[Federal Register Volume 64, Number 177 (Tuesday, September 14, 1999)]
[Proposed Rules]
[Pages 49699-49713]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-23139]
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FEDERAL RESERVE SYSTEM
12 CFR Part 205
[Regulation E; Docket No. R-1041]
Electronic Fund Transfers
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Proposed rule.
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SUMMARY: The Board is requesting comment on proposed revisions to
Regulation E, which implements the Electronic Fund Transfer Act. The
Board previously published an interim rule that permits financial
institutions to use electronic communication (for example,
communication via personal computer and modem) to provide disclosures
required by the act and regulation, if the consumer agrees to such
delivery. (A similar rule was also proposed under various other
consumer financial services and fair lending regulations administered
by the Board.) In response to comments received on the interim rule
(and the proposals), the
[[Page 49700]]
Board is publishing for comment an alternative proposal on the
electronic delivery of disclosures, together with proposed commentary
that would provide further guidance on electronic communication issues.
The interim rule remains in effect. The Board is also publishing for
comment technical amendments involving error resolution notices.
DATES: Comments must be received by October 29, 1999.
ADDRESSES: Comments, which should refer to Docket No. R-1041, may be
mailed to Jennifer J. Johnson, Secretary, Board of Governors of the
Federal Reserve System, 20th Street and Constitution Avenue, NW,
Washington, DC 20551. Comments addressed to Ms. Johnson also may be
delivered to the Board's mail room between 8:45 a.m. and 5:15 p.m.
weekdays, and to the security control room at all other times. The mail
room and the security control room, both in the Board's Eccles
Building, are accessible from the courtyard entrance on 20th Street
between Constitution Avenue and C Street, NW. Comments may be inspected
in room MP-500 between 9:00 a.m. and 5:00 p.m., pursuant to
Sec. 261.12, except as provided in Sec. 261.14 of the Board's Rules
Regarding the Availability of Information, 12 CFR 261.12 and 261.14.
FOR FURTHER INFORMATION CONTACT: Michael L. Hentrel, Staff Attorney, or
John C. Wood, Senior Attorney, Division of Consumer and Community
Affairs, at (202) 452-2412 or (202) 452-3667. Users of
Telecommunications Device for the Deaf (TDD) only, contact Diane
Jenkins at (202) 452-3544.
SUPPLEMENTARY INFORMATION:
I. Background
The Electronic Fund Transfer Act (EFTA), 15 U.S.C. 1693 et seq.,
provides a basic framework establishing the rights, liabilities, and
responsibilities of participants in electronic fund transfer (EFT)
systems. The Board's Regulation E (12 CFR part 205) implements the act.
Types of transfers covered by the act and regulation include transfers
initiated through an automated teller machine (ATM), point-of-sale
terminal, automated clearinghouse, telephone bill-payment plan, or
home-banking program. The act and regulation prescribe restrictions on
the unsolicited issuance of ATM cards and other access devices;
disclosure of terms and conditions of an EFT service; documentation of
EFTs by means of terminal receipts and periodic account statements;
limitations on consumer liability for unauthorized transfers;
procedures for error resolution; and certain rights related to
preauthorized EFTs.
The EFTA and Regulation E require a number of disclosures to be
provided in writing, presuming that institutions provide paper
documents. Under many laws that call for information to be in writing,
information in electronic form is considered to be ``written.''
Information produced, stored, or communicated by computer is also
generally considered to be a writing, where visual text is involved.
In May 1996, the Board revised Regulation E (Electronic Fund
Transfers) following a comprehensive review. During that process, the
Board determined that electronic communication for delivery of
information required by federal laws governing financial services could
effectively reduce compliance costs without adversely affecting
consumer protections. Consequently, the Board simultaneously issued a
proposed rule to permit financial institutions to use electronic
communication to deliver disclosures that Regulation E requires to be
given in writing. (61 FR 19696, May 2, 1996.) The 1996 proposal
required that disclosures be provided in a form the consumer may
retain, a requirement that institutions could satisfy by providing
information in a format that may be printed or downloaded. The proposed
rule also allowed consumers to request a paper copy of a disclosure for
up to one year after its original delivery.
Following a review of the comments, on March 25, 1998, the Board
issued an interim rule under Regulation E (the ``interim rule''), 63 FR
14528. The Board also published proposals under Regulations DD (Truth
in Savings), 63 FR 14533, M (Consumer Leasing), 63 FR 14538, Z (Truth
in Lending), 63 FR 14548, and B (Equal Credit Opportunity), 63 FR
14552, (collectively, the ``March 1998 proposed rules''). The rules
would apply to financial institutions, creditors, lessors, and other
entities that are required to give disclosures to consumers and others.
(For ease of reference this background section uses the terms
``financial institutions,'' ``institutions,'' and ``consumers.'') The
interim rule and the March 1998 proposed rules were similar to the May
1996 proposed rule; however, they did not require financial
institutions to provide paper copies of disclosures to a consumer upon
request if the consumer previously agreed to receive disclosures
electronically. The Board believed that most institutions would
accommodate consumer requests for paper copies when feasible or
redeliver disclosures electronically; and the Board encouraged
financial institutions to do so.
The March 1998 proposed rules and the interim rule permitted
financial institutions to provide disclosures electronically if the
consumer agreed, with few other requirements. The rule was intended to
provide flexibility and did not specify any particular method for
obtaining a consumer's agreement. Whether the parties had an agreement
would be determined by state law. The proposals and the interim rule
did not preclude a financial institution and a consumer from entering
into an agreement electronically, nor did they prescribe a formal
mechanism for doing so.
The Board received approximately 200 written comments on the
interim rule and the March 1998 proposed rules. The majority of
comments were submitted by financial institutions and their trade
associations. Industry commenters generally supported the use of
electronic communication to deliver information required by the EFTA
and Regulation E. Nevertheless, many sought specific revisions and
additional guidance on how to comply with the disclosure requirements
in particular transactions and circumstances.
Industry commenters were especially concerned about the condition
that a consumer had to ``agree'' to receive information by electronic
communication, because the rule did not specify a method for
establishing that an ``agreement'' was reached. These commenters
believed that relying on state law created uncertainty about what
constitutes an agreement and, therefore, potential liability for
noncompliance. To avoid uncertainty over which state's laws apply, some
commenters urged the Board to adopt a federal minimum standard for
agreements or for informed consent to receive disclosures by electronic
communication. These commenters believed that such a standard would
avoid the compliance burden associated with tailoring legally binding
``agreements'' to the contract laws of all jurisdictions where
electronic communication may be sent.
