). The Board believes compliance with the multiple regulations

that govern deposit accounts would be simplified if similar definitions

were used and solicits comment on whether such a change will reduce

burden without adversely affecting consumer protections.

Paragraph (g)--Financial Institution

The Board proposes to simplify the definition of financial

institution (currently Sec. 205.2(i)) by eliminating references to both

state and federal institutions. Instead, the definition would include

``a bank, savings association, credit union, or any other person that

directly or indirectly holds an account belonging to a consumer.'' This

is not intended as a substantive change in coverage.

Paragraph (h)--Person

The proposal adds a definition of ``person,'' incorporating

language from Regulations B (12 CFR 202.2(x)) and Z (12 CFR

226.2(a)(22)). The term is used in several places in the regulation,

most notably in Sec. 205.3(a), defining the regulation's coverage, and

in Sec. 205.10(e) on compulsory use.

Section 205.3--Coverage

The proposal includes a new section defining the regulation's

coverage. The Board solicits comment on whether having a self-contained

section on coverage would facilitate use of the regulation.

Paragraph (a)--General

The proposal clarifies that the regulation applies to any EFT that

authorizes a financial institution to debit or credit a consumer's

account. It also incorporates the discussion of coverage currently

addressed in Sec. 205.1(b).

Paragraph (b)--Electronic Fund Transfer

The definition of ``electronic fund transfer'' (currently

Sec. 205.2(g)), which is central to determining coverage under the

regulation, has been moved into the coverage section. A minor change to

the definition of an EFT makes clear that the term includes transfers

initiated through a computer or through magnetic tape. This change is

proposed because a strict reading of the current regulation might lead

to the unintended conclusion that an EFT does not include transfers

initiated through a computer not involving tape. The definitions of

``preauthorized electronic fund transfer'' and ``unauthorized

electronic fund transfer'' remain in the definitions section.

Questions have arisen about Regulation E coverage of smart cards.

Generally, smart cards are plastic cards that have the capacity to

either compute or communicate information. At one time, it was believed

that smart card systems were not subject to Regulation E because no

account existed within the definition of the act or regulation. With

advances in smart card technology, that assumption is less clear.

Increasingly more uses are available for smart cards. The Board

believes that smart cards are subject to Regulation E if the cards are

used to access an account. A similar analysis might be applied to

value-added or prepaid cards.

The determination about whether smart cards and value-added cards

are subject to the regulation has implications both for the private and

public sectors. For example, any determination made on coverage of

smart cards in the review could apply to electronic benefit transfer

system programs. (See Docket No. R-0829 elsewhere in today's Federal

Register in which the Board deferred to the review of Regulation E for

discussion of smart cards and its implication on electronic benefit

transfer systems.) The Board solicits comment on the coverage of smart

cards.

Paragraph (c)--Exclusions From Coverage

The proposal's expanded section on coverage retains the exemptions

currently contained in Sec. 205.3. Including these exemptions with the

definition of ``electronic fund transfer'' more closely tracks the

statutory provisions. In addition, the Board believes having both

coverage and exemption provisions in one section would facilitate the

determination of whether compliance with the regulation is required.

The paragraph contains several proposed revisions to current

exemptions.

Paragraph (c)(3)--Wire Transfers

The proposal amends the exemption for wire transfers currently

contained in Sec. 205.3(b) to clarify that it exempts transfers through

Fedwire (or similar wire transfer systems) and not all transfers

through the Federal Reserve Communications System. The proposed

amendment does not represent a substantive change in the scope of the

exemption. Rather, it would correct the reference to more accurately

reflect the statutory intent.

Paragraph (c)(4)--Securities and Commodities Transfers

The Board proposes to revise the exemption for certain securities

and commodities transfers. When the current exemption was initially

adopted, the Board omitted the requirement that the purchase or sale be

through a broker-dealer registered with the Securities Exchange

Commission (SEC). The intent of this change was to broaden the scope of

the exemption to include securities transactions made by mutual funds

and pension and profit-sharing plans. The Board noted at the time that

existing federal laws and the regulations of the SEC and the Commodity

Futures Trading Commission (CFTC), although not specifically

promulgated for the regulation of payment transfers, provided

protections to consumers that were consistent with the requirements of

the EFTA and Regulation E.

As currently written, however, the exemption does not extend to a

transfer for the purchase or sale of securities if the securities (for

example, municipal securities) are not regulated by the SEC, even if

the transfer is executed by a broker-dealer who is regulated by the

SEC. In keeping with the statutory language, the proposed change would

exempt transfers involving unregulated securities if the purchase or

sale is transacted by a broker-dealer regulated by the SEC or a futures

commission merchant regulated by the CFTC. The Board believes that the

regulation of broker-dealers and futures commission merchants offers

sufficient protection of payment transfers for consumers and that the

application of the protections in Regulation E would only duplicate

available safeguards.

The Board proposes to extend the exemption to all securities or

commodities held in book-entry form by Federal Reserve Banks on behalf

of the Treasury Department and other federal agencies (for example,

Treasury Direct issues). Currently a transfer to purchase Treasury

securities is technically covered by Regulation E because it is not

regulated by the SEC or the CFTC and, when purchased from the Federal

Reserve Banks, is not purchased or sold by a registered broker-dealer.

The Board believes there is adequate regulation of transfers that

involve Federal Reserve Banks and federal agencies, offering sufficient

consumer protection (see 31 CFR part 370, regulations governing

payments by the automated clearing house method on account of United

States securities).

The Board solicits comments on whether these proposed changes

strike the appropriate balance between facilitating greater use of EFTs

for securities transactions and providing adequate consumer protection.

Paragraph (c)(7)--Small Institutions

The Board proposes to increase the current-asset size cutoff of the

small institution exemption in current Sec. 205.3(g). Section 904(c) of

the EFTA gives the Board authority to modify the requirements imposed

by the regulation on small financial institutions if the Board

determines that such modifications are necessary to alleviate any undue

compliance burden on small institutions and that such modifications are

consistent with the purposes and objective of the act. In 1982, the

Board exempted preauthorized transfers to or from accounts at financial

institutions with assets of less than $25 million. The regulation

exempts the preauthorized transfers as a class of transfers, and not

the financial institutions themselves. A small financial institution

that provides EFT services besides preauthorized transfers must comply

with the regulation for those other services. For example, a small

financial institution that offers ATM services must comply with

Regulation E in regard to the issuance of debit cards, terminal

receipts, periodic statements, and other requirements. In addition, the

institution must comply with provisions of the act that apply to the

financial institution's conduct rather than to the exempted transfers.

For example, the prohibition against compulsory use of EFTs in section

913 of the act--in regard to credit or employment (see discussion below

in Sec. 205.10(e))--remains applicable.

When the Board adopted the exemption in 1982, many small

institutions that did not offer EFT services such as ATM access

benefitted from the exemption. Given the growth in assets of financial

institutions in the past ten years, increasing the asset-size cutoff of

the exemption to $100 million could reduce burden without lessening the

extent of consumer protection originally provided. Because many small

institutions now offer a variety of EFT services, it appears that only

a limited number of institutions would be exempted from Regulation E

under the proposed increase. The Board solicits comment on the proposed

increase in the exemption level. In addition, the Board requests

comment on other ways the burden on small institutions could be reduced

without sacrificing the consumer protections intended by the act.

Questions have been raised about the impact of Article 4A of the

Uniform Commercial Code (UCC) on the small institution exemption. In

the revised commentary to Regulation E, the Board clarifies that

Article 4A is not applicable to the preauthorized transfers that

qualify for the small institution exemption. Article 4A applies

primarily to large-dollar commercial wire transfers made, for example,

via Fedwire, CHIPs, SWIFT, and Telex. Section 4A-108 excludes any

transaction that is subject to the EFTA from coverage under Article 4A.

The question is whether the transfers initiated by small financial

institutions that take advantage of the regulatory exemption may be

subject to the requirements of Article 4A as a consequence. For

example, would a direct deposit to a consumer account at a small bank

be covered by Article 4A if exempt from Regulation E? The Board regards

these preauthorized transfers as remaining subject to certain

requirements of the EFTA, and therefore not covered by Article 4A. The

Board solicits comment on whether specific language is needed in the

regulation to clarify this issue.

The Board proposes deleting footnote 1a, which refers to sections

913, 915, and 916 of the EFTA. Section 913 places restrictions on the

compulsory use of EFTs. For example, an institution may not condition

the extension of credit on repayment by preauthorized debit. The

statutory language from section 913 has been incorporated in proposed

Sec. 205.10(e). Sections 915 and 916 provide for civil and criminal

liability, respectively, for violations of the EFTA. References to

sections 915 and 916 are contained in proposed Sec. 205.3(c)(5)(ii).

The Board has also added cross-references to Sec. 205.10 and sections

915 and 916 in the appropriate paragraphs to replace footnote 1a.

Section 205.4--General Disclosure Requirements; Jointly Offered

Services

Current Sec. 205.4 describes certain requirements under the

regulation. The Board proposes to consolidate the general disclosure

requirements currently dispersed throughout the regulation in this

section. In addition to adding paragraph (a), the proposal contains

various editorial changes including a reordering of the section; no

substantive change is intended.

Paragraph (a)--Form of Disclosures

The proposal incorporates the format requirements for disclosures

currently found in Secs. 205.7(a) and 205.9. The Board interprets these

requirements as generally applying to all disclosures, in addition to

the terminal receipts and periodic statements required by the

regulation. The phrase ``in a form the consumer may keep'' would

replace the wording ``the financial institution shall make available to

the consumer a written receipt of the transfer(s) * * *.'' currently

contained in Sec. 205.9(a). The proposed change is consistent with

language in Regulation Z (12 CFR 226.17(a)) and Regulation DD (12 CFR

230.3(a)), for example. The Board does not consider this to be a

substantive change, as the proposed language is drawn from the current

commentary.

