Electronic Fund Transfer Act (EFTA)

Electronic Fund Transfer Act (EFTA)

Originally passed in 1978, the Electronic Fund Transfer Act (EFTA) is a United States consumer protection statute that sets out the rights, obligations, and liabilities of parties participating in electronic money transfers. It was signed by President Jimmy Carter in order to define the rights and obligations of customers, as well as the responsibilities of all those involved in the transfer of electronic funds. It is a government law that secures buyers when they move reserves electronically, including using check cards, automated teller machines (ATMs), and programmed withdrawals from a bank account. Several revisions were made to the initial regulations, mainly to keep up with evolving technology. The EFTA provides, among other protections, a means of fixing transaction mistakes and restricts liability arising from a lost or stolen card.

However, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 moved the position to the Consumer Financial Protection Bureau (CFPB), with an impact from July 2011. The EFT Act respects their right to appoint the financial institution to which such payments should be made. It also forbids a borrower or lender from authorizing a customer through electronic fund transfer to repay a loan or other credit, except where there is an overdraft on checking plans. The fundamental reason for the EFTA enactment was two dimensional: to ensure the privileges of purchaser’s people occupied with electronically moving cash and to explain the guidelines overseeing electronic financial exchanges.

(Example of Electronic Fund Transfer Act)

Electronic fund transfers are transactions that allow a financial institution to credit or debit a customer’s account by using computers, tablets, or magnetic strips. In the event that the card is lost or stolen, the financial institution must give the customer notice of its responsibility. This should incorporate a telephone number for revealing the misfortune and a depiction of its mistake goal measure. The use of ATMs, debit cards, direct deposits, point-of-sale (POS) transactions, phone-initiated transfers, automated clearinghouse (ACH) systems, and pre-authorized withdrawals from checking or savings accounts are included in electronic transfers.

The Electronic Fund Transfer Act, otherwise called “Guideline E,” basically spreads out all the standards pertinent to electronic exchanges of cash. The EFTA traces prerequisites for banking organizations and purchasers to follow when blunders happen. Consumers may appeal errors under this Act, have them corrected, and receive restricted financial sanctions. Its provisions apply to banks and other financial institutions which handle electronic transfers, as well as to consumers who wish to electronically send or receive money. On the off chance that a client reports to the monetary foundation that their card is absent before any exchanges happen, they are not considered liable for any exchange that happens after the report of a missing/stolen card.

Automated teller machine (ATM) transactions, direct deposits and other pre-authorized money transfers, automated clearinghouse (ACH) transactions, and point of sale transactions made with a credit or debit card are the primary areas protected by the EFTA. If their card is lost or stolen and they do not meet such criteria, a customer can be responsible for unauthorized withdrawals:

  • Loss is limited to $500 if an institution is notified within two business days
  • Loss could be up to $5000 if an institution is notified between 3 and 59 days
  • If the loss is not announced within 60 working days, the customer faces unlimited losses on transactions made after the 60-day span, if any; all money in the account plus maximum overdraft will be lost

On the other hand, the EFTA specifies the criteria to be met by banks and other financial institutions in dealing with such circumstances and refers to the details to be given to customers by credit and debit card issuers. The EFTA requires monetary organizations and any outsider engaged with electronic asset move administrations to reveal the accompanying data to customers:

  • A summary of liability regarding unauthorized transactions and transfers
  • Contact information for the person(s) who should be informed in the event of an illegal transaction, along with the reporting and filing process for a claim
  • The kinds of transfers that we can make, any fees related to them, and any restrictions that may exist
  • A review of our rights including the right to obtain daily statements and receipts for POS transactions
  • A summary of the institution’s liability to us if it fails to make or stop certain transactions
  • The conditions in which an organization will exchange details about our account and account activities with a third party
  • A notice explaining how to report a mistake, how to request more information, and how long we have to file our report

EFT is anything but an ideal framework; in this way, clients should even now be tireless in assessing their EFT articulations for potential blunders as they would with some other kind of exchange. A lot of the Electronic Fund Transfer Act manages shopper rights concerning electronic exchanges. It requires financial institutions to provide customers with specific information on fees associated with EFTs (such as ATM fees), customer responsibility for fraudulent purchases or stolen cards, consumer rights such as the right to obtain periodic accounts), and the restricted circumstances under which an entity may share consumer information with a third party.

Furthermore, the EFT Act does not extend to automatic transfers from a consumer’s account to a particular financial institution. It does not cover all transfers either. Some banks, other financial institutions, and manufacturers can create cards that are imprinted onto the card itself with a cash value. While the impediment is proposed to shield customers from somebody taking cash from their record, numerous individuals discover the limitation irritating and dangerous when they need to move a bigger whole starting with one record then onto the next.


Information Sources:

  3. wikipedia