Consumer advocates generally opposed the March 1998 interim rule
and proposed rules. Without additional safeguards, they believed,
consumers may not be provided with adequate information about
electronic communication before an ``agreement'' is reached. They also
believed that promises of lower costs could induce consumers to agree
to receive disclosures electronically without a full understanding of
the implications. To avoid such problems, they urged the
[[Page 49701]]
Board, for example, either to require institutions to disclose to
consumers that their account with the institution will not be adversely
affected if they do not agree to receive electronic disclosures, or to
permit institutions to offer electronic disclosures only to consumers
who initiate contact with the institution through electronic
communication. They also noted that some consumers will likely consent
to electronic disclosures believing that they have the technical
capability to retrieve information electronically, but might later
discover that they are unable to do so. They questioned consumers'
willingness and ability to access and retain disclosures posted on
Internet websites, and expressed their apprehension that the goals of
federally mandated disclosure laws will be lost.
Consumer advocates and others were particularly concerned about the
use of electronic disclosures in connection with home-secured loans and
certain other transactions that consumers typically consummate in
person (citing as examples automobile loans and leases, short-term
``payday'' loans, or home improvement financing contracts resulting
from door-to-door sales). They asserted that there is little benefit to
eliminating paper disclosures in such transactions and that allowing
electronic disclosures in those cases could lead to abusive practices.
Accordingly, consumer advocates and others believed that paper
disclosures should always accompany electronic disclosures in mortgage
loans and certain other transactions, and that consumers should have
the right to obtain paper copies of disclosures upon request for all
types of transactions (deposit account, credit card, loan or lease, and
other transactions).
A final issue raised by consumer advocates was the integrity of
disclosures sent electronically. They stated that there may be
instances when the consumer and the institution disagree on the terms
or conditions of an agreement and consumers may need to offer
electronic disclosures as proof of the agreed-upon terms and to enforce
rights under consumer protection laws. Thus, to assure that electronic
documents have not been altered and that they accurately reflect the
disclosures originally sent, consumer advocates recommended that the
Board require that electronic disclosures be authenticated by an
independent third party.
The Board's Consumer Advisory Council considered the electronic
delivery of disclosures in 1998 and again in 1999. Many Council members
shared views similar to those expressed in written comment letters on
the 1998 proposals. For example, some Council members expressed concern
that the Board was moving too quickly in allowing electronic
disclosures for certain transactions, and suggested that the Board
might go forward with electronic disclosures for deposit accounts while
proceeding more slowly on credit and lease transactions. Others
expressed concern about consumer access and consumers' ability to
retain electronic disclosures. They believed that, without specific
guidance from the Board, institutions would provide electronic
disclosures without knowing whether consumers could retain or access
the disclosures, and without establishing procedures to address
technical malfunctions or nondelivery. The Council also discussed the
integrity and security of electronic documents.
II. Overview of Proposed Revisions
Based on a review of the comments and further analysis, the Board
is requesting comment on a modified proposed rule that is more detailed
than the interim rule and March 1998 proposed rules. It is intended to
provide specific guidance for institutions that choose to use
electronic communication to comply with Regulation E's requirements to
provide written disclosures, and to ensure effective delivery of
disclosures to consumers through this medium. Though detailed, the
proposal provides flexibility for compliance with the electronic
communication rules. The modified proposal recognizes that some
disclosures may warrant different treatment under the rule. Where
written disclosures are made to consumers who are transacting business
in person, these disclosures generally would have to be made in paper
form.
The Board is soliciting comment on a modified approach that
addresses both industry and consumer group concerns. Under the
proposal, financial institutions would have to provide specific
information about how the consumer can receive and retain electronic
disclosures--through a standardized disclosure statement--before
obtaining consumers' acceptance of such delivery, with some exceptions.
If they satisfy these requirements and obtain consumers' affirmative
consent, financial institutions would be permitted to use electronic
communication. As a general rule an institution would be permitted to
offer the option of receiving electronic disclosures to all consumers,
whether they initially contact the institution by electronic
communication or otherwise. To address concerns about potential abuses,
however, the proposal provides that if a consumer contracts for an EFT
service in person, initial disclosures must be given in paper form.
Financial institutions would have the option of delivering
disclosures to an e-mail address designated by the consumer or making
disclosures available at another location such as the institution's
website, for printing or downloading. If the disclosures are posted at
a website location, financial institutions generally must notify
consumers at an e-mail address about the availability of the
information. (Financial institutions may offer consumers the option of
receiving alert notices at a postal address.) The disclosures must
remain available at that site for 90 days.
Disclosures provided electronically would be subject to the ``clear
and readily understandable'' standard, and the existing format, timing,
and retainability rules in Regulation E. For example, to satisfy the
timing requirement, if disclosures are due at the time a consumer
contracts for an EFT service, the disclosures would have to appear on
the screen before the consumer could complete the transaction.
Financial institutions generally must provide a means for consumers
to confirm the availability of equipment to receive and retain
electronic disclosure documents. A financial institution would not
otherwise have a duty to verify consumers' actual ability to receive,
print, or download the disclosures. Some commenters suggested that
institutions should be required to verify delivery by return receipt.
The Board solicits comment on the need for such a requirement and the
feasibility of that approach.
As previously mentioned, consumer advocates and others have
expressed concerns that electronic documents can be altered more easily
than paper documents. The issue of the integrity and security of
electronic documents affects electronic commerce in general and is not
unique to the written disclosures required under the consumer
protection laws administered by the Board. Consumers' ability to
enforce rights under the consumer protection laws could be impaired in
some cases, however, if the authenticity of disclosures that they
retain cannot be demonstrated. Signatures, notary seals, and other
established verification procedures are used to detect alterations for
transactions memorialized in paper form. The development of similar
devices for electronic communication should reduce uncertainty over
time
[[Page 49702]]
about the ability to use electronic documents for resolving disputes.