The paragraph also incorporates language currently in Sec. 205.9(e)

that permits an institution to use commonly accepted or readily

understandable abbreviations in complying with the documentation

requirements of the regulation.

Section 205.5--Issuance of Access Devices

The proposal contains extensive editorial changes to this section,

including the addition of headings to help distinguish the rules for

solicited and unsolicited issuance of access devices.

The proposal deletes the obsolete language in current

Sec. 205.5(a)(3), a paragraph that grandfathered renewals of pre-1979

access devices from the requirements of the section. In addition, the

Board proposes to move the provisions relating to the Truth in Lending

Act (TILA) contained in current Sec. 205.5(c) to proposed Sec. 205.12

to simplify the regulation by placing all references to TILA in the

same section. (See the discussion of Sec. 205.12 below.)

Footnote 1b, which provides guidance on issuance of an access

device for a joint account, has been deleted from the regulation and

moved to the commentary.

Section 205.6--Liability of Consumer for Unauthorized Transfers

Section 205.6 specifies the rules governing consumer liability for

unauthorized use. The proposal significantly revises the section in an

effort to simplify the text and make it easier to understand.

The Board proposes moving explanatory or illustrative material to

the commentary. This includes the parenthetical in current

Sec. 205.6(a)(2), which provides examples of how a financial

institution may identify the consumer to whom an access device is

issued; Sec. 205.6(b)(3), which explains the relationship between the

various tiers of liability; and examples of extenuating circumstances

that would permit delayed notification by consumers in current

Sec. 205.6(b)(4). The provisions in current Sec. 205.6(d) concerning

the relation to the TILA now appear in proposed Sec. 205.12.

Paragraph (a)--Conditions for Liability

The current regulation appears to condition consumer liability

solely on the issuance of an accepted access device (Sec. 205.6(a)).

The commentary, on the other hand, states that if the consumer fails to

report an unauthorized EFT within 60 days of transmittal of the

periodic statement reflecting the transfer, the consumer could be

subject to liability for subsequent transfers (Q6-1). The Board

interprets section 909 of the EFTA as precluding consumer liability for

unauthorized transfers not involving an access device until 60 days

after transmittal of the periodic statement reflecting the transfer. At

that time, the consumer could be subject to unlimited liability for

those transfers occurring after the 60 days.

The proposal incorporates the current commentary position that a

consumer could be held liable for unauthorized EFTs that did not

involve an access device. The Board believes a consumer cannot,

however, be held liable for unauthorized transfers occurring before the

60-day period expires.

The proposed section slightly alters the current rule by requiring

that a financial institution provide all of the disclosures required by

Sec. 205.7 in order to impose liability on the consumer. Currently

Sec. 205.6(a)(3) requires that only three of the disclosures from

Sec. 205.7 be provided before a consumer can be held liable for

unauthorized transfers. The Board believes this proposed change would

not impose a significant additional burden as institutions must

initially provide all of the disclosures to comply with Sec. 205.7(b).

The Board solicits comment on whether this change increases the risk of

liability for institutions.

Paragraph (b)--Limitations on Amount of Liability

Proposed paragraph (b) incorporates the substance of current

paragraphs (b) (limitations on amount of liability) and (c) (notice to

financial institution). In addition, the proposal spells out more

clearly each of the three tiers of a consumer's liability ($50, $500,

or unlimited). Subheadings provide further clarification.

Section 205.7--Initial Disclosures

The proposal includes structural and editorial changes to this

section. To provide greater clarity, text has been organized into

separate paragraphs on timing and content of disclosures, and

subheadings have been added to make the section easier to understand.

Format requirements have been moved to proposed Sec. 205.4(a).

The provision in current Sec. 205.7(a)(1), giving financial

institutions the option of informing the consumer about the

advisability of promptly reporting lost or stolen access devices, has

been moved to the commentary.

The Board proposes to move the error resolution notice from current

Sec. 205.7(a)(10) to appendix A (Model Form A-3), to streamline the

regulation and place all model disclosures together.

The proposal deletes as obsolete current Sec. 205.7(b) regarding

disclosures for accounts that predate the statute.

Paragraph (a)(3)--Business Days

As described in the supplemental information to paragraph (d), the

Board proposes to change the definition of business day to mean a

calendar day other than a Saturday, Sunday, or any legal public holiday

specified in 5 U.S.C. 6103(a). Accordingly, initial disclosures would

have to include the revised definition of business day to assist

consumers in understanding the timing provisions of the liability and

error resolution rules under the regulation.

Section 205.8--Change in Terms Notice; Error Resolution Notice

The proposal makes two substantive changes in this section. In

addition, the Board proposes to restructure the requirements of

Sec. 205.8 and add subheadings to make it easier to understand.

Paragraph (a)(1)--Prior Notice Required

Section 905(b) of the EFTA requires a financial institution to

notify a consumer in writing at least twenty-one days before the

effective date of certain adverse changes in terms or conditions

contained in the initial disclosures. The Truth in Savings Act (TISA)

(12 U.S.C. 4301) also requires institutions to provide a change in

terms notice for deposit accounts. Section 266(c) of TISA requires a

notice 30 days before the effective date of any adverse change in terms

or conditions. In the proposed official staff interpretation of

Regulation DD, the Board stated that if a financial institution changes

a term that also triggers a change in terms notice under Regulation E,

the institution may use the timing rules of Regulation E for sending

the notice to affected consumers (see 59 FR 5543, February 7, 1994).

The Board proposes to use its exception authority under the EFTA to

extend the timing of the change-in-terms notice in Regulation E to 30

days to coincide with the timing requirements of Regulation DD in order

to facilitate compliance with the requirements of both regulations. The

Board solicits comment on whether it is preferable to retain the

flexibility offered by the two different timing requirements.

Paragraph (a)(2)--Prior Notice Exception

Currently, prior notice is not required when an immediate change in

terms is needed to maintain or restore the security of an EFT system or

account. If a change is made permanent, however, a financial

institution must notify the consumer ``on or with the next regularly

scheduled periodic statement or within 30 days'' of the change if

disclosure would not raise security concerns. In certain circumstances,

periodic statements are sent on a quarterly basis, and thus the

consumer might not receive notification for up to ninety days after the

change. The Board proposes to substitute a more specific timing rule

for this subsequent notice. Under the proposal, if the change is made

permanent, a financial institution must provide written notice within

45 days of the change unless disclosure raised security concerns. The

Board requests comment on the proposed timing requirement.

Paragraph (b)--Error Resolution Notice

The Board proposes to move the alternate error resolution notice,

which an institution may give with each periodic statement in place of

the longer annual notice, from current Sec. 205.8(b) to appendix A

(Model Form A-3). This will streamline the regulation and place all

model disclosures in one location.

Section 205.9--Receipts at Electronic Terminals; Periodic Statements

The proposed section contains a number of editorial revisions and

two substantive changes. New paragraphs and headings have been added to

better organize the text concerning the timing and contents of

disclosures. As noted earlier, disclosure format requirements have been

moved to Sec. 205.4. Current paragraph (e), concerning use of

abbreviations, was also moved to Sec. 205.4.

The Board proposes to move footnote 2, which permits a financial

institution to make receipts available through a third party, to the

commentary.

The proposal deletes two obsolete paragraphs, (f) and (g), which

dealt with receipts from terminals purchased prior to 1980 and delayed

effective dates for certain periodic statements.

Paragraph (a)(1)--Amount

The current regulation allows financial institutions other than the

account-holding institution to include a charge for the transfer in the

total amount of the transfer, provided the amount of the charge is

disclosed on the receipt and on a sign posted on or at the terminal.

The proposal makes two changes. First, it would permit all financial

institutions (including the account-holding institution) to include the

charge in the total amount of the transfer, if the appropriate

disclosures are made. Second, it would permit institutions to display

the fee on or at the terminal--meaning either on a sign or on the ATM

screen itself. The Board solicits comment on whether consumers would

need added protections if the fee is displayed on the screen, for

example, allowing the consumer to cancel the transaction after the fee

is disclosed.

Paragraph (a)(3)--Type

This paragraph corresponds to current paragraph (a)(3) regarding

disclosure of types of transfer and accounts. The examples included in

the current paragraph have been moved to the proposed commentary.

Currently the regulation requires that a financial institution

uniquely identify each account on the terminal receipt if more than one

account of the same type may be accessed by a single access device.

Footnote 3 provided an exception for instances in which the terminal is

incapable of uniquely identifying each account, as well as for

transactions at terminals purchased or ordered by the financial

institution prior to 1980. The portion of the footnote which permits

financial institutions to exclude identification of the type of account

if the access device may access only one account at a terminal has been

incorporated into the text of the proposed regulation at

Sec. 205.9(a)(3). The remainder of the footnote has been deleted as

obsolete.

Paragraph (a)(4)--Identification

Currently, the regulation requires that financial institutions

disclose on terminal receipts a number or code that uniquely identifies

the consumer initiating the transfer, the consumer's account(s), or the

access device used to initiate the transfer (Sec. 205.9(a)(4)). The

Board proposes to delete the reference to a number or code that

uniquely identifies the ``consumer initiating the transfer'' as

superfluous. The Board believes that the remaining identification

requirements sufficiently identify the consumer.

Paragraph (a)(5)--Terminal Location

This paragraph incorporates the substance of current

Sec. 205.9(b)(1)(iv). The detail contained in the current regulation

which specifies appropriate location descriptions has been moved to the

commentary.

The proposal deletes footnotes 5, 6, and 8 from the regulation.

Footnote 5 allows institutions to omit the name of the state on

terminal receipts for transfers occurring at terminals within 50 miles

of the institution's main office. Footnotes 6 and 8 refer back to the

text of footnote 5. The proposal incorporates this exception into the

regulatory text. Footnote 5 also allows institutions to omit the name

of the city and state if all of the terminals are located in the same

city, and to omit the name of the state if all of the terminals are

located in the same state. These exceptions have been deleted as

obsolete, since most institutions that offer ATM access belong to

networks operating on an interstate basis. Accordingly, few if any

financial institutions are able to take advantage of the exception

provided by the footnote. The Board solicits comment on whether these

latter exceptions are still used by institutions.

