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THE LAW

Electronic Funds Transfer Act

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People have been transferring money electronically for decades now. While more and more people are involved in electronic money transfers today, the trend started with wire transfers between accounts several decades ago. Today, Americans use smartphones to deposit money, transfer funds to a friend or family member, and even pay bills online. Millions of people manage their bank accounts and monthly expenses using their banking institutions’ website.

Have you ever stopped to think about the safety of your money when you make all of these electronic fund transfers? The Electronic Funds Transfer Act (EFTA) was established to protect you and your money when engaged in the transfer of funds through a variety of electronic methods.

Overview of the Electronic Funds Transfer Act

By the 1970s, checks had become the preferred method of payment outside of cash. Writing a check represented hard evidence of payment, but the 1970s also saw the electronic ATM grow in popularity and availability, along with the increased use of electronic banking methods. The Electronic Funds Transfer Act (EFTA) was authorized by Congress in 1978, and signed into law by President Jimmy Carter.

The goal of the EFTA is to establish a set of rights and liabilities for consumers in electronic funds transfer activities, as well as other responsible participants in the transfer. As a consumer, the EFTA recognizes your right to nominate the financial institution to which your designated payments should be made. Additionally, your creditors or lenders may not require you to repay a loan or line of credit by electronic fund transfer, unless there is an overdraft of your checking account.

As for your bank or other financial institution, these groups must provide you with notice of your liability in the case that your card is lost or stolen. That notice must include a phone number to call in order to report the loss of your card, and also a description of the error resolution process.

Limits to Consumer Liability under the EFTA

There are limits to your liability when it comes to the loss or theft of a credit card. The EFTA established guidelines for financial institutions to follow that ensure that if you report a missing or stolen card before any transactions take place, you may not be held responsible for the transactions that take place following notice of loss or theft.

With that said, you may be held liable for unauthorized withdrawals if your card is lost or stolen and you do not follow certain criteria. These include:

  • Losses are limited to $50 if the institution is notified within two business days.
  • Loss maximums could be raised to $500 if the institution is notified within 3 to 59 business days.
  • If the loss of your card is not reported within 60 business days, you risk unlimited loss on transfers made after the 60-day period. You may not only lose all your money in an account, but also face a maximum overdraft charge.

What the EFTA Covers

The EFTA is not a catch-all the removes all of your liability during electronic fund transfers. While the EFTA does cover most credit and debit card transactions, as well as other electronic transfers through your banking or lending institution, there are situations not covered by the EFTA that you should be aware of. These include:

  • Preauthorized plans: The act does not apply to automatic transfers from an account in the name of an institution you use and an account in your name. For example, the act does not cover automatic payments toward your mortgage if held by the same bank or lender where your electronic funds account exists.
  • The act does not apply to automatic transfers between your accounts at the same financial institution. For example, a transfer from your checking to savings at the same bank is not covered.
  • Not all transfers are covered. Some banks, financial institutions, and vendors produce cards with cash values on the card itself. For example, a public transportation pass, store gift card, or prepaid phone card is not covered under the EFTA.
  • You do not have the right to stop payment when using an electronic fund transfer.
  • If your state has a lower liability limit than those set forth in the EFTA’s “Loss or Theft: Consumer Liability” section, that limit is overridden by the EFTA.

Fighting Errors under the EFTA

It is important that you remain diligent in tracking your electronic fund transfers. Many people have gotten away from balancing their checkbooks in the digital age, and the result can be lost money from time to time. You should review your EFT statements regularly to prevent errors in transactions from causing financial pain. If you identify errors in your electronic transfers, the following steps can and should be taken:

  • As a Consumer:
    • Contact your financial institution immediately to point out the errors.
    • Make contact with your institution no later than 60 days from the date of the error.
    • Provide the bank, credit union, or other lender with your name and account number.
    • Explain why you believe there is an error on your transfers. Identify the type, dollar amount, and date of the error.
    • Be prepared to provide additional details of the error. This must be done in writing within 10 days.
  • Financial Institution Obligations:
    • Your bank or lender must investigate your claim, and resolve it, within 45 days.
    • Your bank has up to 90 days to investigate and correct errors involving new accounts (opened within 30 days), POS transactions, and foreign transactions.
    • If it takes more than 10 business days to complete the investigation, your bank must credit your account the amount in question.
    • For new accounts, the bank has 20 business days to credit the amount back to your account.
    • Your bank or lender must notify you of the results of its investigation. The lender or creditor must correct or credit situations where errors occurred, or explain in writing if no error was discovered.
    • Must provide you with copies of any and all documents used in the investigation of the error.

Help from Fair Debt Lawyers

If you have identified errors stemming from electronic fund transfers and believe that your financial institution has ignored your requests, you can contact the legal experts at Fair Debt Lawyers. Our team of experienced lawyers is familiar with the EFTA, and can help you identify errors and determine the validity of your claim. Contact us today if you have concerns regarding a recent electronic fund transfer.