To most people, electronic banking
means 24-hour access to cash through an automated teller machine (ATM) or
paychecks deposited directly into checking or savings accounts.
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 such as
cards or codes that you use to gain access to your account. Many financial
institutions use an automated teller machine (ATM) card and a personal
identification number (PIN) for this purpose. The federal Electronic Fund
Transfer Act (EFT Act) covers some consumer transactions.
Electronic Fund Transfers
EFT offers several services that consumers may find
- 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 personal identification number (PIN).
Some ATMs impose a surcharge, or usage fee, on consumers who are not
members of their institution or on transactions at remote locations.
ATMs must disclose the existence of a surcharge on the terminal
screen or on a sign next to the screen. Check the rules of your
institution to find out when or whether a surcharge is imposed.
- 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 telephone your
financial institution with instructions to pay certain bills or to
transfer funds between accounts. You must have an agreement in advance
with the institution to make such transfers.
- Personal Computer Banking allows you to conduct
many banking transactions electronically 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 allow you to pay for
retail purchases with an EFT (or "debit") card. In some instances, this
card also may be your ATM card. This is similar to using a credit card,
but with one important exception: the money for the purchase is
transferred immediately — or very shortly — from your bank account to
the store’s account. An increasing number of merchants are accepting
this type of payment.
Some financial institutions and merchants issue cards that
contain cash value stored electronically on the card itself. These
"stored-value" cards, as well as transactions using them, may not be
covered by the EFT Act, which means you may not be covered for loss or
misuse of the stored-value card.
To understand your legal rights and responsibilities
regarding your EFT account, read the documents you receive from the
financial institution that issued you the "access device" — that is, the
card, code, other means, or combination of ways you access your account to
initiate electronic fund transfers. Although this varies from institution
to institution, most use a card and PIN. No one should know this unique
number 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," 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.
In addition to these disclosures, you will receive two
other types of important 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 for that account. You are
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, as
well as the type of transfer, such as "from savings to checking." When you
make a point-of-sale transfer, you probably will get your terminal receipt
from the salesperson.
You will not receive a terminal receipt for recurring
electronic payments that you have authorized in advance, such as insurance
premiums, mortgages, or utility bills. Instead, these preauthorized
transfers will appear on your periodic statement. If the preauthorized
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 also are entitled to a periodic statement for each
statement cycle in which an electronic transfer is made. This 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 to be
used for inquiries. You are entitled to a quarterly statement even if no
electronic transfers were made.
Keep and compare your EFT receipts with your periodic
statements the same way you compare your credit card invoices with your
monthly credit card statement or your checks against your monthly bank
statements. This will enable you to make the best use of your rights under
federal law to dispute errors and avoid liability for unauthorized
You have 60 days from the date a problem or error appears
on your periodic statements or terminal receipt to notify your financial
institution. The best way to protect yourself in the event of an error —
or a lost or stolen ATM or EFT card — is to notify the issuer by certified
letter, return receipt requested, so you can prove that the institution
received your letter. Keep a copy of the letter you send for your
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 have
missed the 60-day deadline.
After notification about an error on your statement, the
institution has 10 business days to investigate. The financial 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 to complete the investigation — but
only if the money in dispute is returned to your account and you are
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 an EFT card. An oil company, for example, might give you an
EFT card that lets you pay for gasoline purchases directly from your bank
account. These purchases will be shown on your periodic statement from the
bank. In case of an error on your account, however, you should contact the
issuer of the card (for example, the oil company) at the address or phone
number the company has provided. After you’ve notified the company about a
point-of-sale purchase error, the company has 20 business days to
investigate and tell you the results. It has up to 90 days to complete an
investigation, if it returns the money to your account and notifies you
promptly of the credit. If no error is found at the end of the
investigation, the institution may take back the money if it sends you a
Lost or Stolen EFT Cards
If your credit card is lost or stolen, you can’t
lose more than $50. If someone uses your ATM or EFT card without your
permission, you can lose much more.
If you report an ATM or EFT card missing before it is used
without your permission, the EFT Act says the card issuer cannot hold you
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
will not be responsible for more than $50 for unauthorized use.
However, if you do not report the loss within two business
days after you realize the card is missing, but you 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 withdrawal. And, if you do not
report an unauthorized transfer or withdrawal 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 didn’t notify the institution within the time
periods allowed because of an extenuating circumstance, such as lengthy
travel or illness, the issuer must extend the time period for notification
to what is reasonable. 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.
After you report the loss or theft of your ATM card, you
are not liable for additional unauthorized transfers that may be made.
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
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 is as if you had paid cash. That is, it is
up to you to resolve the problem with the seller and get your money
There is one situation, however, when you can stop
payment. If you have arranged regular payments out of your account to
third parties, such as life 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 to be made 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 are getting the best "stop payment" terms
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 are required to receive your salary or
government benefit check by EFT, you have the right to choose the
institution to receive the funds.
If you decide to use EFT, keep these tips in mind:
- Take care of your EFT card. Know where it is at all
times; if you lose it, report it as soon as possible.
- Choose a PIN different from your address, telephone
number, social security number, or birthdate. Choosing a different
number will make it more difficult for a thief to use your EFT card.
- Keep and compare your EFT receipts with your periodic
statements so that you can find errors or unauthorized transfers and
- Make sure you know and trust the merchant before you
provide any bank account information to pre-authorize debits to your
Where to File Complaints
If you think a financial institution or merchant 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 Sts., N.W., Mail Stop 800
- Washington, D.C. 20551
- National Banks
- Office of the Comptroller of the Currency
- Compliance Management
- Mail Stop 7-5
- Washington, D.C. 20219
- Federal Credit Unions
- National Credit Union Administration
- 1776 G St., N.W.
- Washington, D.C. 20456
- Non-Member Federally Insured Banks
- Office of Consumer Programs
- Federal Deposit Insurance Corporation
- 550 Seventeenth St., N.W.
- Washington, D.C. 20429
- Federally Insured Savings and Loans, and Federally
Chartered State Banks
- Consumer Affairs Program
- Office of Thrift Supervision
- 1700 G St., N.W.
- Washington, D.C. 20552
- Other Credit, Debit, or ATM Card Issuers (includes