Electronic funds transfers are a convenient way to send money, but they also leave consumers vulnerable to errors that are made by financial institutions when these transactions occur. The Electronic Funds Transfer Act is legislation that protects consumers from banking errors and allows them to challenge erroneous electronic fund transfers. If the financial institution fails to correct the error, consumers may be entitled to damages plus the costs and attorney’s fees required for a consumer to bring a claim. Read on to find out more about this act and how it can protect you.
Types of Electronic Funds Transfers
There are several types of electronic funds transfers that are covered under the EFTA. These include the following:
- ATM: An ATM machine allows people to make withdrawals and deposits 24/7. Some ATMs charge a fee. If this is the case, the customer must be made aware of the fee before the transaction takes place.
- Direct Deposit: With direct deposit, consumers can have paychecks and other forms of payment deposited directly into their accounts. Consumers have the right to stop direct deposits at any time and must give banks 3 days notice if they do not want the deposits to continue.
- Pay by Phone: If you are making payments or transferring funds by phone, banks are required to ask you several questions to confirm your identity.
- Internet: Consumers can use the internet to monitor their accounts, make transfers, payments and more.
- Debit Cards: These are bank issued cards that can be used to make retail purchases in store or via the internet. They do not include gift cards, credit cards and phone cards which are not covered by the EFTA.
- Electronic Check: Consumers can make payments by scanning a check so the necessary billing information is captured. Once the check is scanned, it becomes null and void.
What Does the EFTA Require from Service Providers?
Any third party that offers EFTA transaction services is required to disclose certain information to consumers. This information must be disclosed in writing and it must include the following:
- A summary of liability regarding unauthorized transfers and transactions.
- Contact information for the person or persons to be notified if an unauthorized transaction occurs as well as the procedure that needs to be followed in these situations.
- The types of transactions you can make and any fees and limitations associated with them.
- A summary of your rights including the right to receive periodic statements and point of sale receipts.
- A summary of the institution’s liability if it fails to stop or make certain transactions.
- The circumstances in which an institution will share your financial information with a third party.
- Information on how to report an error and how long you have to report it.
- Notice that you will have to pay a fee to make a transaction on an ATM machine where you don’t have an account.
The EFTA also protects people from unauthorized transactions that may be due to identity theft. If you suspect a transaction on your statement is unauthorized, you have sixty days from the date of that transaction to report it to the bank. Banks are not required to follow up on unauthorized transactions reported after the 60-day mark.
Once notified, a bank will have 10 business days to conduct an investigation or provisionally recredit your account. They must tell you the results within 3 days of the conclusion of the investigation. If an error was made, the bank will have one day from the determination to correct it. In some cases, investigations can take as long as 45 days, but if this occurs, banks must give you back the disputed funds until the process is over.
Compensation for EFTA Violations
If a financial institution violates the EFTA, consumers may sue for monetary damages plus the costs and attorney’s fees associated with a claim. Institutions can be sued for the following reasons:
- If they refuse to credit money back or correct an error
- If they fail to prevent a transfer on a lost or stolen card or an account you told them to freeze
- If they allow preauthorized recurring electronic fund transfers without written authorization
Consumers who sue financial institutions for these types of damages may be awarded anywhere from $100 – $1000in statutory damages, all actual damages, legal fees, and costs..
Although creditors may encourage consumers to use electronic transfers, they can not require them to do so. Employers, however, can require employees to use direct deposit. In that case, the employee can choose which bank and account the paychecks will be deposited into.
When you are issued a debit card, the bank must disclose specific information concerning your fees and liabilities. The card must have unique identification features such as a magnetic strip and an account number.
A financial institution can not issue you a card without your consent. You can only be issued a card if you request it.
Limited Stop Payment Privileges
Consumers have the right stop payment for recurring charges such as subscriptions and the like. They can do this by oral notification that must take place 3 days before the scheduled transfer. Oral notifications must be followed up by written notifications to be submitted within 14 days of the original request.
Consumers cannot stop payments for defective and damaged goods. These transactions must be worked out between the consumer and the company selling the goods.
There are regulations that apply to situations where consumers make a transaction and there is not enough money in their account to cover the transaction. Overdraft fees can be charged only if the consumer consented to those fees via a written agreement they made with the bank. If you did not sign such an agreement, the transaction will be declined and the bank will not be permitted to charge you those fees.
+In the case of recurring payments, like those made to utility companies and the like, banks may enroll you in an overdraft protection program. This means that if a consumer has insufficient funds for a payment, banks will essentially loan them the balance and cover the transaction. They will then charge them the amount of the loan as well as an overdraft protection fee.
Making Sure Your Rights Are Protected
If you feel your EFTA rights have been violated, you may need a reliable attorney. If you are looking for an attorney in the state of Louisiana, Samuel Ford of Scott, Vicknair, Hair & Checki will help protect your rights.
The SVHC team has years of experience in consumer law. SVHC is known for its caring approach, aggressive representation and outstanding outcomes. Contact SVHC today.
Samuel Ford of SVHC offers free consultations and, if you have a claim, you may be able to recover all associated costs and attorney’s fees, meaning SVHC may be able to represent you at no cost to you! Contact Samuel Ford today!