The rules regarding terminal identification on the receipt have

been slightly modified. Section 205.9(b)(1)(iv)(C) allows financial

institutions to identify the terminal location by using the name of the

entity at whose place of business the terminal is located, including

identifying the name of the financial institution. Footnote 7 requires,

however, that if the institution owns or operates terminals at more

than one location, the terminal location must be identified on the

periodic statement. Therefore, if an institution owns only one terminal

(and does not belong to a network) it could identify the terminal using

its own name. The proposal provides that the receipt and the periodic

statement may provide the terminal location by giving the name of the

institution if it is other than the account-holding institution. In the

previous example, the institution would have to provide either a street

address or a generally accepted name for the location. The Board

believes this change makes the provision available to more

institutions, since very few institutions own and operate only one

terminal and do not belong to a network. The Board solicits comment on

whether this imposes a burden on small institutions, and also on

whether the change adversely reduces consumer information.

Paragraph (a)(6)--Third Party Transfer

Proposed paragraph (a)(6) incorporates the substance of current

paragraph (a)(6). The excluded language, describing the use of codes or

circumstances when the name of the payee cannot be duplicated by the

terminal, has been incorporated into the proposed commentary.

Paragraph (b)--Periodic Statements

Paragraph (b)(1)--Transaction Information

The regulation requires financial institutions to disclose on the

periodic statement either the location of the terminal as it appeared

on the receipt or, if a code or terminal number was used to identify

the location, both the code and a description of the location as

specified in the regulation (Sec. 205.9(b)(1)(iv)). The proposed

regulation simplifies the rule by not requiring a restatement of the

code in addition to the location description (see the discussion in

paragraph (a)(5) above). Proposed paragraph (b)(1)(iv) also

incorporates the substance of footnote 4a, which provides that a

financial institution need not identify the terminal location for

transactions that involve the deposit of cash, checks, drafts, or

similar paper instruments at electronic terminals.

Footnote 4 currently permits financial institutions to provide

certain information on documents that accompany the periodic statement;

and it permits the use of codes, if explained on either the statement

or the accompanying documents. The footnote has been deleted and the

substance moved to the proposed commentary. Footnote 9 allows an

institution to omit the identification of third parties from periodic

statements if their names appear on checks, drafts, or similar paper

instruments deposited to the consumer's account at an electronic

terminal. The footnote has been deleted and the substance moved to the

proposed commentary.

Paragraph (b)(3)--Fees

Currently, Sec. 205.9(b)(3) makes clear that a periodic statement

required by Regulation E need not disclose any finance charge imposed

under 12 CFR 226.7(f). The proposal eliminates the reference from the

regulation, and moves the substance to the commentary.

Regulation DD requires institutions that provide periodic

statements to itemize by type and amount certain fees imposed during

the statement period (Sec. 230.6(a)(3)). Currently, Sec. 205.9(b)(3) of

Regulation E requires the disclosure of any fee that was assessed

against the account during the period for EFTs. The commentary to

Regulation E (Q9-31) allows fees to be shown as a total dollar figure

or to be itemized in part or in full, at the institution's option.

Under Regulation DD, the Board has provided that institutions may

follow the more flexible rules in Regulation E for fees associated with

EFTs even though Regulation DD otherwise requires a more specific

disclosure. The Board solicits comment on whether regulatory burden

would be eased if the disclosure requirement in Regulation E mirrored

the requirement in Regulation DD (see 12 CFR 230.6(a)(3)).

Paragraph (c)--Exceptions to the Periodic Statement Requirements for

Certain Accounts

The proposal incorporates current paragraphs (c), (d), (h), and

footnote 9a in revised Sec. 205.9(c), pertaining to those circumstances

in which a periodic statement is not required (for example, for a

passbook account that can be accessed electronically only by

preauthorized transfers to the account). No substantive change is

intended.

Paragraph (d)--Documentation for Foreign-Initiated Transfers

Proposed paragraph (d) incorporates the essence of current

paragraph (i) without substantive change.

Section 205.10--Preauthorized Transfers

The Board has reformatted this section and has added subheadings.

The proposed section contains a substantive change from the current

regulation and a new paragraph on compulsory use.

Paragraph (a)--Preauthorized Transfers to Consumer's Account

Section 205.10 sets forth general requirements for preauthorized

transfers. The regulation currently requires that when a consumer's

account will be credited by a preauthorized transfer from the same

payor at least once every 60 days, the institution must credit the

funds to the account as of the day the funds are received; this

requirement would be deleted from the regulation as obsolete. The Board

believes that mandating when funds must be credited to an account is no

longer necessary since other regulations address both when funds must

be made available to the consumer and when interest must be paid on the

deposit (see Regulation CC, 12 CFR part 229; Treasury regulations, 31

CFR part 210; and ACH association rules). The Board solicits comment on

whether there is a need to maintain the requirement in the regulation.

Paragraph (b)--Written Authorization for Preauthorized Transfers From

Consumer's Account

The requirement that preauthorized EFTs from a consumer's account

be authorized by the consumer only in writing has been revised. The

requirement for the consumer's authorization to be a writing has been

expanded to include authorizations which are ``similarly

authenticated'' by the consumer. This proposed expansion addresses

developments in electronic services, such as home banking. The broader

interpretation of a ``writing'' would include, for example, electronic

authorization by the consumer recorded on a computer memory unit. The

Board believes this broader interpretation is consistent with the

requirement in section 907 of the EFTA that the authorization be in

writing. The Board solicits comment on whether additional safeguards

are necessary to protect consumers in this situation. In addition, the

Board solicits comment on other examples that might constitute

``similarly authenticated'' for purposes of this section. The Board

notes that the revised requirement for a signed writing makes clear

that only the consumer could produce the written authorization and not,

for example, a third-party merchant on behalf of the consumer.

Paragraph (e)--Compulsory Use

Section 913 of the statute places certain restrictions on

compulsory use of EFTs as a condition of credit, employment, or receipt

of government benefits. The current regulation mentions the prohibition

against compulsory use in footnote 1a, which references a financial

institution's continuing duty to comply with section 913. The proposed

paragraph is a counterpart to the statutory provision and would clarify

that the provision applies to other persons (such as employers) and not

just to financial institutions.

Section 205.11--Procedures for Resolving Errors

The Board proposes to reformat this section and add subheadings to

facilitate compliance. The editorial revisions, with one exception, are

not intended to make substantive changes.

Provisions contained in three footnotes have been moved to the

proposed commentary: Footnote 10, which permits an institution to

prescribe procedures for giving an error notice; footnote 11, which

defines an agreement for purposes of Sec. 205.14; and footnote 12,

which allows institutions to use a periodic statement to inform

consumers that no error has occurred.

The provisions in current paragraph (i) relating to the TILA have

been moved to proposed Sec. 205.12.

Paragraph (c)--Time Limits and Extent of Investigation

Proposed paragraph (c) combines current paragraphs (c) and (d)(2)

of Sec. 205.11 concerning investigation of errors. The regulation

currently requires a financial institution to provide the consumer with

a written explanation, within the prescribed time period (either 10

business days or 45 calendar days), if an error occurred. If an error

did not occur and the financial institution is operating under the 45-

calendar-day rule, the institution has three additional days to notify

the consumer of its findings. Section 908 of the EFTA makes clear the

extra time is available when no error occurred, but is silent on the

availability of extra time when an error is found (see the discussion

in paragraph (e) below).

To facilitate compliance, the Board proposes to use its exception

authority under section 904(c) to permit institutions to give notice

within three business days of concluding its investigation regardless

of the procedure being followed and whether or not an error has been

found. The statutory language contained in section 908(d) lends itself

to such an interpretation, and the Board believes the change will

facilitate compliance with the section without any significant loss of

consumer protection.

Paragraph (d)--Procedures if Financial Institution Determines No Error

or Different Error Occurred

As discussed in the preceding paragraph, the Board proposes to

allow institutions to provide notice within three business days of

concluding an investigation, regardless of which time period is being

followed.

Section 205.12--Relation to Other Laws

The proposed section contains the various references to the TILA

and Regulation Z currently dispersed throughout Regulation E. The

section also includes the standards applied by the Board in granting a

state law preemption or in making an exemption determination.

Paragraph (a)--Relation to Truth in Lending

The Board proposes to consolidate all references from Secs. 205.5,

205.6, and 205.11 to compliance with both the TILA and the EFTA in a

single paragraph. The Board believes consolidating these references in

one section will facilitate compliance.

Paragraph (b)--Preemption of Inconsistent State Laws

Current Sec. 205.12(a) and (b) are incorporated in proposed

paragraph (b), with numerous editorial revisions.

Paragraph (c)--State Exemptions

Proposed paragraph (c) contains the rules the Board applies in

granting a state exemption.

Section 205.13--Administrative Enforcement; Record Retention

Current Sec. 205.13 contains information about administrative

enforcement, issuance of staff interpretations, and record retention.

With the exception of the record retention requirements, the proposal

moves much of this information to the appendices.

Paragraph (b)--Record Retention

Certain provisions of the act and regulation apply to persons other

than financial institutions (for example, the compulsory use provisions

of section 913, which apply to all employers). The proposal differs

from the current rule by limiting the record retention requirements to

financial institutions, rather than covering ``any person subject to

the act and regulation.'' The Board solicits comment on whether this

proposed change will produce an adverse impact on enforcement

activities.

Section 205.14--Electronic Fund Transfer Service Provider Not Holding

Consumer's Account

The Board proposes substantial editorial revisions to this section

to simplify the text. Text has been reorganized into appropriate

categories and subheadings added for greater clarity. Footnote 13

regarding delayed effective dates has been deleted as obsolete. The

Board solicits comment on other ways the section could be simplified to

facilitate compliance with the regulation.