The Board's rules require financial institutions to retain evidence
of compliance with Regulation E. Specific comment is solicited on the
feasibility of complying with a requirement that financial institutions
provide disclosures in a format that cannot be altered without
detection, or have systems in place capable of detecting whether or not
information has been altered, as well as the feasibility of requiring
use of independent certification authorities to verify disclosure
documents.
The interim rule for Regulation E adopted by the Board in 1998
remains in effect. To the extent the interim rule is modified when
final action is taken on the current proposal, the Board will provide a
reasonable time period before the mandatory compliance date for any new
requirements.
Elsewhere in today's Federal Register, the Board is publishing
similar proposals for comment under Regulations B, M, Z, and DD. In a
separate notice the Board is publishing an interim rule under
Regulation DD, which implements the Truth in Savings Act, to permit
depository institutions to use electronic communication to deliver
disclosures on periodic statements. For ease of reference, the Board
has assigned new docket numbers to the modified proposals published
today.
III. Section-by-Section Analysis
Pursuant to its authority under section 904 of the EFTA, the Board
proposes to amend Regulation E to permit institutions to use electronic
communication to provide the information required by this regulation in
writing. Below is a section-by-section analysis of the rules for
providing disclosures by electronic communication, including references
to proposed commentary provisions.
Section 205.4 General Disclosure Requirements; Jointly Offered
Services
4(a) Form of Disclosures
4(a)(2) Foreign Language Disclosures
To provide consistency among the regulations, the guidance
currently contained in comment 4(a)-2 permitting disclosures to be made
in languages other than English (provided they are available in English
upon request) would be set forth in a new Sec. 205.4(a)(2).
4(c) Electronic Communication
4(c)(1) Definition
The definition of the term ``electronic communication'' in the
interim rule remains unchanged. Section 205.4(c)(1) limits the term to
a message transmitted electronically that can be displayed on equipment
as visual text, such as a message that is displayed on a computer
monitor screen. Most commenters supported the term as defined in the
interim rule. Some commenters favored a more expansive definition that
would encompass communications such as audio and voice response
telephone systems. Because the proposal is intended to permit
electronic communication to satisfy the statutory requirement for
written disclosures, the Board believes visual text is an essential
element of the definition.
Commenters asked the Board to clarify the coverage of certain types
of communications. A few commenters asked about communication by
facsimile. Facsimiles are initially transmitted electronically; the
information may be received either in paper form or electronically
through software that allows a consumer to capture the facsimile,
display it on a monitor, and store it on a computer diskette or drive.
Thus, information sent by facsimile may be subject to the provisions
governing electronic communication. When disclosures are sent by
facsimile, a financial institution should comply with the requirements
for electronic communication unless it knows that the disclosures will
be received in paper form. Proposed comment 4(c)(1)-1 contains this
guidance.
4(c)(2) Electronic Communication between Financial Institution and
Consumer
Section 205.4(c)(2)(i) would permit financial institutions to
provide disclosures using electronic communication, if the institution
complies with provisions in new Sec. 205.4(c)(3), discussed below.
1. Presenting Disclosures in a Clear and Readily Understandable Format
The Board does not intend to discourage or encourage specific types
of technologies. Regardless of the technology, however, disclosures
provided electronically must be presented in a clear and readily
understandable format as is the case for all written disclosures under
the act and regulation. See Sec. 205.4(a).
When consumers consent to receive disclosures electronically and
they confirm that they have the equipment to do so, financial
institutions generally would have no further duty to determine that
consumers are able to receive the disclosures. Institutions do have the
responsibility of ensuring the proper equipment is in place in
instances where the institution controls the equipment. Proposed
comment 4(c)(2)-1 contains this guidance.
2. Providing Disclosures in a Form the Consumer May Keep
As with other written disclosures, information provided by
electronic communication must be in a form the consumer can retain.
Under the 1998 proposals and interim rule, a financial institution
would satisfy this requirement by providing information that can be
printed or downloaded. The modified proposal adopts the same approach
but also provides that the information must be sent to a specified
location to ensure that consumers have an adequate opportunity to
retain the information.
Consumers communicate electronically with financial institutions
through a variety of means and from various locations. Depending on the
location (at home, at work, in a public place such as a library), a
consumer may not have the ability at a given time to preserve EFTA
disclosures presented on-screen. Therefore, when a financial
institution provides disclosures by electronic communication, to
satisfy the retention requirements, the institution must send the
disclosures to a consumer's e-mail address or other location where
information may be retrieved at a later date. Proposed comment 4(c)(2)-
2 contains this guidance; see also the discussion under
Sec. 205.4(c)(4), below. In instances where an institution controls an
electronic terminal used to provide electronic disclosures, an
institution may provide equipment for the consumer to print a paper
copy in lieu of sending the information to the consumer's e-mail
address or posting the information at another location such as the
institution's website. See proposed comment 4(c)(2)-1.
3. Timing
Institutions must ensure that electronic disclosures comply with
all relevant timing requirements of the regulation. For example,
initial disclosures must be provided at the time a consumer contracts
for an EFT service or before the first transaction. The rule ensures
that consumers have an opportunity to read important information about
costs and other terms before contracting for or using the service.
To illustrate the timing requirements for electronic communication,
assume that an existing customer of a bank is interested in signing up
for an on-line bill-payment service and uses a personal
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computer at home to access the bank's website on the Internet. The bank
provides disclosures to the consumer about the use of electronic
communication (the Sec. 205.4(c)(3) disclosures discussed below) and
the consumer responds affirmatively. If the bank's procedures permit
the consumer to sign up for and use the EFT service at that time,
disclosures required under Sec. 205.7 would have to be provided. Thus,
the disclosures must automatically appear on the screen or the consumer
must be required to access the information before contracting for the
service (or before the first transaction). The timing requirements for
providing initial disclosures would not be met if, in this example, the
bank permitted the consumer to sign up for and immediately use an EFT
service and sent initial disclosures to an e-mail address thereafter.
Proposed comment 4(c)(2)-3 contains this guidance.
On the other hand, assume that a consumer requests an EFT service
and the institution delays processing the consumer's request until the
required disclosures have been delivered by e-mail. In that case the
information would not have to also appear on the screen; delivery to
the consumer's e-mail address would be sufficient. In either case, the
consumer must receive the disclosures before contracting for the
service or before the first transaction.
