Debit Cards and Electronic Fund Transactions

AuthorDaniel A Edelman
ProfessionLawyer
Pages39-41
39
Debit Cards and Electronic
Fund Transactions
CHAPTER
10
The use of debit cards, automated teller machines (ATMs), and other electronic means to access asset
accounts (checking and savings accounts) is governed by the Electronic Fund Transfer Act (EFTA)
(15U.S.C. §1693) and Consumer Financial Protection Bureau (CFPB) Regulation E (12 C.F.R. part 1005).
The statute and regulation apply to an “electronic fund transfer,” which is any transfer of funds that is
initiated through an electronic terminal, telephone, computer, or magnetic tape for the purpose of order-
ing, instructing, or authorizing a financial institution to debit or credit a consumer’s account. This includes
the presentation of a debit card at the point of sale, the use of an ATM, and the presentation of checks by
businesses in electronic form. It does not include the writing of a check, a wire transfer, transfers for the
purchase or sale of securities and commodities, transfers between accounts at a single financial institution,
and single transfers initiated by telephone communications from consumers (12 C.F.R. § 1005.3).
The EFTA prohibits unauthorized issuance of debit cards and other “access devices.” They can be
issued to consumers only in response to an oral or written request, as a renewal of or substitution for an
accepted access device (e.g., when a debit card expires), or where it cannot be used unless activated by the
consumer’s oral or written request, in which case the financial institution must take reasonable measures
to verify that the party seeking activation is in fact the consumer (12 C.F.R. §1005.5).
The EFTA limits consumer liability for unauthorized transfers, as follows:
•A consumer has no liability unless disclosures of potential liability have been provided, the access
device has been accepted, and the access device provides for a means of identifying the consumer,
such as a personal identification number (PIN).
•If these conditions have been met and an unauthorized transfer or series of related transfers takes
place—for example, if the debit card is stolen—the consumer’s liability is not more than $50 if he
or she notifies the financial institution within two business days after learning of the loss or theft.
•If the consumer fails to give notice within two business days, the limitation on liability is $500.
Edelman53574_Ch010.indd 39 22/05/17 10:23 AM

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