Section 205.15--Electronic Fund Transfer of Government Benefits

The Board has issued a final rule in regard to the coverage by the

EFTA and Regulation E of government benefits that federal, state, and

local governments disburse to recipients by means of electronic benefit

transfer (EBT) programs. (See Docket No. R-0829 elsewhere in today's

Federal Register.) Having just issued that final rule, the Board is not

incorporating the provisions governing EBT programs, contained in a new

Sec. 205.15, in this proposal.

Appendix A--Model Disclosure Clauses and Forms

Most of the model disclosure clauses contained in appendix A remain

unchanged. As noted earlier, the error resolution notices currently

contained in Secs. 205.7 and 205.8 have been moved from the regulation

into appendix A to streamline the regulation (see Model Form A-3).

Appendix B--Administrative Enforcement

Appendix B lists the federal enforcement agencies responsible for

enforcing Regulation E for particular classes of institutions.

Appendix C--Issuance of Staff Interpretations

The proposal includes a new appendix to replace current

Sec. 205.13(b) pertaining to requests for and issuance of staff

interpretations of Regulation E. Much of the information contained in

the current regulation, describing issuance of staff interpretations,

has been deleted. The Board will continue to rely on the publication of

interpretations in the official staff commentary as the primary means

of interpreting the regulation. Specifically, and in keeping with the

practice that has been in place for years, the proposal deletes any

reference to unofficial staff interpretations that are in writing,

limiting written interpretations to those that appear in the staff

commentary, as revised. The Board believes this to be the most

efficient and useful way to facilitate compliance.

(3) Form of Comment Letters

Comment letters should refer to Docket No. R-0830. The Board

requests that, when possible, comments be prepared using a standard

typeface with a type size of 10 or 12 characters per inch. This will

enable the Board to convert the text into machine-readable form through

electronic scanning, and will facilitate automated retrieval of

comments for review. Comments may also be submitted on computer

diskettes, using either the 3.5'' or 5.25'' size, in any DOS-compatible

format. Comments on computer diskettes must be accompanied by a hard

copy version.

(4) Economic Impact Statement

The Board's Division of Research and Statistics has prepared an

economic impact statement on the proposed regulation. A copy of the

analysis may be obtained from Publications Services, Board of Governors

of the Federal Reserve System, Washington, DC 20551, or by telephone at

(202) 452-3245.

List of Subjects in 12 CFR Part 205

Banks, banking, Consumer protection, Electronic fund transfers,

Reporting and recordkeeping requirements.

Text of Proposed Revisions

For the reasons set forth in the preamble, the Board proposes to

amend 12 CFR part 205 as follows:

PART 205--ELECTRONIC FUND TRANSFERS (REGULATION E)

1. The authority citation for part 205 would be revised to read as

follows:

Authority: 15 U.S.C. 1693.

2. Sections 205.1 through 205.14 are revised to read as follows:

Sec. 205.1 Authority and purpose.

(a) Authority. This part is issued by the Board of Governors of the

Federal Reserve System pursuant to the Electronic Fund Transfer Act (15

U.S.C. 1693 et seq.). The information-collection requirements have been

approved by the Office of Management and Budget under 44 U.S.C. 3501 et

seq. and have been assigned OMB No. 7100-0200.

(b) Purpose. This part carries out the purposes of the Electronic

Fund Transfer Act, which establishes the basic rights, liabilities, and

responsibilities of consumers who use electronic fund transfer services

and of financial institutions that offer these services. The primary

objective of the act and this regulation is the protection of

individual consumers engaging in electronic fund transfers.

Sec. 205.2 Definitions.

For purposes of this part, the following definitions apply:

(a)(1) Access device means a card, code, or other means of access

to a consumer's account, or any combination thereof, that may be used

by the consumer to initiate electronic fund transfers.

(2) An access device becomes an accepted access device when the

consumer:

(i) Requests and receives, or signs, or uses (or authorizes another

to use) the access device to transfer money between accounts or to

obtain money, property, or services;

(ii) Requests validation of an access device issued on an

unsolicited basis; or

(iii) Receives an access device in renewal of, or in substitution

for, an accepted access device from either the financial institution

that initially issued the device or a successor.

(b)(1) 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.

(2) The term does not include an account held by a financial

institution under a bona fide trust agreement.

(c) Act means the Electronic Fund Transfer Act (title IX of the

Consumer Credit Protection Act, 15 U.S.C. 1693 et seq.).

(d) Business day means any day other than a Saturday, a Sunday, or

any of the legal public holidays specified in 5 U.S.C. 6103(a).

(e) Consumer means a natural person.

(f) Electronic terminal means an electronic device, other than a

telephone operated by a consumer, through which a consumer may initiate

an electronic fund transfer. The term includes, but is not limited to,

point-of-sale terminals, automated teller machines, and cash dispensing

machines.

(g) Financial institution means 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 electronic fund transfer services.

(h) Person means a natural person or an organization, including a

corporation, government agency, estate, trust, partnership,

proprietorship, cooperative, or association.

(i) Preauthorized electronic fund transfer means an electronic fund

transfer authorized in advance to recur at substantially regular

intervals.

(j) State means any state, territory, or possession of the United

States, the District of Columbia, the Commonwealth of Puerto Rico, or

any political subdivision of the above.

(k) Unauthorized electronic fund transfer means an electronic fund

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. The term does not include an

electronic fund transfer initiated:

(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;

(2) With fraudulent intent by the consumer or any person acting in

concert with the consumer; or

(3) By the financial institution or its employees.

Sec. 205.3 Coverage.

(a) General. This part applies to any electronic fund transfer that

authorizes a financial institution to debit or credit a consumer's

account. Generally, the part applies to financial institutions. For

purposes of Secs. 205.10(b), (d), (e) and 205.13 of this part, the part

applies to any person.

(b) Electronic fund transfer. The term electronic fund transfer

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 an account. The term includes, but is not limited to:

(1) Point-of-sale transfers;

(2) Automated teller machine transfers;

(3) Direct deposits or withdrawals of funds;

(4) Transfers initiated by telephone; and

(5) Transfers resulting from debit card transactions, whether or

not initiated through an electronic terminal.

(c) Exclusions from coverage. The term electronic fund transfer

does not include:

(1) Checks. Any transfer of funds originated by check, draft, or

similar paper instrument; or any payment made by check, draft, or

similar paper instrument at an electronic terminal.

(2) Check guarantee or authorization services. Any transfer of

funds that guarantees payment or authorizes acceptance of a check,

draft, or similar paper instrument which does not directly result in a

debit or credit to a consumer's account.

(3) Wire transfers. Any transfer of funds through Fedwire or

through a similar wire transfer system that is used primarily for

transfers between financial institutions or between businesses.

(4) Securities and commodities transfers. Any transfer of funds the

primary purpose of which is the purchase or sale of a security or

commodity, if the security or commodity is:

(i) Regulated by the Securities and Exchange Commission or the

Commodity Futures Trading Commission;

(ii) Purchased or sold through a broker-dealer regulated by the

Securities and Exchange Commission or through a futures commission

merchant regulated by the Commodity Futures Trading Commission; or

(iii) Held in book-entry form by a Federal Reserve Bank or federal

agency.

(5) Automatic transfers by account-holding institution. Any

transfer of funds under an agreement between a consumer and a financial

institution which provides that the institution will initiate

individual transfers without a specific request from the consumer:

(i) Between a consumer's accounts within the financial institution;

(ii) From a consumer's account to an account of a member of the

consumer's family held in the same financial institution; or

(iii) Between a consumer's account and an account of the financial

institution, except that these transfers remain subject to

Sec. 205.10(e) of this part regarding compulsory use and sections 915

and 916 of the act regarding civil and criminal liability.

(6) Telephone-initiated transfers. Any transfer of funds that:

(i) Is initiated by a telephone conversation between a consumer and

an officer or employee of a financial institution; and

(ii) Does not take place under a telephone bill-payment plan or

other written agreement in which periodic or recurring transfers are

contemplated.

(7) Small institutions. Any preauthorized transfer to or from an

account if the assets of the account-holding financial institution are

$100 million or less on the preceding December 31. If assets of the

account-holding institution subsequently exceed $100 million, the

institution's exemption for preauthorized transfers terminates one year

from the end of the calendar year in which the assets exceed $100

million. Preauthorized transfers exempt under this paragraph remain

subject to Sec. 205.10(e) of this part regarding compulsory use and

sections 915 and 916 of the act regarding civil and criminal liability.

Sec. 205.4 General disclosure requirements; jointly offered services.

(a) Form of disclosures. Disclosures required under this part shall

be clear and readily understandable, in writing, and in a form the

consumer may keep. A financial institution may use commonly accepted or

readily understandable abbreviations in complying with the disclosure

requirements of the part.

(b) Additional information; disclosures required by other laws.

Information or disclosures required by other laws (such as the Truth in

Lending Act or the Truth in Savings Act) may be combined with the

disclosures required by this part.

(c) Multiple accounts and account holders--(1) Multiple accounts.

If a consumer holds more than one account at a financial institution,

the institution may combine the required disclosures into a single

statement.

(2) Multiple account holders. For joint accounts held by two or

more consumers, the financial institution need provide only one set of

the required disclosures and it may provide them to any of the account

holders.

(d) Services offered jointly. Financial institutions that provide

electronic fund transfer services jointly may contract among themselves

to comply with the requirements that this regulation imposes on any or

all of them. An institution that provides electronic fund transfer

services under an agreement with other institutions need make only

those disclosures required by Secs. 205.7 and 205.8 of this part that

are within the purview of its relationship with the consumer for whom

it holds an account.

Sec. 205.5 Issuance of access devices.

(a) Solicited issuance. A financial institution may issue an access

device to a consumer only:

(1) In response to an oral or written request for the device; or

(2) As a renewal of, or in substitution for, an accepted access

device whether issued by the institution or a successor.

