Electronic Banking
For many consumers, electronic banking
means 24-hour access to cash through an automated teller machine (ATM)
or Direct Deposit of paychecks into checking or savings accounts. But
electronic banking now involves many different types of transactions.
Electronic banking, also known as
electronic fund transfer (EFT), uses computer and electronic
technology as a substitute for checks and other paper transactions.
EFTs are initiated through devices like cards or codes that let you,
or those you authorize, access your account. Many financial
institutions use ATM or debit cards and Personal Identification
Numbers (PINs) for this purpose. Some use other forms of debit cards
such as those that require, at the most, your signature or a scan. The
federal Electronic Fund Transfer Act (EFT Act) covers some electronic
consumer transactions.
Electronic Fund Transfers
EFT offers several services that consumers may find practical:
- Automated Teller Machines or 24-hour
Tellers are electronic terminals that let you bank almost any time.
To withdraw cash, make deposits, or transfer funds between accounts,
you generally insert an ATM card and enter your PIN. Some financial
institutions and ATM owners charge a fee, particularly to consumers
who don't have accounts with them or on transactions at remote
locations. Generally, ATMs must tell you they charge a fee and its
amount on or at the terminal screen before you complete the
transaction. Check the rules of your institution and ATMs you use to
find out when or whether a fee is charged.
- Direct Deposit lets you authorize
specific deposits, such as paychecks and Social Security checks, to
your account on a regular basis. You also may pre-authorize direct
withdrawals so that recurring bills, such as insurance premiums,
mortgages, and utility bills, are paid automatically.
- Pay-by-Phone Systems let you call
your financial institution with instructions to pay certain bills or
to transfer funds between accounts. You must have an agreement with
the institution to make such transfers.
- Personal Computer Banking lets you
handle many banking transactions via your personal computer. For
instance, you may use your computer to view your account balance,
request transfers between accounts, and pay bills electronically.
- Point-of-Sale Transfers let you pay
for purchases with a debit card, which also may be your ATM card.
The process is similar to using a credit card, with some important
exceptions. While the process is fast and easy, a debit card
purchase transfers money - fairly quickly - from your bank account
to the store's account. So it's important that you have funds in
your account to cover your purchase. This means you need to keep
accurate records of the dates and amounts of your debit card
purchases and ATM withdrawals in addition to any checks you write.
Your liability for unauthorized use, and your rights for error
resolution, may differ with a debit card.
- Electronic Check Conversion converts
a paper check into an electronic payment at the point of sale or
elsewhere, such as when a company receives your check in the mail.
In a store, when you give your check to a store cashier, the check
is processed through an electronic system that captures your banking
information and the amount of the check. Once the check is
processed, you're asked to sign a receipt authorizing the merchant
to present the check to your bank electronically and deposit the
funds into the merchant's account. You get a receipt of the
electronic transaction for your records. When your check has been
processed and returned to you by the merchant, it should be voided
or marked by the merchant so that it can't be used again. In the
mail-in situation, you should still receive advance notice from a
company that expects to process your check electronically.
Be especially careful in telephone
transactions, which also could involve e-checks. A legitimate merchant
should explain the process and answer any questions you may have. The
merchant also should ask for your permission to debit your account for
the item you're purchasing or paying on. However, because telephone
e-checks don't occur face-to-face, you should be cautious with whom
you reveal your bank or checking account information. Don't give this
information to sellers with whom you have no prior experience or with
whom you have not initiated the call, or to sellers who seem reluctant
to discuss the process with you.
Not all electronic fund transfers are
covered by the EFT Act. For example, some financial institutions and
merchants issue cards with cash value stored electronically on the
card itself. Examples include prepaid telephone cards, mass transit
passes, and some gift cards. These "stored-value" cards, as well as
transactions using them, may not be covered by the EFT Act. This means
you may not be covered for the loss or misuse of the card. Ask your
financial institution or merchant about any protections offered for
these cards.
Disclosures
To understand your legal rights and responsibilities regarding
your EFT account, read the documents you receive from the financial
institution that issued your "access device." That is, a card, code or
other means of accessing your account to initiate electronic fund
transfers. Although the means varies by institution, it often involves
a card and/or a PIN. No one should know your PIN except you and select
employees of the financial institution.
Before you contract for EFT services or
make your first electronic transfer, the institution must tell you the
following information in a form you can keep.
- A summary of your liability for
unauthorized transfers.