4(c)(2)(ii) In-Person Exception
The proposal contains an exception to the general rule allowing
information required by Regulation E to be provided by electronic
communication; where the exception applies, paper disclosures would be
required. The exception, contained in Sec. 205.4(c)(2)(ii), seeks to
address concerns about potential abuses where consumers are transacting
business in person but are offered disclosures in electronic form. In
such transactions, there is a general expectation that consumers would
be given paper copies of disclosures along with paper copies of other
documents evidencing the transaction.
Under Sec. 205.4(c)(2)(ii), if a consumer contracts for an EFT
service in person, the financial institution must provide initial
disclosures in paper form. For example, if a consumer signs up for an
ATM card while opening an account at a financial institution, initial
disclosures are required before contracting for the card (or the first
transaction) and they must be provided in paper form; directing the
consumer to disclosures posted on the institution's website would not
be sufficient. An institution also complies if a consumer signs up for
an EFT service on the Internet and is sent disclosures electronically
at or around that time, even though the institution's procedures
requires the consumer to visit the institution at a later time to
complete the transaction (for example, to complete a signature card).
Proposed comment 4(c)(2)(ii)-1 contains this guidance.
4(c)(3) Disclosure Notice
Section 205.4(c)(3) would identify the specific steps required
before an institution could use electronic communication to satisfy the
regulation's disclosure requirements. Proposed Model Forms A-6 and A-7,
and Sample Forms A-9 and A-10 are published to aid compliance with
these requirements.
4(c)(3)(i) Notice by Financial Institution
Section 205.4(c)(3)(i) outlines the information that financial
institutions must provide before electronic disclosures can be given.
The financial institution must: (1) describe the information to be
provided electronically and specify whether the information is also
available in paper form or whether the EFT service is offered only with
electronic disclosures; (2) identify the address or location where the
information will be provided electronically, and if it will be
available at a location other than the consumer's electronic address,
specify for how long and where it can be obtained once that period
ends; (3) specify any technical requirements for receiving and
retaining information sent electronically, and provide a means for the
consumer to confirm the availability of equipment meeting those
requirements; and (4) provide a toll-free telephone number and, at the
institution's option, an electronic or postal address for questions
about receiving electronic disclosures or for updating consumers'
electronic addresses, and for seeking assistance with technical or
other difficulties (see proposed comments to 4(c)(3)(i)). The Board
requests comment on whether other information should be disclosed
regarding the use of electronic communication and on any format changes
that might improve the usefulness of the notice for consumers.
The Board also solicits comment on the benefits of requiring an
annual notice in paper form to consumers who receive disclosures by
electronic communication. The notice would contain general information
about receiving electronic disclosures including, for example, a
reminder of the toll-free number where consumers may contact the
institution if they have questions regarding their electronic
disclosures.
Under the proposal, the Sec. 205.4(c)(3)(i) disclosures must be
provided, as applicable, before the financial institution uses
electronic communication to deliver any information required by the
regulation. The approach of requiring a standardized disclosure
statement addresses, in several ways, the concern that consumers may be
steered into using electronic communication without fully understanding
the implications. Under this approach, the specific disclosures that
would be delivered electronically must be identified, and consumers
must be informed whether there is also an option to receive the
information in paper form. Consumers must provide an e-mail address
where one is required. Technical requirements must also be stated, and
consumers must affirm that their equipment meets the requirements, and
that they have the capability of retaining electronic disclosures by
downloading or printing them (see proposed comment 4(c)(3)-1). Thus,
the Sec. 205.4(c)(3)(i) disclosures should allow consumers to make
informed judgments about receiving electronic disclosures.
Some commenters requested clarification of whether a financial
institution may use electronic communication to provide some required
disclosures while using paper for others. The proposed rule would
permit institutions to do so; the disclosure given under
Sec. 205.4(c)(3)(i) must specify which EFTA disclosures will be
provided electronically.
Commenters requested further guidance on a financial institution's
obligation under the regulation if the consumer chooses not to receive
information by electronic communication. A financial institution could
offer a consumer the option of receiving disclosures in paper form, but
it would not be required to do so. A financial institution could
establish accounts or services for which disclosures are given only by
electronic communication. Section 205.4(c)(3)(i)(A) would require
financial institutions to tell consumers whether or not they have the
option to receive disclosures in paper form. Section 205.4(c)(3)(i)(D)
would require financial institutions to provide a toll-free number that
consumers could use to inform institutions if they wish to discontinue
receiving electronic disclosures. In such cases the institution must
inform the consumer whether the EFT service is also available with
disclosures in paper form. Proposed sample disclosure statements in
which
[[Page 49704]]
the consumer has an option to receive electronic or paper disclosures
(Form A-9) or electronic disclosures only (Form A-10) are contained in
appendix A.
4(c)(3)(ii) Response by Consumer
Proposed Sec. 205.4(c)(3)(ii) would require financial institutions
to provide a means for the consumer to affirmatively indicate that
disclosures may be provided electronically. Examples include a ``check
box'' on a computer screen or a signature line (for requests made in
paper form). The requirement is intended to ensure that consumers'
consent is established knowingly and voluntarily, and that consent to
receive electronic disclosures is not inferred from consumers' use of
the account or acceptance of general account terms. See proposed
comment 4(c)(3)(ii)-1.
4(c)(3)(iii) Changes
Financial institutions would be required to notify consumers about
changes to the information that is provided in the notice required by
Sec. 205.4(c)(3)(i)--for example, if upgrades to computer software are
required. Proposed comment 4(c)(3)(iii)-1 contains this guidance.
The notice must include the effective date of the change and be
provided before that date. Proposed comment 4(c)(3)(iii)-2 would
provide that the notice must be sent a reasonable period of time before
the effective date of the change. Although the number of days that
constitutes reasonable notice may vary, depending on the type of change
involved, the comment would provide institutions with a safe harbor:
fifteen days' advance notice would be considered a reasonable time in
all cases. The same time period is stated in similar proposals under
Regulations B, Z, and DD published in today's Federal Register. Comment
is requested on whether a safe harbor of 15 days is an appropriate time
period, and whether a uniform period for changes involving electronic
communication is desirable. An alternative approach would adopt notice
requirements that are consistent with change-in-terms requirements
under the respective regulations. Under this approach, for example, the
safe harbor would be 21 days under Sec. 205.8 for Regulation E, 15 days
under Sec. 226.9 for Regulation Z, and 30 days under Sec. 230.5 for
Regulation DD. Proposed comment 4(c)(3)(iii)-3 contains guidance on
delivery requirements for the notice of change.
