|
|
|
Goto: List of all articles
< previous article
next article >
Electronic Funds Transfer (EFT) |
- Example:
On his way home last
Friday night, Martin Wilson realized that he had no cash
for the weekend. The bank was closed, but Martin had his bank debit card and the
code to use it. He inserted the card into an automated teller machine outside
the front door of the bank; then, using a number keypad, he entered his code and
pressed the buttons for a withdrawal of $50. Martin’s cash was dispensed
automatically from the machine, and his bank account was electronically debited
for the $50 cash withdrawal.
Martin’s debit card is just one way to use electronic fund transfer (EFT)
systems that allow payment between parties by substituting an electronic signal
for cash or checks.
Are we heading for a checkless society? Probably not. But making a dent in
the large number of paper checks in the country’s banking system is clearly one
advantage to electronic banking.
Today, the cost of moving checks through the banking system is estimated to
be about $3.00 per check, including the costs of paper, printing, and mailing.
Moreover, checks except your own check presented at your own bank take time to
cash: time for delivery, endorsement, presentation to another person’s bank, and
winding through various stations in the check-clearing system. Technology now
can significantly lower the costs of the payment mechanism (by about $1.50 per transaction)
and make it more efficient and convenient by reducing paperwork.
EFT in Action
The national payment mechanism moves money between accounts in a fast,
paperless way. These are some examples of EFT systems in operation:
Automated Teller Machines (ATMs). Consumers can do their banking
without the assistance of a teller, as Martin Wilson did to get cash, or to make
deposits, pay bills, or transfer funds from one account to another
electronically. These machines are used with a debit or EFT card and a code,
which is often called a personal identification number or “PIN.”
Point-of-Sale (POS) Transactions. Some debit or EFT cards (sometimes
referred to as check cards) can be used when shopping to allow the transfer of
funds from the consumer’s account to the merchant’s. To pay for a purchase, the
consumer presents an EFT card instead of a check or cash. Money is taken out of
the consumer’s account and put into the merchant’s account electronically.
Preauthorized Transfers. This is a method of automatically depositing
to or withdrawing funds from an individual’s account, when the account holder
authorizes the bank or a third party (such as an employer) to do so. For
example, consumers can authorize direct electronic deposit of wages, social
security, or dividend payments to their accounts. Or they can authorize
financial institutions to make regular, ongoing payments of insurance, mortgage,
utility, or other bills.
Telephone Transfers. Consumers can transfer funds from one account to
another— from savings to checking, for example—or can order payment of specific
bills by phone.
What Law Applies?
THE ELECTRONIC FUND TRANSFER ACT answers several basic questions consumers
have about using EFT services.
A check contains information that authorizes a bank to withdraw a certain
amount of money from one person’s account and pay that amount to another person.
Most consumer questions center on the fact that EFT systems transmit the
information without the paper:
- What record will I have of my transactions?
- How do I correct errors?
- What if someone steals money from my account?
- What about mail solicitations for debit cards?
- Do I have to use EFT services?
Below are the answers the EFT Act gives to questions about these systems.
What Record Will I Have of My Transactions?
A cancelled check is permanent proof that a payment has been made. What proof
of payment is available with EFT services?
If you use an ATM to withdraw money or make deposits or a POS terminal to pay
for a purchase, you can get a written receipt, much like a sales receipt you get
with a cash purchase. This shows the amount of the transfer, the date it was made,
and other information. This receipt is your record of transfers initiated at an
electronic terminal.
Your regular bank statement must also show electronic transfers to and from
your account, including those made with debit cards, by a preauthorized
arrangement, or under a telephone transfer plan. The statement will also show
the party to whom payment has been made and display any fees for EFT services (or
the total amount charged for account maintenance) and both your opening and closing
balances.
How Do I Correct Errors?
The way to report errors is somewhat different with EFT services than it is
with credit cards (see the section on correcting credit billing errors). But as
with credit cards, financial institutions must investigate and promptly correct
any EFT errors that you report.
If you believe there has been an error in an electronic fund transfer
relating to your account:
1. Write or call your financial institution immediately if possible, but
no later than 60 days from the date the first statement that you think shows an
error was mailed to you. Give your name and account number and explain why you
think there is an error, the kind of error, and the dollar amount and date in
question. If you call, you may be asked to send this information in writing
within 10 business days.
2. The financial institution must promptly investigate an error and
resolve it within 45 days. For errors involving new accounts (opened in the last
30 days), POS transactions, and foreign transactions, the institution may take
longer - up to 90 days - to investigate the error. However, if the financial institution
takes longer than 10 business days to complete its investigation, generally it
must put back into your account the amount in question while it finishes the
investigation. For new accounts, the financial institution may take up to 20
business days to credit your account for the amount you think is in error.
