If you’ve ever had your debit card number stolen or had an unauthorized transfer made from your bank account, you may be familiar with some of the details of Regulation E, a federal framework to protect consumers.
What is Regulation E?
Regulation E protects individuals who make electronic funds transfers (EFTs) so they aren’t fully liable for unauthorized or incorrect transactions to and from their bank accounts, as long as they let their bank know about the situation as soon as possible.
Regulation E was created by the Federal Reserve and is currently enforced by the Consumer Financial Protection Bureau. It outlines the responsibilities and liabilities of businesses and people who take part in electronic fund transfers, or EFTs.
Regulation E is the way the CFPB implements the Electronic Fund Transfer Act, which was created in 1978 and has been updated over time to reflect new electronic payment technologies.
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What is an electronic fund transfer?
The Federal Reserve defines an EFT as a transaction that a person initiates via an electronic terminal, telephone, computer or debit card that either credits or debits a consumer’s bank account. EFTs can include services such as ATM transfers, bill payment services over the phone, point-of-sale debit card transactions with retailers and pre-authorized transfers to or from a consumer’s bank account.
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Why does Regulation E matter for consumers?
Regulation E limits a consumer’s liability to $50 in the instance that they experience theft or loss from an unauthorized EFT. However, people who have experienced an unauthorized EFT need to notify their bank, credit union or other depository institution in a timely manner, usually within 60 to 120 days depending on the financial institution; otherwise, they may be liable for $500 or an unlimited amount.
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What is not covered by Regulation E?
Regulation E covers transactions that affect funds in consumer bank accounts, which means it doesn’t cover checks or credit card transactions. If you have an issue with unauthorized or mistaken use of your credit card, report it to your credit card issuer.