The notice of a change must also include a toll-free telephone
number or, at the institution's option, an address for questions about
receiving electronic disclosures. For example, a consumer may call
regarding problems related to a change, such as an upgrade to computer
software that is not provided by the institution. Consumers may also
use the toll-free number if they wish to discontinue receiving
electronic disclosures. In such cases, the institution must inform
consumers whether the EFT service is also available with disclosures in
paper form. (See proposed comments 4(c)(3)(iii)-4 through -6.)
If the change involves providing additional disclosures by
electronic communication, institutions generally would be required to
provide the notice in Sec. 205.4(c)(3)(i) and obtain the consumer's
consent. That notice would not be required if the institution
previously obtained the consumer's consent to the additional
disclosures in its initial notice by disclosing the possibility and
specifying which disclosures might be provided electronically in the
future. Comment is specifically requested on this approach. A list of
additional disclosures may be necessary to ensure that consumers'
consent is informed and knowing (provided it does not cause confusion).
4(c)(4) Address or Location to Receive Electronic Communication
Proposed Sec. 205.4(c)(4) identifies addresses and locations where
institutions using electronic communication may send information to the
consumer. Institutions may send information to a consumer's electronic
address, which is defined in proposed comment 4(c)(4)(i)-1 as an e-mail
address that the consumer also may use for receiving communications
from parties other than the financial institution. For notices of
preauthorized transfers, for example, a financial institution's
responsibility to provide notice under Sec. 205.10(d) will be satisfied
when the information is sent to the consumer's electronic address in
accordance with the applicable proposed rules concerning delivery of
disclosures by electronic communication.
Guidance accompanying the interim rule provided that an institution
would not meet delivery requirements by simply posting information to
an Internet site such as a financial institution's ``home page''
without appropriate notice on how consumers can access the information.
Industry commenters wanted to retain the flexibility of posting
disclosures on an Internet website. They did not object to providing a
separate notice alerting consumers about the disclosures' availability
but requested more guidance on the issue. Consumer advocates and others
expressed concern that the mere posting of information inappropriately
places the responsibility to obtain disclosures on consumers, and
undermines the purpose of the delivery requirements of the regulation.
The Board recognizes that currently, because of security and
privacy concerns associated with data transmissions, a number of
institutions may choose to provide disclosures at their websites, where
the consumer may retrieve them under secure conditions. Under
Sec. 205.4(c)(4), a financial institution may make disclosures
available to a consumer at a location other than the consumer's
electronic address. The institution must notify the consumer when the
information becomes available and identify the account involved. The
notice must be sent to the electronic mail address designated by the
consumer; the financial institution may, at its option, permit the
consumer to designate a postal address. A proposed model form (Model
Form A-8) is published below; see also proposed comment 4(c)(4)(ii)-1.
The Board believes it would be inconsistent with the EFTA to
require a consumer to initiate a search--for example, to search the
website of each financial institution with which an account is held--to
determine whether a disclosure has been provided. The proposed approach
ensures that a consumer would not be required to check an institution's
website repeatedly, for example, to learn whether the institution
posted a change in a term that affects an EFT service used by the
consumer.
The requirements of the regulation would be met only if the
required disclosure is posted on the website and the consumer is
notified of its availability in a timely fashion. For example,
financial institutions must provide a change-in-terms notice to
consumers at least 21 days in advance of the change. (12 CFR 205.8(a).)
For a change-in-terms notice posted on the Internet, an institution
must both post the notice and notify consumers of its availability at
least 21 days in advance of the change.
Commenters sought guidance on how long disclosures posted at a
particular location must be available to consumers. There is a variety
of circumstances when a consumer may not be able immediately to access
the information due to illness, travel, or computer malfunction, for
example. Under Sec. 205.4(c)(4), institutions must post information
that is sent to a location other than the consumer's electronic
[[Page 49705]]
mail address for 90 days. Proposed comment 4(c)(4)(ii)-2 contains this
guidance.
Under the modified proposal, institutions that post information at
a location other than the consumer's electronic mail address are
required--after the 90 day period--to make disclosures available to
consumers upon request for a period of not less than two years from the
date disclosures are required to be made, consistent with the record
retention requirements under Sec. 205.13(b). The Board requests comment
on this approach, including suggestions for alternative means for
providing consumers continuing access to disclosures.
4(c)(5) Consumer Use of Electronic Communication
Proposed Sec. 205.4(c)(5) would clarify consumers' ability to
provide certain information to financial institutions by electronic
communication. Regulation E provides that a consumer may allege an
error or stop payment of a preauthorized EFT by notifying the
institution orally or in writing; the institution may require written
confirmation of an oral notice of error or stop-payment order. The
revised proposal differs from guidance accompanying the interim rule;
under the proposal, consumers generally would have the option to use
electronic communication for these written notices (including written
confirmations) if the consumer has chosen to receive information by
electronic communication. Because the consumer's electronic
communication serves as written confirmation, the financial institution
could not also require paper confirmation. Institutions could, however,
specify a particular electronic address for receiving the notices.
In issuing the March 1998 interim rule, the Board stated that
financial institutions could require paper confirmation of electronic
notices in the two instances where the regulation allows written
confirmation--stop-payment notices and notices of error. This approach
was consistent with guidance provided in the May 1996 proposed rule,
where the Board stated that (as in the case of an oral communication)
if the consumer sends an electronic communication to the financial
institution, the institution could require paper confirmation from the
consumer (particularly since the consumer was entitled to a paper copy
of a disclosure upon request under the May 1996 proposal).
Views were mixed on whether financial institutions should be
permitted to require paper confirmations of electronic notices. Many
industry commenters requested that the Board allow financial
institutions to request paper confirmations; some stated that paper
confirmations protect both the consumer and the financial institution.
Consumer advocates and other commenters believed it would be unfair to
require paper confirmation of an electronic communication from
consumers who receive electronic communication from a financial
institution.