(b) Unsolicited issuance. A financial institution may distribute an

access device to a consumer on an unsolicited basis if the access

device is:

(1) Not validated, which means the institution has not yet

performed all the procedures that would enable a consumer to initiate

an electronic fund transfer using the access device;

(2) Accompanied by a clear explanation that the access device is

not validated and how the consumer may dispose of it if validation is

not desired;

(3) Accompanied by a complete disclosure, in accordance with

Sec. 205.7 of this part, of the consumer's rights and liabilities that

will apply if the access device is validated; and

(4) Validated only in response to the consumer's oral or written

request for validation, after the institution verifies the consumer's

identity by a reasonable means (such as by photograph, fingerprint,

personal visit, or signature comparison).

Sec. 205.6 Liability of consumer for unauthorized transfers.

(a) Conditions for liability. A consumer may be held liable, within

the limitations described in paragraph (b) of this section, for an

unauthorized electronic fund transfer involving the consumer's account

only if the financial institution has provided the disclosures required

by Sec. 205.7(b) of this part. If the unauthorized transfer involved an

access device, it must be an accepted access device and the financial

institution must have provided a means to identify the consumer to whom

it was issued.

(b) Limitations on amount of liability. The extent of a consumer's

liability for an unauthorized electronic fund transfer or a series of

related unauthorized transfers shall be determined as follows:

(1) Timely notice given. If the consumer notifies the financial

institution within two business days after learning of the loss or

theft of the access device, the consumer's liability shall not exceed

the lesser of $50 or the amount of unauthorized transfers that occur

before notice to the financial institution.

(2) Timely notice not given. If the consumer fails to notify the

financial institution within two business days after learning of the

loss or theft of the access device, the consumer's liability shall not

exceed the lesser of $500 or the sum of:

(i) $50 or the amount of unauthorized transfers that occur within

the two business days, whichever is less; and

(ii) The amount of unauthorized transfers that occur after the

close of two business days and before notice to the institution and

that the institution establishes would not have occurred had the

consumer notified the institution within that time.

(3) Periodic statement; timely notice not given. If the consumer

fails to report an unauthorized electronic fund transfer that appears

on a periodic statement within 60 days of the financial institution's

transmittal of the statement, the consumer's liability shall not exceed

the amount of the unauthorized transfers that occur after the close of

the 60 days and before notice to the institution and that the

institution establishes would not have occurred had the consumer

notified the institution within that time. If an access device is

involved, the consumer's liability may also extend to the amounts set

forth in paragraphs (b)(1) or (b)(2) of this section, as applicable.

(4) Extension of time limits. If the consumer's delay in notifying

the financial institution was due to extenuating circumstances, the

institution shall extend the times specified above to a reasonable

period.

(5) Notice to financial institution--(i) Notice to a financial

institution is given when a consumer takes steps reasonably necessary

to provide the institution with the pertinent information, whether or

not an employee or agent of the institution actually receives the

information.

(ii) The consumer may notify the institution in person, by

telephone, or in writing.

(iii) Written notice is considered given at the time the consumer

mails the notice or delivers it for transmission by any other usual

means to the institution. Notice may be considered constructively given

when the institution becomes aware of circumstances leading to the

reasonable belief that an unauthorized transfer involving the

consumer's account has been or may be made.

(6) Liability under state law or agreement. If state law or an

agreement between the consumer and the financial institution imposes

less liability than is provided by this section, the consumer's

liability shall not exceed the amount imposed under the state law or

the agreement.

Sec. 205.7 Initial disclosures.

(a) Timing of disclosures. A financial institution shall make the

disclosures required by this section at the time a consumer contracts

for an electronic fund transfer service or before the first electronic

fund transfer is made involving the consumer's account.

(b) Content of disclosures. The following disclosures shall be

provided, as applicable:

(1) Liability of consumer. A summary of the consumer's liability,

under Sec. 205.6 of this part or under state or other applicable law or

agreement, for unauthorized electronic fund transfers.

(2) Telephone number and address. The telephone number and address

of the person or office to be notified when the consumer believes that

an unauthorized electronic fund transfer has been or may be made.

(3) Business days. The financial institution's business days.

(4) Types of transfers; limitations. The type of electronic fund

transfers that the consumer may make and any limitations on the

frequency and dollar amount of transfers. The details of the

limitations need not be disclosed if confidentiality is essential to

maintain the security of the electronic fund transfer system.

(5) Fees. Any fees imposed by the financial institution for

electronic fund transfers or for the right to make transfers.

(6) Documentation. A summary of the consumer's right to receive

documentation of electronic fund transfers, as provided in Secs. 205.9,

205.10(a), and 205.10(d) of this part.

(7) Stop payment. A summary of the consumer's right to stop payment

of a preauthorized electronic fund transfer and the procedure for

placing a stop-payment order, as provided in Sec. 205.10(c) of this

part.

(8) Liability of institution. A summary of the financial

institution's liability to the consumer under section 910 of the act

for failure to make or to stop certain transfers.

(9) Confidentiality. The circumstances under which, in the ordinary

course of business, the financial institution may provide information

concerning the consumer's account to third parties.

(10) Error resolution. A notice that is substantially similar to

the notice concerning error resolution contained in appendix A of this

part.

Sec. 205.8 Change in terms notice; error resolution notice.

(a) Change in terms notice--(1) Prior notice required. A financial

institution shall mail or deliver a written notice to the consumer at

least 30 days before the effective date of any change in a term or

condition required to be disclosed under Sec. 205.7(b) of this part if

the change would result in:

(i) Increased fees;

(ii) Increased liability for the consumer;

(iii) Fewer types of available electronic fund transfers; or

(iv) Stricter limitations on the frequency or dollar amount of

transfers.

(2) Prior notice exception. A financial institution need not give

prior notice if an immediate change in terms or conditions is necessary

to maintain or restore the security of an electronic fund transfer

system or an account. If such a change is made permanent and disclosure

would not jeopardize the security of the system or account, the

financial institution shall notify the consumer in writing within 45

days of the change.

(b) Error resolution notice. For accounts to or from which

electronic fund transfers can be made, a financial institution shall

mail or deliver to the consumer, at least once each calendar year, the

error resolution notice set forth in appendix A of this part.

Alternatively, an institution may include an abbreviated notice

substantially similar to the error resolution notice set forth in

appendix A on or with each periodic statement required by Sec. 205.9(b)

of this part.

Sec. 205.9 Receipts at electronic terminals; periodic statements.

(a) Receipts at electronic terminals. A financial institution shall

make a receipt available to a consumer at the time the consumer

initiates an electronic fund transfer at an electronic terminal. The

receipt shall set forth the following information, as applicable:

(1) Amount. The amount of the transfer. A transaction fee may be

included in this amount, provided the amount of the fee is disclosed on

the receipt and displayed on or at the terminal.

(2) Date. The date the consumer initiates the transfer.

(3) Type. The type of transfer and the type of the consumer's

account or accounts to or from which funds are transferred. The type of

account may be omitted if the access device used may access only one

account at that terminal.

(4) Identification. A number or code that uniquely identifies the

consumer's account or the access device used to initiate the transfer.

(5) Terminal location. The location or an identification of the

terminal where the transfer is initiated (such as a code or terminal

number). The location shall include the city and state (the state may

be omitted for terminals that are within 50 miles of the account-

holding institution's main office) or foreign country and one of the

following:

(i) The street address;

(ii) A generally accepted name for the specific location; or

(iii) The name of the owner or operator of the terminal if other

than the account-holding institution.

(6) Third party transfer. The name of any third party to or from

whom funds are transferred.

(b) Periodic statements. For accounts to or from which electronic

fund transfers can be made, a financial institution shall send a

periodic statement for each monthly cycle in which an electronic fund

transfer has occurred; and shall send a periodic statement at least

quarterly if no transfer has occurred. The statement shall set forth

the following information, as applicable:

(1) Transaction information. For each electronic fund transfer

occurring during the cycle:

(i) The amount of the transfer;

(ii) The date the transfer was credited or debited to the

consumer's account;

(iii) The type of transfer and type of account or accounts to or

from which funds were transferred;

(iv) For a transfer initiated by the consumer at an electronic

terminal (except for a deposit of cash or a check, draft, or similar

paper instrument), the terminal location in a form set forth in

paragraph (a)(5) of this section; and

(v) The name of any third party to or from whom funds were

transferred.

(2) Account number. The number of the account to which the

statement pertains.

(3) Fees. The amount of any fees assessed against the account

during the statement period for electronic fund transfers, for the

right to make transfers, or for account maintenance.

(4) Account balances. The balance in the account at the beginning

and at the close of the statement period.

(5) Address and telephone number for inquiries. The address and

telephone number to be used for inquiries or notice of errors, preceded

by ``Direct inquiries to'' or similar language. The address and

telephone number provided on an error resolution notice given on or

with the statement satisfies this requirement.

(6) Telephone number for preauthorized transfers. A telephone

number the consumer may call to ascertain whether preauthorized

transfers to the consumer's account have occurred, if the financial

institution uses the telephone-notice option under

Sec. 205.10(a)(1)(iii) of this part.

(c) Exceptions to the periodic statement requirements for certain

accounts--(1) Preauthorized transfers to accounts. A financial

institution need not send a monthly periodic statement for accounts

that may only be accessed by preauthorized transfers to the account if:

(i) Passbook accounts. The financial institution updates the

passbook upon presentation or enters on a separate document the amount

and date of each electronic fund transfer since the passbook was last

presented.

(ii) Other accounts. For accounts other than passbook accounts, the

institution sends the periodic statement quarterly.

(2) Intra-institutional transfers. If an electronic fund transfer

is initiated by the consumer between two accounts of the consumer in

the same institution, documenting the transfer on a periodic statement

for one of the two accounts satisfies the statement requirement.

(3) Relationship between paragraphs (c)(1) and (c)(2) of this

section. An account that is accessed by preauthorized transfers to the

account and by intra-institutional transfers described in paragraph

(c)(2), but by no other type of electronic fund transfers, qualifies

for the exceptions provided by paragraph (c)(1).

