Electronic Fund Transfer Act
The Electronic Fund Transfer Act (EFTA, 1978) defined the LIABILITY rules governing electronic fund transfers. As defined in the act, electronic fund transfers are “any transfer of funds, other than a transaction originated by check, draft, or similar paper instrument, which is initiated through an electronic terminal, telephone instrument, or computer or magnetic tape so as to order, instruct, or authorize a financial institution to DEBIT or credit an account. Such term includes, but is not limited to, pointof- sale transfers, automated teller machine transactions, direct deposits or withdrawals of funds, and transfers initiated by telephone.” At the time it was passed, the EFTA was far-reaching legislation, affecting the E-COMMERCE that is commonplace today. The act provides CONSUMER PROTECTIONs requiring financial institutions providing EFT services to inform the customer regarding
• the customer’s liability for unauthorized transfers caused by loss, or the loss of the card, code, or other access device
• whom to call and the phone number if there is a theft or loss
• the charges for using the EFT system
• what systems are available, including limits on frequency and dollar amounts
• the consumer’s right to see transactions in writing
• ways to correct errors
• the consumer’s right to stop payments
• rules concerning disclosure of account information to third parties
Probably the EFTA’s most important aspect to consumers is the $50 limit on their liability when their access device is lost, stolen, or misplaced. This limit applies if the consumer notifies the financial institution within two business days of learning of the loss or theft. A consumer’s liability rises to $500 if notification is made after two business days, and unlimited liability occurs if notification does not take place within 60 days after receiving a periodic statement reflecting the unauthorized transfer. The act also provides sanctions and DAMAGES against financial institutions that violate the EFTA. Actual, punitive, and criminal sanctions can result from failure to comply with the act.