Based upon the comments received and further analysis, and subject
to certain limitations discussed below, the Board is proposing that
consumers be permitted to provide electronically any information that a
consumer is required to provide a financial institution to preserve the
consumer's rights under the regulation, such as the stop-payment notice
and the notice of error. If an institution uses electronic
communication to provide disclosures to consumers on a continuing
basis, such as change-in-terms notices or periodic statements, it is
appropriate to allow consumers to use electronic communication to
provide notices to the institution. If, however, an institution limits
its use of electronic communication to the delivery of initial
disclosures (that is, if all subsequent disclosures regarding the EFT
service are provided in paper form), institutions would not be required
to accept electronic communication from consumers.
4(c)(5)(ii) Institution's Designation of Address
Section 205.4(c)(5)(ii) would provide that an institution may
designate the electronic address that must be used by a consumer for
sending electronic communication as permitted by Sec. 205.4(c)(5)(i).
Appendix A to Part 205--Model Disclosure Clauses and Forms
The Board solicits comment on three proposed model forms and two
sample forms for use by financial institutions to aid compliance with
the disclosure requirements of Secs. 205.4(c)(3) and (c)(4). Model
Forms A-6 and A-7 would implement Sec. 205.4(c)(3), regarding the
notice that financial institutions must give prior to using electronic
communication to provide required disclosures. Model Form A-8 would
implement Sec. 205.4(c)(4), regarding notices to consumers about the
availability of electronic disclosures at locations such as the
financial institution's website. Use of any modified version of these
forms would be in compliance as long as the institution does not delete
information required by the regulation or rearrange the format in a way
that affects the substance, clarity, or meaningful sequence of the
disclosure. For example, institutions that combine Regulation E and
Regulation DD disclosures on a deposit account can modify the model
form to provide a single disclosure statement about electronic delivery
of those disclosures.
Sample Form A-9 illustrates the disclosures under Sec. 205.4(c)(3)
for an electronic banking service. The sample assumes that the
institution also offers paper disclosures for consumers who choose not
to receive electronic disclosures. Sample Form A-10 assumes that
consumers must accept electronic disclosures if they want to contract
for the EFT service.
Additional Issues
1. Signature Requirements
Section 205.10(b) requires that preauthorized EFTs be authorized
only by a writing signed or similarly authenticated by the consumer.
The phrase ``or similarly authenticated'' was added in the 1996 review
of Regulation E. The Official Staff Commentary to Regulation E states
that an example of a consumer's authorization that is not in the form
of a signed writing but is instead ``similarly authenticated'' is a
consumer's authorization under Sec. 205.10(b) for using a home-banking
system. The Board indicated in the supplementary information to the
1996 final rule that the authentication method should provide the same
assurance as a signature in a paper-based system. Since the publication
of the amended regulation and accompanying commentary, the Board has
been asked to give further guidance on this issue. In the supplementary
information to the March 1998 interim rule, the Board expressed
interest in learning about other ways in which authentication in an
electronic environment might occur in lieu of a consumer's signature.
Some commenters provided alternatives for verifying a consumer's
identity, including alphanumeric codes (combinations of letters and
numbers) or combinations of unique identifiers (such as account numbers
combined with a number representing algorithms of the account numbers).
In the supplementary information to the March 1998 interim rule, the
Board cited security codes and digital signatures as examples of
authentication devices that might meet the requirements of
authentication and signatures. Many commenters stated
[[Page 49706]]
their concern that the Board approved only these or similar methods.
These commenters urged the Board to take a flexible approach to this
requirement. They suggested that the Board's implied or explicit
endorsement of any particular method could hinder the development of
new technologies. Further, these commenters requested that the Board
take a ``wait and see'' approach to this issue, to allow the industry
to develop alternatives that will result in more security for
consumers.
To avoid unduly influencing the development of electronic
authentication methods and to encourage innovation and flexibility, the
Board will limit its guidance to the general principle that a home-
banking or other electronic communication system must use an
authentication device that provides the same assurance as a signature
in a paper-based system.
2. Preemption
A few commenters suggested that any final rule issued by the Board
permitting electronic disclosures should explicitly preempt any state
law requiring paper disclosures. Under Sec. 205.12(b) of the
regulation, state laws are preempted if they are inconsistent with the
act and regulation and only to the extent of the inconsistency. The
proposed rule would provide financial institutions with the option of
giving required disclosures by electronic communication as an
alternative to paper. There is no apparent inconsistency with the act
and regulation if state laws require paper disclosures. The Board will,
however, review preemption issues that are brought to the Board's
attention. Section 205.12(b)(1) outlines the Board's procedures for
determining whether a specific law is preempted, which will guide the
Board in any determination requested by a state, financial institution,
or other interested party following publication of a final rule
regarding electronic communication.
3. Technical Amendment to Error Resolution Notice
In September 1998, the Board revised the time periods for
investigating alleged errors involving point-of-sale and foreign-
initiated transactions. (63 FR 52115, September 29, 1998.) The
amendments to Sec. 205.11 require financial institutions to
provisionally credit an account within 10 business days (rather than
20). At the same time, the Board extended the time periods to
provisionally credit funds and investigate claims involving new
accounts. The amended rule permits institutions to take up to 20
business days to provisionally credit funds and up to 90 calendar days
to complete the investigation. The Board proposes to revise the model
error resolution notices contained in Appendix A (Forms A-3 and A-5) to
conform with Sec. 205.11 as amended.
IV. Form of Comment Letters
Comment letters should refer to Docket No. R-1041, and, when
possible, should use a standard typeface with a type size of 10 or 12
characters per inch. This will enable the Board to convert the text to
machine-readable form through electronic scanning, and will facilitate
automated retrieval of comments for review. Also, if accompanied by an
original document in paper form, comments may be submitted on 3\1/2\
inch computer diskettes in any IBM-compatible DOS-or Windows-based
format.
V. Initial Regulatory Flexibility Analysis
In accordance with section 3(a) of the Regulatory Flexibility Act
and section 904(a)(2) of the EFTA, the Board has reviewed the proposed
amendments to Regulation E. Although the proposal would add disclosure
requirements with respect to electronic communication, overall, the
proposed amendments are not expected to have any significant impact on
small entities. A financial institution's use of electronic
communication to provide disclosures required by the regulation is
optional. The proposed rule would give financial institutions
flexibility in providing disclosures. A final regulatory flexibility
analysis will be conducted after consideration of comments received
during the public comment period.
