The Electronic Funds Transfer Act, or EFTA, is also known as Regulation E. The Act was created in 1978 in order to help define and regulate electronic transfers, which were becoming more and more common thanks to the improvements in technology.
Electronic transfers are increasingly proving to be more efficient and less costly than any form of physical fund transfer requiring a negotiable instrument. However, prior to the Electronic Funds Transfer Act, they were dangerously unregulated. The Electronic Funds Transfer Act sets out exactly what the rights of the consumer are with regard to a consumer electronic transfer.
The Electronic Funds Transfer Act gives consumers the right to seek restitution for errors made in an electronic transfer. When a customer notes an error marked on a transaction review sheet, then the customer should contact the institution with whom the consumer fund transfer was made and provide all necessary information.
That financial institution would then have a duty, under the Electronic Funds Transfer Act, towards the consumer to determine why the error occurred and to correct the error, if such an error is identified. This is probably the type of practice that would be expected of any such situation, but without the Electronic Funds Transfer Act to codify such practice, some financial institutions might have abused an electronic transfer by ignoring customer pleas regarding mistakes.
The Electronic Funds Transfer Act also protects customers from situations in which they lose their debit or credit card, which they use for consumer an electronic transfer. If the consumer quickly reports a missing or stolen card before any transactions take place, then the consumer cannot be held liable for any illegitimate electronic transfers conducted with the card. But if they do not report it before transactions take place, then the consumer would hold some liability for those electronic transfers, depending upon how quickly the consumer alerts the financial institution.
If he or she alerts the institution within 2 business days, then he or she only suffers $50 liability, but after two days, it goes up to $500 liability, and after 60 days, the consumer would probably be liable for all electronic transfers. In all such instances, however, the financial institution in question would have to alert the consumer to the level of liability that he or she might hold in order to ensure that the consumer is properly informed.
The Electronic Funds Transfer Act grants certain other rights to consumers. For example, a consumer receiving electronic transfers for his or her salary or his or her payment from a government benefit, can choose the financial institution into which those transfers pay. The Electronic Funds Transfer Act also guarantees that a consumer debtor cannot be asked to repay a loan in the form of an electronic transfer, except in the case of overdraft fees from checking accounts. These may be very specific rights, but they do act to further protect consumers from potential misuse of electronic transfers by other institutions or agencies.
The Electronic Funds Transfer Act covers many different forms of electronic transfer, including transfers over a phone, along with transfers through computers and through cards with magnetic strips. Of late, the majority of electronic transfers are likely to have been based on Internet transactions in particular.
These transactions are likely to begin requiring a different set of more specified rules, however, as the Electronic Funds Transfer Act provides a good set of rules to protect consumers in basic electronic transfers, but the Internet complicates the situation with additional means of breaching security and concerns with the availability of information.