For immediate release

The Federal Reserve Board on Friday announced final amendments to Regulation E (Electronic Fund Transfer Act) that clarify the responsibilities of parties involved in electronic check conversion transactions and require that consumers receive written notification in advance of these transactions. Additional revisions to the regulation's official staff commentary provide guidance on preauthorized transfers from consumers' accounts, error resolution, and disclosures at automated teller machines (ATMs).

In a separate action, the Board also amended Regulation E so that it covers payroll card accounts.

Among other things, the final rule announced today provides that merchants and other payees that convert payments by check into electronic fund transfers must provide a notice to consumers to obtain consumer authorization for the electronic fund transfer. Merchants and other payees must also notify consumers that if a check is converted, funds may be debited from consumers' accounts as soon as the same day that payment is received, and the check will not be returned by their financial institution.

The final rule also revises the regulation's official staff commentary to clarify the error resolution obligations of financial institutions and to clarify the disclosure obligations of ATM operators with respect to fees imposed by the ATM operator on a consumer for initiating an electronic fund transfer or for a balance inquiry at an ATM.

The final rule addressing electronic check conversion and other matters will take effect thirty days after the date of publication in the Federal Register, which is expected soon. The mandatory compliance date is January 1, 2007.

In addition to the final rule on electronic check conversion services, the Board is adopting a separate interim final rule on payroll card accounts to provide that payroll card accounts established for the purpose of providing salary, wages, or other employee compensation on a recurring basis are accounts covered by Regulation E. The interim final rule grants flexibility to financial institutions that must provide account transaction information to payroll card users.

The amendments to address payroll cards are being issued as interim final rules so that interested parties may comment on the new requirements. The Board requests comment within sixty days after publication in the Federal Register.

Both Federal Register notices are attached.

Final rule, electronic check conversion transactions (208 KB PDF)
Interim final rule, payroll card accounts (101 KB PDF)

2005 Banking and consumer regulatory policy