(d) Documentation for foreign-initiated transfers. The failure by a

financial institution to provide a terminal receipt for an electronic

fund transfer or to document the transfer on a periodic statement does

not violate this regulation if:

(1) The transfer is not initiated within a state; and

(2) The financial institution treats an inquiry for clarification

or documentation as a notice of error in accordance with Sec. 205.11 of

this part.

Sec. 205.10 Preauthorized transfers.

(a) Preauthorized transfers to consumer's account--(1) Notice by

financial institution. When a person initiates preauthorized electronic

fund transfers to a consumer's account at least once every 60 days, the

account-holding institution shall provide notice to the consumer by:

(i) Positive notice. Providing oral or written notice of the

transfer within two business days after it occurs;

(ii) Negative notice. Providing oral or written notice, within two

business days after the date on which the transfer was scheduled to

occur, that the transfer did not occur; or

(iii) Telephone. Providing a readily available telephone line that

the consumer may call to determine whether the transfer occurred and

disclosing the telephone number on the initial disclosure of account

terms and on each periodic statement.

(2) Notice by payor. A financial institution need not provide

notice if the payor gives the consumer positive notice that the

transfer has been initiated.

(b) Written authorization for preauthorized transfers from

consumer's account. Preauthorized electronic fund transfers from a

consumer's account may be authorized only by a writing signed or

similarly authenticated by the consumer. The person that obtains the

authorization shall provide a copy to the consumer.

(c) Consumer's right to stop payment--(1) Notice. A consumer may

stop payment of a preauthorized electronic fund transfer from the

consumer's account by notifying the financial institution orally or in

writing at least three business days before the scheduled date of the

transfer.

(2) Written confirmation. The financial institution may require the

consumer to give written confirmation of a stop-payment order within 14

days of an oral notification. An institution that requires written

confirmation shall inform the consumer of the requirement and provide

the address where confirmation must be sent when the consumer gives the

oral notification. An oral stop-payment order ceases to be binding

after 14 days if the consumer fails to provide the required written

confirmation.

(d) Notice of transfers varying in amount--(1) Notice. When a

preauthorized electronic fund transfer from the consumer's account will

vary in amount from the previous transfer under the same authorization

or from the preauthorized amount, the designated payee or the financial

institution shall send written notice of the amount and date of the

transfer to the consumer at least 10 days before the scheduled date of

transfer.

(2) Range. The designated payee or the institution shall inform the

consumer of the right to receive notice of all varying transfers, but

may give the consumer the option of receiving notice only when a

transfer falls outside a specified range of amounts or only when a

transfer differs from the most recent transfer by more than an agreed-

upon amount.

(e) Compulsory use--(1) Credit. No financial institution or other

person may condition the extension of credit to a consumer on the

consumer's repayment by preauthorized electronic fund transfers, except

for credit that is extended under an overdraft credit plan or that is

extended to maintain a specified minimum balance in the consumer's

account.

(2) Employment or government benefit. No financial institution or

other person may require a consumer to establish an account for receipt

of electronic fund transfers with a particular institution as a

condition of employment or receipt of a government benefit.

Sec. 205.11 Procedures for resolving errors.

(a) Definition of error--(1) Types included. The term ``error''

means:

(i) An unauthorized electronic fund transfer;

(ii) An incorrect electronic fund transfer to or from the

consumer's account;

(iii) The omission of an electronic fund transfer from a periodic

statement;

(iv) A computational or bookkeeping error made by the financial

institution relating to an electronic fund transfer;

(v) The consumer's receipt of an incorrect amount of money from an

electronic terminal;

(vi) An electronic fund transfer not identified in accordance with

Sec. 205.9 or Sec. 205.10(a) of this part; or

(vii) The consumer's request for documentation required by

Sec. 205.9 or Sec. 205.10(a) of this part or for additional information

or clarification concerning an electronic fund transfer, including a

request the consumer makes to determine whether an error exists under

paragraphs (a)(1) (i) through (vi) of this section.

(2) Exclusions. The term ``error'' does not include:

(i) A routine inquiry about the consumer's account balance;

(ii) A request for information for tax or other recordkeeping

purposes; or

(iii) A request for duplicate copies of documentation.

(b) Notice of error from consumer--(1) Timing; contents. A

financial institution shall comply with the requirements of this

section with respect to any oral or written notice of error from the

consumer that:

(i) Is received by the institution no later than 60 days after the

institution sends the periodic statement or provides the passbook

documentation on which the alleged error is first reflected;

(ii) Enables the institution to identify the consumer's name and

account number; and

(iii) Indicates why the consumer believes an error exists and

includes to the extent possible the type, date, and amount of the

error, except for requests described in paragraph(a)(1)(vii) of this

section.

(2) Written confirmation. A financial institution may require the

consumer to give written confirmation of an error within 10 business

days of an oral notice. An institution that requires written

confirmation shall inform the consumer of the requirement and provide

the address where confirmation must be sent when the consumer gives the

oral notification.

(3) Request for documentation or clarifications. When a notice of

error is based on documentation or clarification that was requested

under paragraph (a)(1)(vii) of this section, the notice is timely if

received by the financial institution within 60 days of transmitting

the requested information.

(c) Time limits and extent of investigation--(1) Ten-day period. A

financial institution shall promptly investigate and determine whether

an error occurred within 10 business days of receiving a notice of

error. The institution shall report the results to the consumer within

three business days after completing its investigation. The institution

shall correct the error within one business day after determining that

an error occurred.

(2) Forty-five day period. If the financial institution is unable

to complete its investigation within 10 business days, the institution

may take up to 45 days after receiving a notice of error, provided the

institution:

(i) Provisionally credits the consumer's account in the amount of

the alleged error (including interest where applicable) within 10

business days after receiving the error notice. If the financial

institution has a reasonable basis for believing that an unauthorized

electronic fund transfer has occurred and it has satisfied the

requirements of Sec. 205.6(a) of this part, the institution may

withhold a maximum of $50 from the amount credited. An institution need

not provisionally credit the consumer's account if:

(A) It requires but does not receive written confirmation within 10

business days of an oral notice of error; or

(B) The alleged error involves an account that is subject to

Regulation T (credit by brokers and dealers, 12 CFR part 220);

(ii) Informs the consumer, within two business days after the

provisional crediting, of the amount and date of crediting and gives

the consumer full use of the funds during the investigation;

(iii) Corrects the error, if any, within one business day after

determining that an error occurred; and

(iv) Reports the results to the consumer within three business days

of completing its investigation (including, if applicable, notice that

a provisional credit has been made final).

(3) Extension of time periods. The applicable time periods in this

subsection shall be 20 business days in place of 10 business days, and

90 days in place of 45 days, if a notice of error involves an

electronic fund transfer that:

(i) Was not initiated within a state; or

(ii) Resulted from a point-of-sale debit card transaction.

(4) Investigation. With the exception of transfers covered by

Sec. 205.14 of this part, a financial institution's review of its own

records regarding an alleged error satisfies the requirements of this

section if:

(i) The alleged error concerns a transfer to or from a third party;

and

(ii) There is no agreement between the institution and the third

party for the type of electronic fund transfer involved.

(d) Procedures if financial institution determines no error or

different error occurred. In addition to the procedures specified in

paragraph (c) of this section, the financial institution shall follow

the procedures set forth in this paragraph if it determines that no

error occurred or that an error occurred in a different manner or

amount from that described by the consumer:

(1) Written explanation. The institution's report of the results of

the investigation shall include a written explanation of the

institution's findings and shall note the consumer's right to request

the documents that the institution relied on in making its

determination. The institution shall, upon request, promptly provide

copies of the documents.

(2) Debiting provisional credit. Upon debiting a provisionally

credited amount, the financial institution shall:

(i) Notify the consumer of the date and amount of the debiting;

(ii) Notify the consumer that the institution will honor checks,

drafts, or similar instruments payable to third parties and

preauthorized transfers from the consumer's account (without charge to

the consumer as a result of an overdraft) for five business days after

the notice; and honor items as specified in the notice. The institution

need only honor items that it would have paid if the provisionally

credited funds had not been debited.

(e) Reassertion of error. A financial institution that has fully

complied with the error resolution requirements has no further

responsibilities under this section should the consumer later reassert

the same error, except that the institution shall investigate an error

asserted by the consumer following receipt of information requested

under paragraph (a)(1)(vii) of this section.

Sec. 205.12 Relation to other laws.

(a) Relation to Truth in Lending. (1) The Electronic Fund Transfer

Act and this part govern:

(i) The addition to an accepted credit card, as defined under

Regulation Z (12 CFR 226.12(a)(2), footnote 21), of the capability to

initiate electronic fund transfers;

(ii) The issuance of an access device that permits credit

extensions only under a preexisting agreement between a consumer and a

financial institution to extend credit when the consumer's account is

overdrawn or to maintain a specified minimum balance in the consumer's

account; and

(iii) A consumer's liability for an unauthorized electronic fund

transfer and the investigation of an alleged error that involves an

extension of credit, if the extension of credit occurs under an

agreement between the consumer and a financial institution to extend

credit when the consumer's account is overdrawn or to maintain a

specified minimum balance in the consumer's account.

(2) The Truth in Lending Act and Regulation Z, which prohibit the

unsolicited issuance of credit cards, govern:

(i) The addition of a credit feature to an accepted access device;

and

(ii) The issuance of a credit card that is also an access device,

except as provided in paragraph (a)(1)(ii) of this section.

(b) Preemption of inconsistent state laws--(1) Inconsistent

requirements. The Board shall determine, upon its own motion or upon

the request of any state, financial institution, or other interested

party, whether the act and this regulation preempt state law relating

to electronic fund transfers. Only those state laws that are

inconsistent with the act and this regulation shall be preempted and

then only to the extent of the inconsistency. A state law is not

inconsistent with the act and this regulation if it is more protective

of consumers.

