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Federal Reserve Proposes New Rules Governing Electronic Funds Transfers

September 17, 2004

   Related Information
69 Fed Reg 55996
FEDERAL RESERVE SYSTEM 12 CFR Part 205 [Regulation E; Docket No. R–1210] Electronic Fund Transfers [pdf]

The Federal Reserve Board on Monday requested public comment on proposed amendments to Regulation E, which implements the Electronic Fund Transfer Act, and the regulation's official staff commentary. The proposed revisions to the regulation would provide guidance regarding the rights, liabilities, and responsibilities of parties engaged in electronic check conversion transactions and would provide that payroll card accounts are "accounts" covered by Regulation E.

Among the proposed changes, persons, such as merchants and other payees, that use information from a check to initiate an electronic fund transfer from a consumer's account, would be required to provide notice to the consumer for each electronic fund transfer and obtain the consumer's authorization for the transaction. Currently, merchants and other payees that engage in electronic check conversion transactions are not covered by Regulation E.

In addition, the regulation would be revised to provide that payroll card accounts that are established either directly or indirectly by an employer on behalf of a consumer for the purpose of providing salary, wages, or other employee compensation on a recurring basis are covered by Regulation E. A payroll card account would be subject to the regulation whether the account is operated or managed by the employer, a third-party payroll processor, or a depository institution.

Proposed commentary revisions would provide guidance on preauthorized electronic transfers from a consumer's account, additional electronic check conversion issues, error resolution, and other matters.

The Board's Federal Register notice is attached. Comments are due November 19, 2004.

Source: Federal Reserve Board



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