January 30, 2023

Volume XIII, Number 30


January 30, 2023

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CFPB Issues FAQs on Electronic Fund Transfers

On June 4, the CFPB issued eight updated FAQs to the unauthorized transfer and error resolution provisions under the Electronic Fund Transfer Act  (EFTA) and Regulation E.  Highlights from the FAQs include the following:

  • Unauthorized electronic fund transfers (EFTs) include situations where a consumer is fraudulently induced by a third party into sharing account access information without consent.

  • Negligence by the consumer cannot be used as the basis for imposing greater liability than is permissible when assessing consumer liability for unauthorized transfers. Nor may financial institutions rely on agreements with consumers that modify or waive certain protections granted by Regulation E.

  • Financial institutions may not rely on private network rules that provide less consumer protections than federal law.

  • Financial institutions must begin their investigations promptly upon receipt of an oral or written notice of error and may not delay initiating or completing investigations pending receipt of information from the consumer.

These FAQs come after the CFPB released its Summer 2020 edition of Supervisory Highlights (published in September 2020) discussing instances where examiners found that financial institutions had violated certain Regulation E requirements in their investigations of any errors filed by consumers.

Putting it Into Practice:  These FAQs indicate the CFPB expectations around Regulation E compliance.  Of note is the CFPB’s concern with requiring consumers to sign deposit agreements or stop payment request forms that indemnify and hold institutions harmless.  Financial institutions should consider revising these documents to ensure they do not contain any waivers of consumers’ rights in violation of the EFTA.  Likewise, based on the FAQs and recent CFPB exam findings noted in the Supervisory Highlights, financial institutions ought to review their policies on EFT error notice processing to comply with the Regulation E timing requirements.  Regulation E requires that notice must be received by the institution no later than 60 days after the institution sends the periodic statement that reflects the alleged error.  Financial institutions should confirm their reliance on correct dates to assess timeliness of EFT error notices.

Copyright © 2023, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XI, Number 160

About this Author

Moorari Shah Bankruptcy Lawyer Sheppard Mullin Law Firm

Moorari Shah is a partner in the Finance and Bankruptcy Practice Group in the firm's Los Angeles and San Francisco offices. 

Areas of Practice

Moorari combines deep in-house and law firm experience to deliver practical, business-minded legal advice. He represents banks, fintechs, mortgage companies, auto lenders, and other nonbank institutions in transactional, licensing, regulatory compliance, and government enforcement matters covering mergers and acquisitions, consumer and commercial lending, equipment finance and leasing, and supervisory examinations,...

A.J. S. Dhaliwal Bankruptcy Attorney Sheppard Mullin Washington DC

A.J. is an associate in the Finance and Bankruptcy Practice Group in the firm's Washington, D.C. office. 

A.J. has over a decade of experience helping banks, non-bank financial institutions, and other companies providing financial products and services in a wide range of matters including government enforcement actions, civil litigation, regulatory examinations, and internal investigations.

With a diversified regulatory, compliance, and enforcement background, A.J. counsels financial institutions in matters involving...