(2) Standards for determination. State law is inconsistent with the

requirements of the act and the regulation if it:

(i) Requires or permits a practice or act prohibited by the federal

law;

(ii) Provides for consumer liability for unauthorized electronic

fund transfers that exceed the limits imposed by the federal law;

(iii) Allows longer time periods than the federal law for the

investigation and correction of errors alleged by a consumer, or fails

to require the crediting of the consumer's account during the

investigation of errors as set forth in Sec. 205.11(c)(2)(i) of this

part; or

(iv) Requires initial disclosures, periodic statements, or receipts

that are different in content from those required by the federal law

except to the extent that the disclosures relate to rights granted to

consumers by the state law and not by the federal law.

(c) State exemptions--(1) General rule. Any state may apply to the

Board for an exemption from the requirements of the federal law for any

class of electronic fund transfers within the state. The Board shall

grant an exemption if the Board determines that:

(i) Under state law that class of electronic fund transfers is

subject to requirements substantially similar to those imposed by the

federal law; and

(ii) There is adequate provision for state enforcement.

(2) Exception. To assure that the federal and state courts will

continue to have concurrent jurisdiction, and to aid in implementing

the act:

(i) No exemption shall extend to the civil liability provisions of

section 915 of the act; and

(ii) When an exemption has been granted, the requirements of the

applicable state law shall constitute the requirements of the federal

law, for the purposes of section 915 of the act, except for state law

requirements not imposed by the federal law.

Sec. 205.13 Administrative enforcement; record retention.

(a) Enforcement by federal agencies. Compliance with this part is

enforced by the agencies listed in appendix B of this part.

(b) Record retention--(1) A financial institution shall retain

evidence of compliance with the requirements imposed by the act and

this regulation for a period of not less than two years. Records may be

stored by use of microfiche, microfilm, magnetic tape, or any other

method capable of accurately retaining and reproducing information.

(2) A financial institution having actual notice that it is the

subject of an investigation or an enforcement proceeding by an agency

charged with monitoring compliance with the act and this regulation, or

having been served with notice of an action filed under sections 910,

915, or 916(a) of the act, shall retain the records that pertain to the

action or proceeding until final disposition of the matter, unless an

earlier time is allowed by court or agency order.

Sec. 205.14 Electronic fund transfer service provider not holding

consumer's account.

(a) Electronic fund transfer service providers subject to

regulation. An electronic fund transfer service provider that does not

hold the consumer's account qualifies as a financial institution

subject to this regulation if it:

(1) Issues an access device to a consumer;

(2) Provides electronic fund transfer service to the consumer by

allowing the access device to be used to access the consumer's account

held by another financial institution; and

(3) Has no agreement with the account-holding institution regarding

service involving that access device.

(b) Compliance by electronic fund transfer service provider. In

addition to the requirements generally applicable under this part, the

service provider shall comply with the following special rules:

(1) Disclosures and documentation. The electronic fund transfer

service provider shall provide the disclosures and documentation

required by Secs. 205.7, 205.8, and 205.9 of this part that are within

the purview of its relationship with the consumer, but need not furnish

a periodic statement to the consumer under Sec. 205.9(b) of this part

if the service provider:

(i) Issues a debit card (to be used by the consumer to initiate

electronic fund transfers) bearing the service provider's name and an

address or telephone number for consumer inquiries or for consumers to

give notice of error;

(ii) Provides the consumer a notice concerning transactions made

with the debit card that is substantially similar to the notice

contained in appendix A of this part;

(iii) Provides, on or with the receipts required by Sec. 205.9(a)

of this part, the address and telephone number to be used for an

inquiry, or to give notice of an error, to report the loss or theft of

the debit card;

(iv) Transmits to the account-holding institution the information

specified in Sec. 205.9(b)(1) of this part in the format prescribed by

the automated clearinghouse system used to clear the fund transfers;

(v) Extends the time period set forth in Sec. 205.6(b) (1) and (2)

of this part for notice of loss or theft of a debit card, from two

business days to four business days after the consumer learns of the

loss or theft; and

(vi) Extends the time periods set forth in Secs. 205.6(b)(3) and

205.11(b)(1)(i) of this part for reporting unauthorized transfers or

errors, from 60 days to 90 days following the transmittal of a periodic

statement by the account-holding institution.

(2) Error resolution--(i) Extension of error notification period.

The electronic fund transfer service provider shall extend by a

reasonable time the period specified in Sec. 205.11(b)(1)(i) of this

part in which notice of an error must be received if a delay resulted

from the initial attempt by the consumer to notify the account-holding

institution.

(ii) Disclosure of provisional credit. The service provider shall

disclose to the consumer the date on which it initiates a transfer to

effect a provisional credit in accordance with Sec. 205.11(c)(2)(ii) of

this part.

(iii) Error occurred. If the service provider determines an error

occurred, it shall transfer funds to or from the consumer's account, in

the appropriate amount and within the applicable time period, in

accordance with Sec. 205.11(c)(2)(i) of this part.

(iv) No error occurred. If funds were provisionally credited and

the service provider determines no error occurred, it may reverse the

credit. The service provider shall then notify the account-holding

institution of the period during which the account-holding institution

must honor debits to the account in accordance with

Sec. 205.11(d)(2)(ii) of this part. If an overdraft results, the

service provider shall promptly reimburse the account-holding

institution in the amount of the overdraft.

(c) Compliance by account-holding institution. The account-holding

institution need not comply with the requirements of the act and this

regulation with respect to electronic fund transfers made by the

electronic fund transfer service provider except as follows:

(1) The account-holding institution shall provide a periodic

statement describing each electronic fund transfer involving

transactions initiated by the consumer with the access device issued by

the service provider. The account-holding institution has no liability

for failure to comply with this requirement if the service provider did

not provide the necessary information; and

(2) The account-holding institution shall provide, upon request,

information or copies of documents needed by the service provider to

investigate errors or to furnish copies of documents to the consumer.

The account-holding institution shall also honor debits to the account

in accordance with Sec. 205.11(d)(2)(ii) of this part.

3. Appendices A and B are revised, and Appendix C is added to part

205 to read as follows:

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

A-1--Model Clauses for Unsolicited Issuance (Sec. 205.5(b)(2))

A-2--Model Clauses for Initial Disclosures (Sec. 205.7(b))

A-3--Model Forms for Error Resolution Notice (Secs. 205.7(b)(10) and

205.8(b))

A-4--Model Form for Service-Providing Institutions

(Sec. 205.14(b)(1)(ii))

A-1--Model Clauses for Unsolicited Issuance (Sec. 205.5(b)(2))

(a) Accounts using cards. You cannot use the enclosed card to

transfer money into or out of your account until we have validated

it. If you do not want to use the card, please (destroy it at once

by cutting it in half).

Financial institution may add validation instructions here

(b) Accounts using codes. You cannot use the enclosed code to

transfer money into or out of your account until we have validated

it. If you do not want to use the code, please (destroy this notice

at once).

Financial institution may add validation instructions here

A-2--Model Clauses for Initial Disclosures (Sec. 205.7(b))

(a) Consumer Liability (Sec. 205.7(b)(1)). (Tell us AT ONCE if

you believe your [card] [code] has been lost or stolen. Telephoning

is the best way of keeping your possible losses down. You could lose

all the money in your account (plus your maximum overdraft line of

credit). If you tell us within 2 business days, you can lose no more

the $50 if someone used your [card][code] without your permission.

(If you believe your [card] [code] has been lost or stolen, and you

tell us within 2 business days after you learn of the loss or theft,

you can lose no more than $50 if someone used your [card] [code]

without your permission.)

If you do NOT tell us within 2 business days after you learn of

the loss or theft of your [card] [code], and we can prove we could

have stopped someone from using your [card] [code] without your

permission if you had told us, you could lose as much as $500.

Also, if your statement shows transfers that you did not make,

tell us at once. If you do not tell us within 60 days after the

statement was mailed to you, you may not get back any money you lost

after the 60 days if we can prove that we could have stopped someone

from taking the money if you had told us in time.

If a good reason (such as a long trip or a hospital stay) kept

you from telling us, we will extend the time periods.

(b) Contact in event of unauthorized transfer

(Sec. 205.7(b)(2)). If you believe your [card] [code] has been lost

or stolen or that someone has transferred or may transfer money from

your account without your permission, call:

----------------------------------------------------------------------

[Telephone number]

or write:

----------------------------------------------------------------------

[Name of person or office to be notified]

----------------------------------------------------------------------

[Address]

(c) Business days (Sec. 205.7(b)(3)). For purposes of these

disclosures, our business days include every day other than

Saturday, Sunday or one of the federal holidays.

(d) Transfer types and limitations (Sec. 205.7(b)(4))--(1)

Account access. You may use your [card][code] to:

(i) Withdraw cash from your [checking] [or] [savings] account.

(ii) Make deposits to your [checking] [or] [savings] account.

(iii) Transfer funds between your checking and savings accounts

whenever you request.

(iv) Pay for purchases at places that have agreed to accept the

[card] [code].

(v) Pay bills directly [by telephone] from your [checking] [or]

[savings] account in the amounts and on the days you request.

Some of these services may not be available at all terminals.

(2) Limitations on frequency of transfers.--(i) You may make

only [insert number, e.g., 3] cash withdrawals from our terminals

each [insert time period, e.g., week].

(ii) You can use your telephone bill-payment service to pay

[insert number] bills each [insert time period] [telephone call].

(iii) You can use our point-of-sale transfer service for [insert

number] transactions each [insert time period].

(iv) For security reasons, there are limits on the number of

transfers you can make using our [terminals] [telephone bill-payment

service] [point-of-sale transfer service].

(3) Limitations on dollar amounts of transfers--(i) You may

withdraw up to [insert dollar amount] from our terminals each

[insert time period] time you use the [card] [code].

(ii) You may buy up to [insert dollar amount] worth of goods or

services each [insert time period] time you use the [card] [code] in

our point-of-sale transfer service.

