Reg E (Electronic Funds Transfer Act-EFTA) & Reg CC (Expedited Funds Availability Act)
Who is a remittance transfer provider?
-A threshold of 100 covered remittances transfers in both the current year and prior calendar year before an entity would be classified as providing remittances in the normal course of business. -If considered a provider, allowed up to 6 months transition period.
Two Categories of Consumer Liability under Reg E
-Access device that is missing or stolen -Customer statement that includes an unauthorized or unrecognized transaction
What type of accounts does Reg CC cover?
-Applies to NOW and DDA accounts -Applies to both business and personal checking accounts -Can by policy be applied to savings accounts
Substitute Checks under Reg CC
-Banks are not required to truncate checks or accept image cash letters but banks are required to accept substitute checks -Must accurately represent all info on the feont and back of the original check and bear the following legend "This is a legal copy of your check. You can use it the same way you would use the original check." -There are encoding (MICR) requirements
Reasonable cause hold under Reg CC
-Based on facts that could lead a reasonable person to doubt the collectibility of a check -Examples: confidential information, notice of returned items, unable to verify endorsement, erasures or alterations, stale dated or post dated, invalid routing number, check deposited was previously returned unpaid
Exception holds under Reg CC
-Can be used whether you extend normal availability to the limit under regulations or give next day regularly -Must give a written notice with a specific reason for the delay in availability -Can be held up to 7 business days (2+5) -Special rules for new accounts -Special rules for next day items; 6 business days (1+5)
Expedited credit under Check 21 in Reg CC
-Consumer's claim must be received by the bank within 40 days if the date the bank mailed or delivered the statement or the substitute check to the consumer. -Within 10 business days, the bank must determine the validity of the consumer's claim or re-credit up to $2,500 per check (plus interest if applicable) -The bank may delay availability for 45 days for new accounts, excessive overdrafts, reasonable cause to believe fraud and must notify the consumer of the delay in availability.
Notice of nonpayment for check processing under Reg CC
-Covers any check $2,500 or more -Must contain specified info -Depository bank must notify the customer by midnight of the banking day after the banking day of receipt -The 2017 amendments require that all returned checks, both paper and electronic, be returned by 2pm on the second business day after presentment
Check 21 under Reg CC
-Definition of account is different than the definition for the other sections of Reg CC. -Any deposit including a demand deposit or other transaction account, plus savings or time deposit account -Required to provide customer notice only to consumers who receive paid paper checks with periodic statements; multiple holders not required to receive separate disclosures
Two business day notice rule under Reg E
-Does not include the day the consumer learns of the loss (day 0) or any day that is not a business day -Liability is calculated based on two 24 hour business days. Business day ends at midnight.
Record retention for Reg CC
-Generally 2 years -For exception holds, must retain reason why collectability was doubted -Retain copies of policies and procedures
Reg E-EFT error resolution bank's responsibilities
-Investigate and notify customer of the result (generally 10 business days from customer notice or 20 business days if a new account). -The bank can utilize additional time if the following actions are taken within that initial 10 business days: *Re-credit disputed funds plus any fees or interest related to the disputed amount *Advise the consumer within 2 business days of the provisional credit *Give customer full use of provisional funds
Reg E Foreign Remittance Rule
-Issued by CFPB in Oct 2013 -Sub part B -covers consumer who sends the transaction in a closed network transfer (Western Union) or open network transfers (bank)
Failure to comply with Reg E-EFTA
-Liable for all damages caused by failure to make an EFT in accordance with terms and conditions -Civil damages: *Individual action: damages between $100 and $1,000 *Class action: leaser of $500,000 or 1% of the bank's net worth *Banks could pay court costs and attorney fees -Criminal liability: *Individuals fined up to $5,000 or imprisoned up to 1 year or both *Those fraudulently use debit cards may be fined up to $10,000 and imprisoned up to 10 years or both
Written notice for holds under Reg CC
-Must be given at time of deposit or by the end of the next business day if facts come to light later -If not given at the time of deposit, notify customer that bo OD or returned check fees will be assessed if OD would not have occurred but for the delayed availability
Reg E change in terms notice
-Must be mailed or delivered to the consumer at least 21 days before the effective date of any change in a term or condition required to be disclosed in the initial disclosure that will negatively affect the consumer. -If an immediate change in terms or conditions is necessary to maintain or restore security of an account, no prior notice is required. -If the change is to become permanent, the bank must provide notice in writing to the consumer on or with the next regularly scheduled periodic statement or within 30 days, unless disclosures would jeopardize the security of the system.
