ACH Payments

Cleaning Up Regulation E – The Electronic Fund Transfer Act

A few technical corrections to the implementation provisions of the Electronic Fund Transfer Act

On October 12, 2016, the Bureau of Consumer Financial Protection (CFPB) published a Final Rule in the Federal Register that was intended to correct a number of technical/clerical errors that had inadvertently made their way into Regulation E.

Regulation E is the provision that implements the Electronic Fund Transfer Act (15 U.S.C. 1693 et seq.), which is intended to:

“…provide a basic framework establishing the rights, liabilities, and responsibilities of participants in electronic fund and remittance transfer systems.” 15 U.S.C. 1693(b)

The Electronic Fund Transfer Act was originally passed by Congress in 1978 in order to establish the rights and liabilities of consumers and the responsibilities of everyone involved with the electronic transfer of funds. The Act was implemented in Federal Reserve Board Regulation E.

The Act clearly plays a key role in the mission of the CFPB, which is tasked with protecting American consumers in all their interactions in the consumer markets and as those consumers participate in broader commerce. Regulation E implements that Act and provides official interpretations to the implementing regulations at 12 C.F.R. part 1005. This part deals with a variety of topics, including automated teller machines, banks, banking, consumer protection, credit unions, electronic fund transfers, national banks, remittances, reporting and record-keeping requirements and savings associations.

The CFPB considers the Final Rule necessary because:

“Current Regulation E inadvertently contains several errors.”

and the only reason for action is:

“… to correct these errors. No substantive change is intended by the corrections herein.”

Let’s take a look at the changes

Where can I find the definition of “automated teller machine operator”?

Subpart A of Regulation E references the definition of “automated teller machine operator” as defined in “§ 1005.16(a)(1).” This is a clerical error since that paragraph does not exist within § 1005.16. The definition of “automated teller machine operator” is found in § 1005.16(a), and the final rule corrects the faulty cross-reference in § 1005.17(b)(11) by changing it from:

  • 1005.16(a)(1) to § 1005.16(a).

What language should be on Model forms to fully inform payment senders of their rights?

One of the model forms (Model Form A-37) in appendix A to part 1005 failed to include the full language of the rights of a payment sender regarding error resolution and cancellation that is required under § 1005.31(b)(2)(vi). That language is included in other model forms in subpart B but was inadvertently left-off with Model Form A-37. That language:

informs a sender they can contact the State agency that licenses or charters a transfer provider and the (CFPB) for questions or complaints about the transfer provider.

The final rule adds that language to Model Form A-37 and includes contact information so consumers will have quick access to find the relevant State agency or the CFPB.

What is the right reference for the exception to §§ 1005.33(a) and (g)?

Section 1005.33(a)(1)(iv) allows that a payment transfer provider’s failure to make funds available to a designated recipient by the previously disclosed “date of availability” is an error UNLESS one of the enumerated exceptions applies. One of the listed exceptions (found in § 1005.33(a)(1)(iv)(D)) allows for the failure if the SENDER gave the provider an incorrect account number and is explained in a subsequent comment named Comment 33(a)-9. The clerical error is in Comment 33(a)-9 and the final rule:

corrects the error by removing the erroneous cross-reference to § 1005.30(h)(2) and replacing it with the correct cross-reference to § 1005.33(a)(1)(iv)(D).

In addition, there is another comment cross-reference that needed adjustment. Comment 33(g)-1 contains a cross-reference to the regulatory requirements that transfer providers are subject to record-retention requirements, but the final rule corrects a clerical error inadvertently included by:

correcting the cross-reference that mistakenly noted§ 1005.31(g)(2) and changing it to the correct reference which is § 1005.33(g)(2).

Why are there two section headings in the commentary to 1005.36?

Before the final rule, there were two section headings in the commentary to § 1005.36, and one of those headings was mistakenly different from the regulatory text of § 1005.36. This final rule corrects that clerical error to make sure there is only one heading for the commentary to § 1005.36 that accurately reflects the heading of § 1005.36 from the regulatory text. Functionally, the commentary under the previously erroneous heading is also included under the correct heading.

The single, correct heading for the comments under § 1005.36 is now:

“Transfers Scheduled Before the Date of Transfer.”

As noted above, the changes promulgated in the Final Rule are clerical in nature and provide clarity to those regulated by the relevant provisions. It is not at all unusual for federal agencies to have to do corrections to previously passed rules in order to “clean-up” regulations that inadvertently included errors, and the CFPB has done exactly that here.

The changes will surely be noticed, but it seems likely that the kinds of corrections noted above were already found by regulated parties whose business depends on their compliance. These corrections are necessary and helpful, however, in order to allow the public access to critical reference information they may need in order to find the full protection under the law they are afforded when dealing with the electronic transfer of funds.