VI. Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
3506; 5 CFR Part 1320 Appendix A.1), the Board reviewed the proposed
rule under the authority delegated to the Board by the Office of
Management and Budget (OMB). The Federal Reserve may not conduct or
sponsor, and an organization is not required to respond to, this
information collection unless it displays a currently valid OMB number.
The OMB control number is 7100-0200.
The collection of information requirements that are relevant to
this proposed rulemaking are in 12 CFR Part 205 and in Appendix A. This
information is mandatory (15 U.S.C. 1693 et seq.) to evidence
compliance with the requirements of the Regulation E and the Electronic
Fund Transfer Act (EFTA). The revised requirements would be used to
ensure adequate disclosure of basic terms, costs, and rights relating
to services affecting consumers using certain home-banking services and
consumers receiving certain disclosures by electronic communication.
The respondents/recordkeepers are for-profit financial institutions,
including small businesses. Institutions are also required to retain
records for 24 months. This regulation applies to all types of
depository institutions, not just state member banks; however, under
Paperwork Reduction Act regulations, the Federal Reserve accounts for
the burden of the paperwork associated with the regulation only for
state member banks. Other agencies account for the paperwork burden on
their respective constituencies under this regulation.
The proposed revisions would allow institutions the option of using
electronic communication (for example, via personal computer and modem)
to provide disclosures required by the regulation. Although the
proposal would add disclosure requirements with respect to electronic
communication, the optional use of electronic communication would
likely reduce the paperwork burden of financial institutions. With
respect to state member banks, it is estimated that there are 851
respondents/recordkeepers and an average frequency of 85,808 responses
per respondent each year. Therefore the current amount of annual burden
is estimated to be 462,839 hours. There is estimated to be no
additional annual cost burden and no capital or start-up cost.
Because the records would be maintained at state member banks and
the notices are not provided to the Federal Reserve, no issue of
confidentiality under the Freedom of Information Act arises; however,
any information obtained by the Federal Reserve may be protected from
disclosure under exemptions (b)(4), (6), and (8) of the Freedom of
Information Act (5 U.S.C. 522 (b)(4), (6) and (8)). The disclosures and
information about error allegations are confidential between
institutions and the customer.
The Federal Reserve requests comments from institutions, especially
state member banks, that will help to estimate the number and burden of
the various disclosures that would be made in the first year this
proposed regulation would be effective. Comments are invited on: (a)
the cost of compliance; (b) ways to enhance the quality, utility, and
clarity of the information to be disclosed; and (c) ways to minimize
the burden of disclosure on respondents, including through the use of
automated disclosure techniques or other forms of
[[Page 49707]]
information technology. Comments on the collection of information
should be sent to the Office of Management and Budget, Paperwork
Reduction Project (7100-0200), Washington, DC 20503, with copies of
such comments sent to Mary M. West, Federal Reserve Board Clearance
Officer, Division of Research and Statistics, Mail Stop 97, Board of
Governors of the Federal Reserve System, Washington, DC 20551.
List of Subjects in 12 CFR Part 205
Banks, banking, Consumer protection, Electronic fund transfers,
Reporting and record keeping requirements.
Text of Proposed Revisions
Certain conventions have been used to highlight proposed changes to
Regulation E. New language is shown inside bold-faced arrows, deletions
inside bold-faced brackets.
For the reasons set forth in the preamble, the Board proposes to
amend Regulation E, 12 CFR part 205, as set forth below:
PART 205--ELECTRONIC FUND TRANSFERS (REGULATION E)
1. The authority citation for part 205 would continue to read as
follows:
Authority: 15 U.S.C. 1693-1693r.
2. Section 205.4 is amended by redesignating paragraph (a) as
paragraph (a)(1), adding a new paragraph (a)(2), and revising paragraph
(c) to read as follows:
Sec. 205.4 General disclosure requirements; jointly offered services.
(a) (1) Form of disclosures. * * *
(2) Foreign language disclosures. Disclosures may be
made in languages other than English, provided they are available in
English upon request.
* * * * *
(c) Electronic communication. (1) Definition. Electronic
communication means a message transmitted electronically between a
financial institution and a consumer in a format that allows visual
text to be displayed on equipment such as a personal computer monitor.
(2) Electronic communication between financial institution and
consumer. (i) General. Except as provided in paragraph(c)(2)(ii) of
this section, a financial institution that has complied with paragraph
(c)(3) of this section may provide by electronic communication any
information required by this regulation to be in writing.
(ii) In-person exception. When a consumer contracts for an
electronic fund transfer service in person, the disclosures required
under Sec. 205.7 shall be provided in paper form, unless the consumer
requested the service by electronic communication and disclosures were
provided in compliance with paragraph (c)(3)(i) and (c)(3)(ii) of this
section at or around that time.
(3) Disclosure notice. The disclosure notice required by this
paragraph shall be provided in a manner substantially similar to the
applicable model form set forth in Appendix A of this part (Model Forms
A-6 and A-7).
(i) Notice by financial institution. A financial institution shall:
(A) Describe the information to be provided electronically and
specify whether the information is also available in paper form or
whether the electronic fund transfer service is offered only with
electronic disclosures;
(B) Identify the address or location where the information will be
provided electronically; and if it is made available at a location
other than the consumer's electronic address, how long the information
will be available, and how it can be obtained once that period ends;
(C) Specify any technical requirements for receiving and retaining
information sent electronically, and provide a means for the consumer
to confirm the availability of equipment meeting those requirements;
and
(D) Provide a toll-free telephone number and, at the institution's
option, an address for questions about receiving electronic
disclosures, for updating consumers' electronic addresses, and for
seeking technical or other assistance related to electronic
communication.
(ii) Response by consumer. A financial institution shall provide a
means for the consumer to accept or reject electronic disclosures.
(iii) Changes. (A) A financial institution shall notify affected
consumers of any change to the information provided in the notice
required by paragraph (c)(3)(i) of this section. The notice shall
include the effective date of the change and must be provided before
that date. The notice shall also include a toll-free telephone number,
and, at the institution's option, an address for questions about
receiving electronic disclosures.