- The telephone number and address of
the person to be notified if you think an unauthorized transfer has
been or may be made, a statement of the institution's "business
days" (which is, generally, the days the institution is open to the
public for normal business), and the number of days you have to
report suspected unauthorized transfers.
- The type of transfers you can make,
fees for transfers, and any limits on the frequency and dollar
amount of transfers.
- A summary of your right to receive
documentation of transfers, to stop payment on a pre-authorized
transfer, and the procedures to follow to stop payment.
- A notice describing the procedures
you must follow to report an error on a receipt for an EFT or your
periodic statement, to request more information about a transfer
listed on your statement, and how long you have to make your report.
- A summary of the institution's
liability to you if it fails to make or stop certain transactions.
- Circumstances under which the
institution will disclose information to third parties concerning
your account.
- A notice that you may be charged a
fee by ATMs where you don't have an account.
In addition to these disclosures, you
will receive two other types of information for most transactions:
terminal receipts and periodic statements. Separate rules apply to
passbook accounts from which pre-authorized transfers are drawn. The
best source of information about those rules is your contract with the
financial institution for that account. You're entitled to a terminal
receipt each time you initiate an electronic transfer, whether you use
an ATM or make a point-of-sale electronic transfer. The receipt must
show the amount and date of the transfer, and its type, such as "from
savings to checking." When you make a point-of-sale transfer, you'll
probably get your terminal receipt from the salesperson.
You won't get a terminal receipt for
regularly occurring electronic payments that you've pre-authorized,
like insurance premiums, mortgages, or utility bills. Instead, these
transfers will appear on your periodic statement. If the
pre-authorized payments vary, however, you should receive a notice of
the amount that will be debited at least 10 days before the debit
takes place.
You're also entitled to a periodic
statement for each statement cycle in which an electronic transfer is
made. The statement must show the amount of any transfer, the date it
was credited or debited to your account, the type of transfer and type
of account(s) to or from which funds were transferred, and the address
and telephone number for inquiries. You're entitled to a quarterly
statement whether or not electronic transfers were made.
Keep and compare your EFT receipts with
your periodic statements the same way you compare your credit card
receipts with your monthly credit card statement. This will help you
make the best use of your rights under federal law to dispute errors
and avoid liability for unauthorized transfers.
Errors
You have 60 days from the date a periodic statement containing a
problem or error was sent to you to notify your financial institution.
The best way to protect yourself if an error occurs - including
erroneous charges or withdrawals from an account, or for a lost or
stolen ATM or debit card - is to notify the financial institution by
certified letter, return receipt requested, so you can prove that the
institution received your letter. Keep a copy of the letter for your
records.
If you fail to notify the institution
of the error within 60 days, you may have little recourse. Under
federal law, the institution has no obligation to conduct an
investigation if you've missed the 60-day deadline.
Once you've notified the financial
institution about an error on your statement, it has 10 business days
to investigate. The institution must tell you the results of its
investigation within three business days after completing it and must
correct an error within one business day after determining that the
error has occurred. If the institution needs more time, it may take up
to 45 days, in most situations, to complete the investigation - but
only if the money in dispute is returned to your account and you're
notified promptly of the credit. At the end of the investigation, if
no error has been found, the institution may take the money back if it
sends you a written explanation.
An error also may occur in connection
with a point-of-sale purchase with a debit card. For example, an oil
company might give you a debit card that lets you pay for gas
purchases directly from your bank account. Or you may have a debit
card that can be used for various types of retail purchases. These
purchases will appear on your periodic statement from the bank. In
case of an error on your account, however, you should contact the card
issuer (for example, an oil company or a bank) at the address or phone
number provided by the company. Once you've notified the company about
the error, it has 10 business days to investigate and tell you the
results. In this situation, it may take up to 90 days to complete an
investigation. If no error is found at the end of the investigation,
the institution may take back the money if it sends you a written
explanation.
Lost or Stolen ATM or Debit Cards
If your credit card is lost or stolen, you can't lose more than
$50. If someone uses your ATM or debit card without your permission,
you can lose much more.
If you report an ATM or debit card
missing to the card issuer before it's used without your permission,
you can't be held responsible for any unauthorized withdrawals.
If unauthorized use occurs before you
report it, the amount you can be held responsible for depends upon how
quickly you report the loss to the card issuer.
- If you report the loss within two
business days after you realize your card is missing, you won't be
responsible for more than $50 for unauthorized use.
