FCS 3400
Electronic Banking
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 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 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
transfer 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.
Disclosures
To understand your legal rights and responsibilities regarding your EFT account, read the documents you receive from your 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 funds 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 of 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 amounts of transfers
- A summary of your right to receive documentation of transfers, to
stop payments 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 contact 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 pre-authorized
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 are also entitled to a periodic statement for each 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
inquires. 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 bank
statements. This will enable your to 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 problem or error appears on your
periodic statements or terminal receipts 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 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 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 your 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 have 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 written
explanation.
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 on 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 loss 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 with 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 have
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 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
back.
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
instigation'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 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 are required to receive your
salary or government benefit check by EFT, you have the right to
choose the institution to receive the funds.
Suggestions
If you decide to use EFT, keep these tips in mid:
- Take care of your EFT card. Know where it is at all times; if you
lost it, report it as soon as possible.
- Choose a PIN different from your address, telephone number, social
security number, or birthday. 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 report them.
- Make sure you know and trust the merchant before you provide any
bank account information to pre-authorize debits to your account.