New account holds under Reg CC
-New account is one that is open less than 30 days and each account owner is not an established customer with other transaction accounts (checking accounts) -Next day requirements still apply to cash and electronic credits, first $5,000 of next day check items including travelers checks - Remainder of next day items by 9th business day except on-us items -No limit on local items
Disclosure Requirements for Reg E Opt In Rule
-Notice must be segregated from all other info and cannot be combined with an initial Reg E disclosure -Very strict disclosure content rule -Customize the opt-in notice content based on each bank's policy for overdraft service description, fees, limits, and opt-in methods
Reg E Credit Card or CARD Act
-Primarily addresses credit cards but also includes a section on gift cards -Mandated changes to gift cards that protect consumers from unexpected costs: *Limits inactivity (dormancy) fees *Improves disclosure requirements *Reins in expiration (valid through) dates-5 years
Reg E-EFT error resolution customer responsibilities
-Provide oral or written notice within 2 business days following learning of the loss or within 60 calendar days of transmittal of the statement containing the first error. -Bank's option to require written notice within 10 business days to receive provisional credit.
Reg E disclosures
-The bank must provide an initial disclosure when the customer contracts for an electronic fund transfer (EFT) service, or before the EFTA is made. Generally, new accounts personnel provide this disclosure when opening a new account that has EFT features. -ATM fee disclosures: provide on screen or paper disclosure to include amount of the fee and provided before the consumer is committed to the transaction and allow the consumer the option to terminate the transaction before the fee is assessed. -Written receipts available at electronic terminals. Financial institution is not subject to the requirement to make a receipt available if the amount of the transfer is $15 or less. -A full error resolution notice must be sent at least annually if no statements are sent to the customer. A short form can be included with the periodic statement.
Emergency Conditions Holds under Reg CC
-The institution must provide notice within a reasonable time frame, depending on the circumstances. -Examples: telecommunications outage, equipment failure, war or disaster, emergency condition beyond the control of the bank
Consumer liability for Reg E when there are unauthorized transfers that do not involve the loss or theft of an access device
-Tier 1: from first statement including unauthorized transactions through the 60th calendar day following statement availability-$0 customer liability -Tier 2: from calendar day 61 following statement availability up to late notification of bank-unlimited customer liability
Case by case holds under Reg CC
-Used when your policy is to provide availability earlier than the regulation requires -Invoke holds at your discretion, any reason is acceptable and the bank is not required to disclose the reason for the hold -Does not require a reason if not exceeding 2 days but the bank must make the first $200 available the next business day
Types of holds for Reg CC
-case by case hold -exception hold
Remotely Created Checks under Reg CC
A check that is drawn on a customer account at a bank, is created by the payee, and does not bear a signature in the format agreed to by the paying bank and the customer.
Reg E Covered Transactions
Any electronic fund transfer that authorizes a financial institution to debit or credit a consumer's account. Electronic funds tranafer menas any transfer of funds that is initiated through an electronic terminal, telephone, computer, or magnetic tape for the purpose of ordering, instructing, or authorizing a financial institution to debit or credit a consumer's account
Reg CC local and non-local checks
Effective 2/26/2010, all routing numbers are local.
Foreign remittance record retention requirements
Financial institutions must maintain evidence of compliance for at least 2 yrs after the date the required disclosures are made available.
Reg CC Non-Continental Deposits
For depository branches in non-continental locations, 1 business day may be added for items payable by a bank not located in that state or territory.
Repeated overdrafts holds under Reg CC
If the account has a -Negative balance for 6 or more banking days in the last 6 months or -Negative balance of $5,000 or more for 2 or more banking days in the last 6 months.
Reg E Opt-In Rule
In response to customer complaints about ATM and one-time debit transactions, Reg E was amended and consumers must opt-in before a bank may impose a fee for an ATM or one-time debit card overdraft.
Next day availability items
Next day availability is not required if the deposit is not made in-person to an employee of the bank (i.e. deposit made at the ATM or night drop). Exception-treasury checks will ALWAYS be next day availability.
Reg E periodic statement disclosure
The bank must mail or deliver a statement if an EFT has occurred, but at least quarterly if no transfer has occurred.
Reg E's new account definition
The consumer account is new for the first 30 days after the first deposit was made, regardless of the status of each of the account holder.
Calculation of consumer liability for a lost or stolen card
The tíers represent the time period counted from the date the consumer learns of the loss. -Tier 1: from card loss up to the 2nd business day following the loss of the card-never more than $50 customer liability -Tier 2: from business day 3 up to timely notification of the bank-never more than $450 customer liability -Tier 3: from calendar day 61 following statement availability to late notification of the bank. Unlimited customer liability.
