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Electronic Fund Transfer Act (EFTA)

Electronic Fund Transfer Act (EFTA)

What Is the Electronic Fund Transfer Act (EFTA)?

The Electronic Fund Transfer Act (EFTA) is a federal law that safeguards consumers when they transfer funds electronically, including using debit cards, automated teller machines (ATMs), and automatic withdrawals from a bank account. Among different protections, the EFTA gives a method for rectifying transaction errors and limits the liability coming about because of a lost or taken card.

Understanding the Electronic Fund Transfer Act (EFTA)

Electronic fund transfers are transactions that utilization PCs, telephones, or magnetic strips to approve a financial institution to credit or debit a client's account. Electronic transfers incorporate the utilization of ATMs, debit cards, direct deposits, point-of-sale (POS) transactions, transfers initiated by telephone, automated clearing house (ACH) systems, and pre-approved withdrawals from checking or savings accounts.

The EFTA frames requirements for banking institutions and consumers to follow when errors happen. Under this act, consumers can challenge errors, have them adjusted, and receive limited financial punishments. The EFTA likewise expects banks to give certain data to consumers and characterizes how they can limit their liability on account of a lost or taken card.

The utilization of paper checks has consistently declined since the EFTA was passed, yet checks keep on filling in as hard evidence of payment. The blast of electronic financial transactions made a requirement for new rules that would provide consumers with similar level of confidence as they have in the checking system. This incorporates the ability to challenge errors, right them inside a 60-day window, and limit liability on a lost card to $50 in the event that it is reported as lost inside two business days.

On the off chance that the institution is informed inside three to 59 days of a lost card, the liability could be essentially as much as $500. Furthermore, would it be advisable for it not be reported in something like 60 days, the consumer isn't protected from liability by any stretch of the imagination, meaning they could relinquish all funds in the associated account, and be responsible for paying any overdraft charges.

History of the Electronic Fund Transfer Act (EFTA)

Congress passed the EFTA in 1978 in response to the growth of ATMs and electronic banking, and the Federal Reserve Board (FRB) carried out it as Regulation E. The act laid out rules to safeguard consumers and defined the rights and obligations of all participants engaged with transferring funds electronically.

The standard making authority of the EFTA eventually migrated from the Federal Reserve (Fed) to the Consumer Financial Protection Bureau (CFPB) in 2011, following the enactment of the [Dodd-Frank Wall Street Reform and Consumer Protection Act](/dodd-frank-financial-administrative reform-bill).

Gift cards, stored-esteem cards, credit cards, and prepaid telephone cards are excluded from the EFTA.

Services Protected Under the Electronic Fund Transfer Act (EFTA)

Fundamental services that are protected under the EFTA include:

  • ATMs: The EFTA approves 24-hour access to ATMs.
  • Direct Deposit: Most banks offer direct deposit, which permits you to pre-approve deposits, including payroll checks and government benefits, and recurring bill payments, like mortgages, insurance payments, or utility bills.
  • Pay-by-Phone: You might approve your financial institution to make payments or transfer funds through telephone. Banks are required to affirm your identity by posing account-explicit inquiries.
  • Internet: You can access your accounts by means of financial institutions' online entryways to monitor activity, check balances, transfer funds, and pay bills.
  • Debit Card: Debit cards issued by financial institutions let consumers make purchases online or at a retail store or business.
  • Electronic Check Conversion: This feature empowers a business to change over a paper check into an electronic payment by filtering the check and catching the bank name, address, account number, and routing number. After the paper check is examined into an electronic payment, it becomes null and void.

You reserve the privilege to stop preauthorized transfers whenever, no matter what any opposing contract terms.

Electronic Fund Transfer Act (EFTA) Requirements for Service Providers

The EFTA requires financial institutions and any outsider engaged with electronic fund transfer services to uncover the following data to consumers:

  • A summary of liability in regards to unauthorized transactions and transfers
  • Contact data for the person(s) who ought to be told in the event of an unauthorized transaction, along with the system to report and file a case
  • The types of transfers you can make, any fees associated with them, and any limitations that could exist
  • A summary of your rights, including the right to receive periodic statements and POS purchase receipts
  • A summary of the institution's liability to you on the off chance that it neglects to make or stop certain transactions
  • The conditions under which an institution will share data with an outsider concerning your endlessly account activities
  • A notice portraying how to report a blunder, request more data, and the amount of time inside which you must file your report

The Bottom Line

The Electronic Fund Transfer Act (EFTA) is a federal law that was passed in 1978. It gives important protections to consumers when they transfer funds electronically, including using debit cards, automated teller machines (ATMs), and automatic withdrawals from a bank account. The EFTA gives a way to transactions to be investigated, and errors to be revised. It likewise limits a bank's liability in the event that a card is lost or taken, for however long this is reported in 60 days or less.

The EFTA additionally imposes liabilities on financial institutions, expecting them to reveal important data about the way that they oversee accounts.

Features

  • Protection under the EFTA incorporates transfers made by means of ATMs, debit cards, direct deposits, point-of-sale, and telephone.
  • The EFTA was enacted in 1978 because of the increased utilization of ATMs.
  • The Electronic Fund Transfer Act (EFTA) safeguards consumers while transferring funds electronically.

FAQ

Does EFTA Require Withdrawal Limits?

Indeed. The EFTA expects banks to limit the amount of money that can be removed from your account during some random time span. Most banks set the limit at $200 or $300 each day, meaning you can't electronically pull out more than this amount in cash inside a 24-hour period.

Does EFTA Cover Lost Cards?

Indeed, yet its protections are limited. EFTA limits your liability for spending on a lost or taken card to $50 provided that you tell the bank or credit union inside two business days of your debit card being lost or taken. For this and different reasons (the right to dispute undelivered purchases, for instance), consumers who shop online ought to utilize a credit card.

Who Does the EFTA Apply To?

EFTA applies to all persons, remembering offices of foreign financial institutions for the United States that offer EFT services to residents of any state. It covers any account situated in the United States through which EFTs are offered to a resident of a state, regardless of where a specific transfer happens.