- If you fail to report the loss
within two business days after you realize the card is missing, but
do report its loss within 60 days after your statement is mailed to
you, you could lose as much as $500 because of an unauthorized
transfer.
- If you fail to report an
unauthorized transfer within 60 days after your statement is mailed
to you, you risk unlimited loss. That means you could lose all the
money in your account and the unused portion of your maximum line of
credit established for overdrafts.
If you failed to notify the institution
within the time periods allowed because of an extenuating
circumstance, such as lengthy travel or illness, the issuer must
reasonably extend the notification period. In addition, if state law
or your contract imposes lower liability limits, those lower limits
apply instead of the limits in the federal EFT Act.
Once you report the loss or theft of
your ATM or debit card, you're no longer responsible for additional
unauthorized transfers occurring after that time. Because these
unauthorized transfers may appear on your statements, however, you
should carefully review each statement you receive after you've
reported the loss or theft. If the statement shows transfers that you
did not make or that you need more information about, contact the
institution immediately, using the special procedures provided for
reporting errors.
Limited Stop-Payment Privileges
When you use an electronic fund transfer, the EFT Act does not
give you the right to stop payment. If your purchase is defective or
your order is not delivered, it's as if you paid cash. That is, it's
up to you to resolve the problem with the seller and get your money
back.
There is one situation, however, when
you can stop payment. If you've arranged for regular payments out of
your account to third parties, such as insurance companies, you can
stop payment if you notify your institution at least three business
days before the scheduled transfer. The notice may be oral or written,
but the institution may require a written follow-up within 14 days of
the oral notice. If you fail to provide the written follow-up, the
institution's responsibility to stop payment ends.
Although federal law provides only
limited rights to stop payment, individual financial institutions may
offer more rights or state laws may require them. If this feature is
important to you, you may want to shop around to be sure you're
getting the best "stop-payment" terms available.
Other Rights
The EFT Act protects your right of choice in two specific
situations regarding use of electronic fund transfers: First, the Act
prohibits financial institutions from requiring you to repay a loan by
electronic transfer. Second, if you're required to receive your salary
or government benefit check by EFT, you have the right to choose your
institution.
Suggestions
If you decide to use EFT, keep these tips in mind:
- Take care of your ATM or debit card.
Know where it is at all times; if you lose it, report it as soon as
possible.
- Choose a PIN for your ATM or debit
card that's different from your address, telephone number, Social
Security number, or birthdate. This will make it more difficult for
a thief to use your card.
- Keep and compare your receipts for
all types of EFT transactions with your periodic statements. That
way, you can find errors or unauthorized transfers and report them.
- Make sure you know and trust a
merchant before you share any bank account information or
pre-authorize debits to your account. Be aware that some merchants
use electronic processing of your check if you sign a receipt
authorizing the transaction.
Where to File Complaints
If you think a financial institution or company has failed to
fulfill its responsibilities to you under the EFT Act, speak up. In
addition, you may wish to complain to the federal agency listed below
that has enforcement jurisdiction over that company.
State Member Banks of
the Federal Reserve System
Consumer and Community Affairs
Board of Governors of the Federal Reserve System
20th & C Streets, NW, Mail Stop 801
Washington, DC 20551
www.federalreserve.gov
National Banks
Office of the Comptroller of the Currency
Compliance Management
Mail Stop 7-5
Washington, DC 20219
www.occ.treas.gov
Federal Credit Unions
National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314
www.ncua.gov
Non-Member Federally
Insured Banks
Office of Consumer Programs
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
www.fdic.gov
Federally Insured
Savings and Loans, and Federally Chartered State Banks
Consumer Affairs Program
Office of Thrift Supervision
1700 G Street, NW
Washington, DC 20552
www.ots.treas.gov
Other Credit and Debit or ATM Card
Issuers
The FTC works for the consumer to
prevent fraudulent, deceptive and unfair business practices in the
marketplace and to provide information to help consumers spot, stop and
avoid them. To file a
complaint or to get free information
on consumer issues, visit
www.ftc.gov or
call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The
FTC enters Internet, telemarketing, identity theft and other fraud-related
complaints into
Consumer Sentinel, a
secure, online database available to hundreds of civil and criminal law
enforcement agencies in the U.S. and abroad.
|
FEDERAL TRADE COMMISSION |
FOR THE CONSUMER |
1-877-FTC-HELP |
www.ftc.gov |
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January 2003 |