3. The financial institution must notify you of the results of its
investigation. If there was an error, they must correct it promptly,
for example, by making a re-credit final. If it finds no error, the financial
institution must explain in writing why it believes no error occurred and let
you know that it has deducted any amount re-credited during the investigation.
You may ask for copies of documents that were used in the investigation.
What about Theft or Loss?
It’s important to be aware of the potential risk in using an EFT card, which
differs from the risk on a credit card.
On lost or stolen credit cards, your loss is limited to $50 per card.
On an EFT card, your liability for an unauthorized withdrawal varies:
- Your loss is limited to $50 if you notify the financial institution within
2 business days after learning of loss or theft of your card or code.
- But you could lose as much as $500 if you do not tell the card issuer within
2 business days after learning of loss or theft.
- If you do not report an unauthorized transfer that appears on your statement
within 60 days after the statement is mailed to you, you risk unlimited loss on
transfers made after the 60-day period. That means you could lose all the money
in your account plus your maximum overdraft line of credit, if present.
- Example:
On Monday, Martin’s debit card
and PIN were stolen. On Tuesday, the thief
withdrew $250, all the money Martin had in his checking account. Five days later,
the thief withdrew another $500, triggering Martin’s overdraft line of credit.
Martin did not realize his card was stolen until he received his bank statement,
showing withdrawals of $750 he did not make. He called the bank right away.
Martin’s liability is $50.
Now suppose that when Martin got his bank statement he didn’t look at it and
didn’t call the bank. Seventy days after the statement was mailed to Martin, the
thief withdrew another $1,000, reaching the limit on Martin’s line of credit. In
this case, Martin would be liable for $1,050 ($50 for transfers before the end of
the 60 days; $1,000 for transfers made more than 60 days after the statement was
mailed).
What about Mail Solicitations for Debit Cards?
A financial institution may send you an EFT card that is valid for use only
if you ask for one, or to replace or renew an expiring card. The financial
institution must also give you the following information about your rights and
responsibilities:
- A notice of your liability in case the card is lost or stolen
- A telephone number for reporting loss or theft of the card or an
unauthorized transfer
- A description of its error resolution procedures
- The kinds of electronic fund transfers you may make and any limits on the
frequency or dollar amounts of such transfers
- Any charge by the institution for using EFT services
- Your right to receive records of electronic fund transfers
- How to stop payment of a pre-authorized transfer
- The financial institution’s liability to you for any failure to make or to
stop transfers and
- The conditions under which a financial institution will give information to
third parties about your account.
In general, you must get advance notice of any change in the account that
would increase your costs or liability, or would limit transfers. A financial
institution may send you a card that you did not request only if the card is
not valid for use. An unsolicited card can be validated only at your request and
only after the institution makes sure that you are the person whose name is on
the card. The mailing must also include instructions on how to dispose of an
unwanted card.
Do I Have to Use EFT?
The EFT Act forbids a bank from requiring you to repay a loan or other
credit by EFT, except in the case of overdraft checking plans. With some
exceptions, your employer or a government agency can require you to receive your
salary or a government benefit by electronic transfer. However, you have the
right to choose the financial institution that will receive your funds.
Special Questions about Preauthorized Plans
Q. How will I know that a preauthorized deposit has been made?
A. There are various ways in which you may be notified. Notice may be given
by your employer (or whoever is sending the funds) that the deposit has been
sent to your financial institution. Otherwise, a financial institution may
provide notice when it has received the credit or will send you a notice only
when it has not received the funds. Financial institutions also have the option
of giving you a telephone number you can call to check on a preauthorized
deposit.
Q. How do I stop a preauthorized payment?
A. You may stop any preauthorized payment by calling or writing the financial
institution, but your order must be received at least three business days before
the payment date. Written confirmation of a telephone notice to stop payment may
be required. You should also contact the merchant or organization you authorized
to debit your account. Q. If the payments I preauthorize vary in amount from
month to month, how will I know how much will be transferred out of my account?
A. You have the right to be notified of all varying payments at least 10 days in
advance. Or you may choose to specify a range of amounts and to be told only
when a transfer falls outside that range. You may also choose to be told only
when a transfer differs by a certain amount from the previous payment to the
same company.
Q. Do the EFT Act protections apply to all preauthorized plans?
A. No. They do not apply to automatic transfers from your account to the
institution that holds your account or vice versa. For example, they do not
apply to automatic payments made on a mortgage held by the financial institution
where you have your EFT account. The EFT Act also does not apply to automatic
transfers among your accounts at one financial institution.
|
|