ACH Transactions and Regulation E
The Electronic Fund Transfer Act (EFTA) and its implementing regulation, Regulation E, provide consumer protections for electronic fund transfers (EFTs). EFTs include any transfer of funds 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 (12 CFR 1005.3(b)(1)).
Coverage of ACH Transactions
Regulation E applies to ACH transactions that meet the definition of an EFT. ACH, or Automated Clearing House, is a network that facilitates electronic payments between financial institutions. ACH transactions can be used for a variety of purposes, including direct deposit of paychecks, payment of bills, and person-to-person (P2P) payments.
Accounts Covered
Regulation E applies to accounts held directly or indirectly by a financial institution and established primarily for personal, family, or household purposes. This includes demand deposit (checking) accounts, savings accounts, and other consumer asset accounts. It also includes prepaid accounts as defined by Regulation E (12 CFR 1005.2(b)(1)).
Authorization and Agreement
The requirements of Regulation E apply to accounts for which an agreement for EFT services has been entered into between the consumer and the financial institution or a third party. The account-holding institution must receive notice of the agreement, and the fund transfers must have begun (12 CFR 1005.3(a)).
Conclusion
ACH transactions are covered under Regulation E if they meet the definition of an EFT and the other requirements of the regulation are met. This means that consumers have certain rights and protections when using ACH to transfer funds.
Sources
- Electronic Fund Transfers FAQs
- Regulation E – Electronic Fund Transfers
- What Is Regulation E in Electronic Fund Transfers (EFTs)?
FAQs
What is Regulation E?
Regulation E is a federal regulation that implements the Electronic Fund Transfer Act (EFTA). It provides consumer protections for electronic fund transfers (EFTs), including ACH transactions.
What is an EFT?
An EFT is any transfer of funds 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.
Are ACH transactions covered by Regulation E?
Yes, ACH transactions are covered by Regulation E if they meet the definition of an EFT.
What types of accounts are covered by Regulation E?
Regulation E applies to accounts held directly or indirectly by a financial institution and established primarily for personal, family, or household purposes. This includes demand deposit (checking) accounts, savings accounts, and other consumer asset accounts. It also includes prepaid accounts as defined by Regulation E.
What are the requirements for ACH transactions to be covered by Regulation E?
The requirements are:
* The transaction must be initiated through an electronic terminal, telephone, computer, or magnetic tape.
* The transaction must be for the purpose of ordering, instructing, or authorizing a financial institution to debit or credit a consumer’s account.
* The transaction must be covered by an agreement between the consumer and the financial institution or a third party.
* The account-holding institution must receive notice of the agreement, and the fund transfers must have begun.
What are the consumer protections provided by Regulation E?
Regulation E provides consumers with a number of protections, including:
* The right to receive periodic statements that show all EFTs.
* The right to dispute errors on EFTs.
* The right to receive timely notice of changes to EFT terms and conditions.
* The right to cancel preauthorized EFTs.
How can I file a complaint about an EFT?
You can file a complaint about an EFT with the Consumer Financial Protection Bureau (CFPB). You can submit a complaint online at https://www.consumerfinance.gov/complaint/ or by calling 1-855-411-2372.
Where can I learn more about Regulation E?
You can learn more about Regulation E on the CFPB’s website at https://www.consumerfinance.gov/rules-policy/regulations/1005/interp-3/.