(e) Fees (Sec. 205.7(b)(5))--(1) Per transfer charge. We will

charge you [insert dollar amount] for each transfer you make using

our [automated teller machines] [telephone bill-payment service]

[point-of-sale transfer service].

(2) Fixed charge. We will charge you [insert dollar amount] each

[insert time period] for our [automated teller machine service]

[telephone bill-payment service] [point-of-sale transfer service].

(3) Average or minimum balance charge. We will only charge you

for using our [automated teller machines] [telephone bill-payment

service] [point-of-sale transfer service] if the [average] [minimum]

balance in your [checking account] [savings account] [accounts]

falls below [insert dollar amount]. If it does, we will charge you

[insert dollar amount] each [transfer] [insert time period].

(f) Confidentiality (Sec. 205.7(b)(9)). We will disclose

information to third parties about your account or the transfers you

make:

(1) Where it is necessary for completing transfers, or

(2) In order to verify the existence and condition of your

account for a third party, such as a credit bureau or merchant, or

(3) In order to comply with government agency or court orders,

or

(4) If you give us your written permission.

(g) Documentation (Sec. 205.7(b)(6))--(1) Terminal transfers.

You can get a receipt at the time you make any transfer to or from

your account using one of our [automated teller machines] [or]

[point-of-sale terminals].

(2) Preauthorized credits. If you have arranged to have direct

deposits made to your account at least once every 60 days from the

same person or company, (we will let you know if the deposit is

[not] made.) [the person or company making the deposit will tell you

every time they send us the money] [you can call us at (insert

telephone number) to find out whether or not the deposit has been

made].

(3) Periodic statements. You will get a [monthly] [quarterly]

account statement (unless there are no transfers in a particular

month. In any case you will get the statement at least quarterly).

(4) Passbook account where the only possible electronic fund

transfers are preauthorized credits. If you bring your passbook to

us, we will record any electronic deposits that were made to your

account since the last time you brought in your passbook.

(h) Preauthorized payments (Sec. 205.7(b)(6), (7) and (8))--(1)

Right to stop payment and procedure for doing so. If you have told

us in advance to make regular payments out of your account, you can

stop any of these payments. Here's how:

Call us at [insert telephone number], or write us at [insert

address], in time for us to receive your request 3 business days or

more before the payment is scheduled to be made. If you call, we may

also require you to put your request in writing and get it to us

within 14 days after you call. (We will charge you [insert amount]

for each stop-payment order you give.)

(2) Notice of varying amounts. If these regular payments may

vary in amount, [we] [the person you are going to pay] will tell

you, 10 days before each payment, when it will be made and how much

it will be. (You may choose instead to get this notice only when the

payment would differ by more than a certain amount from the previous

payment, or when the amount would fall outside certain limits that

you set.)

(3) Liability for failure to stop payment of preauthorized

transfer. If you order us to stop one of these payments 3 business

days or more before the transfer is scheduled, and we do not do so,

we will be liable for your losses or damages.

(i) Financial institution's liability (Sec. 205.7(b)(8)). If we

do not complete a transfer to or from your account on time or in the

correct amount according to our agreement with you, we will be

liable for your losses or damages. However, there are some

exceptions. We will not be liable, for instance:

If, through no fault of ours, you do not have enough

money in your account to make the transfer.

If the transfer would go over the credit limit on your

overdraft line.

If the automated teller machine where you are making

the transfer does not have enough cash.

If the [terminal] [system] was not working properly and

you knew about the breakdown when you started the transfer.

If circumstances beyond our control (such as fire or

flood) prevent the transfer, despite reasonable precautions that we

have taken.

There may be other exceptions stated in our agreement

with you.

A-3--Model Forms for Error Resolution Notice

1. Initial and annual error resolution notice Secs. 205.7(b)(10)

and 205.8(b))

In Case of Errors or Questions About Your Electronic Transfers,

Telephone us at [insert telephone number] or Write us at [insert

address] as soon as you can, if you think your statement or receipt

is wrong or if you need more information about a transfer listed on

the statement or receipt. We must hear from you no later than 60

days after we sent the FIRST statement on which the problem or error

appeared.

(1) Tell us your name and account number (if any).

(2) Describe the error or the transfer you are unsure about, and

explain as clearly as you can why you believe it is an error or why

you need more information.

(3) Tell us the dollar amount of the suspected error.

If you tell us orally, we may require that you send us your

complaint or question in writing within 10 business days.

We will tell you the results of our investigation within 10

business days after we hear from you and will correct any error

promptly. If we need more time, however, we may take up to 45 days

to investigate your complaint or question. If we decide to do this,

we will credit your account within 10 business days for the amount

you think is in error, so that you will have the use of the money

during the time it takes us to complete our investigation. If we ask

you to put your complaint or question in writing and we do not

receive it within 10 business days, we may not credit your account.

If we decide that there was no error, we will send you a written

explanation within three business days after we finish our

investigation. You may ask for copies of the documents that we used

in our investigation.

2. Error resolution notice on periodic statements Sec. 205.8(b)

In Case of Errors or Questions About Your Electronic Transfers,

Telephone us at [insert telephone number] or Write us at [insert

address] as soon as you can, if you think your statement or receipt

is wrong or if you need more information about a transfer on the

statement or receipt. We must hear from you no later than 60 days

after we sent you the FIRST statement on which the error or problem

appeared.

(1) Tell us your name and account number (if any).

(2) Describe the error or the transfer you are unsure about, and

explain as clearly as you can why you believe it is an error or why

you need more information.

(3) Tell us the dollar amount of the suspected error.

We will investigate your complaint and will correct any error

promptly. If we take more than 10 business days to do this, we will

credit your account for the amount you think is in error, so that

you will have the use of the money during the time it takes us to

complete our investigation.

A-4--Model Form for Service-Providing Institutions

Sec. 205.14(b)(1)(ii)

ALL QUESTIONS ABOUT TRANSACTIONS MADE WITH YOUR (NAME OF CARD)

CARD MUST BE DIRECTED TO US (NAME OF SERVICE PROVIDER), AND NOT TO

THE BANK OR OTHER FINANCIAL INSTITUTION WHERE YOU HAVE YOUR ACCOUNT.

We are responsible for the [name of service] service and for

resolving any errors in transactions made with your [name of card]

card.

We will not send you a periodic statement listing transactions

that you make using your [name of card] card. The transactions will

appear only on the statement issued by your bank or other financial

institution. SAVE THE RECEIPTS YOU ARE GIVEN WHEN YOU USE YOUR [NAME

OF CARD] CARD, AND CHECK THEM AGAINST THE ACCOUNT STATEMENT YOU

RECEIVE FROM YOUR BANK OR OTHER FINANCIAL INSTITUTION. If you have

any questions about one of these transactions, call or write us at

[telephone number and address] [the telephone number and address

indicated below].

IF YOUR [NAME OF CARD] CARD IS LOST OR STOLEN, NOTIFY US AT ONCE

by calling or writing to us at [telephone number and address].

Appendix B to Part 205--Federal Enforcement Agencies

The following list indicates which Federal agency enforces

Regulation E for particular classes of institutions. Any questions

concerning compliance by a particular institution should be directed

to the appropriate enforcing agency. Terms that are not defined in

the Federal Deposit Insurance Act (12 U.S.C. 1813(s)) shall have the

meaning given to them in the International Banking Act of 1978 (12

U.S.C. 3101).

National banks, and Federal branches and Federal agencies of

foreign banks

District office of the Office of the Comptroller of the Currency

where the institution is located.

State member banks, branches and agencies of foreign banks (other

than Federal branches, Federal agencies, and insured state branches

of foreign banks), commercial lending companies owned or controlled

by foreign banks, and organizations operating under section 25 or

25(a) of the Federal Reserve Act

Federal Reserve Bank serving the District in which the

institution is located.

Nonmember insured banks and insured state branches of foreign banks

Federal Deposit Insurance Corporation regional director for the

region in which the institution is located.

Savings institutions insured under the Savings Association

Insurance Fund of the FDIC and federally-chartered savings banks

insured under the Bank Insurance Fund of the FDIC (but not

including state-chartered savings banks insured under the Bank

Insurance Fund)

Office of Thrift Supervision Regional Director for the region in

which the institution is located.

Federal Credit Unions

Division of Consumer Affairs, National Credit Union

Administration, 1775 Duke Street, Alexandria, Virginia 22314-3428

Air Carriers

Assistant General Counsel for Aviation Enforcement and

Proceedings, Department of Transportation, 400 Seventh Street, SW.,

Washington, DC 20590.

Brokers and Dealers

Division of Market Regulation, Securities and Exchange

Commission, Washington, DC 20549.

Retailers, Consumer Finance Companies, Certain Other Financial

Institutions, and all others not covered above

Federal Trade Commission, Electronic Fund Transfers, Washington,

DC 20580.

Appendix C to Part 205--Issuance of Staff Interpretations

Official Staff Interpretations

Pursuant to section 915(d) of the act, the Board has designated

the director and other officials of the Division of Consumer and

Community Affairs as officials ``duly authorized'' to issue, at

their discretion, official staff interpretations of this regulation.

Except in unusual circumstances, such interpretations will not be

issued separately but will be incorporated in an official commentary

to the regulation, which will be amended periodically.

Requests for Issuance of Official Staff Interpretations

A request for an official staff interpretation shall be in

writing and addressed to the Director, Division of Consumer and

Community Affairs, Board of Governors of the Federal Reserve System,

Washington, DC 20551. The request shall contain a complete statement

of all relevant facts concerning the issue, including copies of all

pertinent documents.

Scope of Interpretations

No staff interpretations will be issued approving financial

institutions' forms or statements. This restriction does not apply

to forms or statements whose use is required or sanctioned by a

government agency.

By order of the Board of Governors of the Federal Reserve

System, February 24, 1994.

William W. Wiles,

Secretary of the Board.

[FR Doc. 94-4680 Filed 3-2-94; 12:38 pm]

BILLING CODE 6210-01-P