Regulation E, or also known as Reg E, as it is sometimes called, is the set of rules established by federal banking regulators to carry out the Electronic Fund Transfer Act. That 1978 law lays down consumers’ rights when they use the banks’ electronic fund transfer (EFT) system, used by banks to generate debit card transactions.
Regulation E is a regulation put forth by the Federal Reserve Board that outlines rules and procedures for electronic funds transfers (EFTs) and provides guidelines for issuers of electronic debit cards.
Special Considerations
Financial institutions should circulate these regulations internally to make sure they have no difficulty in complying.
Consumers should also make sure they are complying with federal regulations when reporting errors to make sure their financial institutions are complying and to avoid liability.
Understanding Regulation E
A law was passed by the U.S. Congress in 1978 as a means of protecting consumers engaged in these sorts of financial transactions and it is called the Electronic Funds Transfers Act. Regulation E was issued by the Federal Reserve as an implementation of the law.
Much of Regulation E outlines the procedures consumers must follow in reporting errors with EFTs, and the steps a bank must take to provide recourse. Errors subject to these regulations could include the consumer’s receipt of an incorrect amount of money from an ATM, unauthorized credit or debit card activity, or an unauthorized wire transfer to or from a consumer’s account.
Generally, banks have a period of 10 business days during which to investigate a reported EFT error. This can, however, be extended to 45 business days provided that the bank provisionally credits the consumer’s account with the reportedly missing funds. Banks must then report the results of an investigation to the Federal Reserve and the consumer.
For example, consumers must report lost or stolen credit cards no more than two days after the consumer becomes aware of the theft; otherwise, the bank has no obligation to refund losses.
Regulation E also outlines consumer responsibility for reporting unauthorized ETF activity, typically involving a stolen or missing card. Regulation E does govern EFT features of credit card usage. Regulation E governs the issuance of debit but not credit cards, which are governed by regulations outlined in the Truth in Lending Act and implemented by the Federal Reserve as Regulation Z. However, Regulation E does govern EFT features of credit card usage.
Consumers and financial institutions both have an interest in understanding Regulation E’s guidelines.
Regulation E provides guidelines for consumers and banks or other financial institutions in the context of electronic funds transfers. These include transfers with Automated Teller Machines (ATMs), point-of-sale transactions, and Automated Clearing House (ACH) systems. Rules about consumer liability for unauthorized card usage fall under this regulation as well.
They also govern the issuance of debit but not credit cards, which are governed by regulations outlined in the Truth in Lending Act and implemented by the Federal Reserve as Regulation Z.