(B) In addition to the notice under paragraph (c)(3)(iii)(A) of
this section, if the change involves providing additional disclosures
by electronic communication, a financial institution shall provide the
notice in paragraph (c)(3)(i) of this section and obtain the consumer's
consent. A notice is not required under paragraph (c)(3)(i) of this
section if the institution's initial notice states that additional
disclosures may be provided electronically in the future and specifies
which disclosures could be provided.
(4) Address or location to receive electronic communication. A
financial institution that uses electronic communication to provide
information required by this Regulation E (12 CFR Part 205) shall:
(i) Send the information to the consumer's electronic address; or
(ii) Post the information for at least 90 days at a location such
as a website, and send a notice to the consumer when the information
becomes available. Thereafter the information shall be available upon
request for a period of not less than two years from the date
disclosures are required to be made. The notice required by this
paragraph (c)(4) shall identify the account involved, shall be sent to
an electronic address designated by the consumer (or to a postal
address, at the financial institution's option), and shall be
substantially similar to the model form set forth in Appendix A of this
part (Model Form A-8).
(5) Consumer use of electronic communication. (i) General. A
consumer may use electronic communication to assert any right under
Sec. 205.10(c) and Sec. 205.11 if the consumer has consented to receive
information required by this regulation by electronic communication,
except when the consumer consented to receive only the disclosures
required under Sec. 205.7 by electronic communication.
(ii) Institution's designation of address. A financial institution
may designate the electronic address or location that consumers must
use if they send electronic communication under this
paragraph.
3. Appendix A to Part 205 is amended by:
a. Revising the table of contents at the beginning of the appendix;
b. Revising Appendices A-3 and A-5; and
c. Adding new Appendices A-6, A-7, A-8, A-9, and A-10.
The revisions and additions read as follows:
Appendix A to Part 205--Model Disclosure Clauses and Forms
A-1--Model Clauses for Unsolicited Issuance (Sec. 205.5(b)(2))
A-2--Model Clauses for Initial Disclosures (Sec. 205.7(b))
A-3--Model Forms for Error-Resolution Notice (Secs. 205.7(b)(10) and
205.8(b))
A-4--Model Form for Service-Providing Institutions
(Sec. 205.14(b)(1)(ii))
A-5--Model Forms for Government Agencies (Sec. 205.15(d)(1) and (2))
[[Page 49708]]
A-6--Model Disclosures for Electronic Communication
(Sec. 205.4(c)(3)) (Disclosures Available in Paper or
Electronically)
A-7--Model Disclosures for Electronic Communication
(Sec. 205.4(c)(3)) (Disclosures Available Only Electronically)
A-8--Model Notice for Delivery of Information Posted at Certain
Locations (Sec. 205.4(c)(4))
A-9--Sample Form for Electronic Communication (Sec. 205.4(c)(3))
(Disclosures Available in Paper or Electronically)
A-10--Sample Form for Electronic Communication (Sec. 205.4(c)(3))
(Disclosures Available Only Electronically)
* * * * *
A-3--MODEL FORMS FOR ERROR RESOLUTION NOTICE (Secs. 205.7(b)(10) and
205.8(b))
(a) Initial and annual error resolution notice
Secs. 205.7(b)(10) and 205.8(b)). In case of errors or questions
about your electronic transfers telephone us at [insert telephone
number] or write us at [insert address] as soon as you can, if you
think your statement or receipt is wrong or if you need more
information about a transfer listed on the statement or receipt. We
must hear from you no later than 60 days after we sent the FIRST
statement on which the problem or error appeared.
(1) Tell us your name and account number (if any).
(2) Describe the error or the transfer you are unsure about, and
explain as clearly as you can why you believe it is an error or why
you need more information.
(3) Tell us the dollar amount of the suspected error.
If you tell us orally, we may require that you send us your
complaint or question in writing within 10 business days.
We will determine whether an error occurred within 10 business
days after we hear from you and will correct any error promptly. If
we need more time, however, we may take up to 45 days to investigate
your complaint or question. If we decide to do this, we will credit
your account within 10 business days for the amount you think is in
error, so that you will have the use of the money during the time it
takes us to complete our investigation. If we ask you to put your
complaint or question in writing and we do not receive it within 10
business days, we may not credit your account.
For errors involving new accounts, point-of-sale, and
foreign-initiated transactions, we may take up to 90 days to
investigate your complaint or question. For new accounts, we may
take up to 20 business days to credit your account for the amount
you think is in error.
We will tell you the results within three business days after
completing our investigation. If we decide that there was no error,
we will send you a written explanation.
You may ask for copies of the documents that we used in our
investigation.
* * * * *
A-5--MODEL FORMS FOR GOVERNMENT AGENCIES (Sec. 205.15(d)(1) AND (2))
(1) Disclosure by government agencies of information about
obtaining account balances and account histories
Sec. 205.15(d)(1)(i) and (ii). You may obtain information about the
amount of benefits you have remaining by calling [telephone number].
That information is also available [on the receipt you get when you
make a transfer with your card at (an ATM)(a POS terminal)][when you
make a balance inquiry at an ATM][when you make a balance inquiry at
specified locations].
You also have the right to receive a written summary of
transactions for the 60 days preceding your request by calling
[telephone number]. [Optional: Or you may request the summary by
contacting your caseworker.]
(2) Disclosure of error resolution procedures for government
agencies that do not provide periodic statements
Sec. 205.15(d)(1)(iii) and (d)(2)). In case of errors or questions
about your electronic transfers telephone us at [telephone number]
or write us at [address] as soon as you can, if you think an error
has occurred in your [EBT][agency's name for program] account. We
must hear from you no later than 60 days after you learn of the
error. You will need to tell us:
Your name and [case] [file] number.
Why you believe there is an error, and the dollar
amount involved.
Approximately when the error took place.
If you tell us orally, we may require that you send us your
complaint or question in writing.
[We will generally complete our investigation within 10 business
days and correct any error promptly.]
We will determine whether an error occurred within 10
business days after we hear from you and will correct any error
promptly. If we need more time, however, we may take up to 45 days
to investigate your complaint or question. If we decide to do this,
we will credit your account within 10 business days for the amount
you think is in error, so that you will have the use of the money
during the time it takes us to complete our investigation. If we ask
you to put your complaint or question in writing and we do not
receive it within 10 business days, we may not credit your account.
For errors involving new accounts, point-of-sale, and foreign-
initiated transactions, we may take up to 90 days to investigate
your complaint or question. For new accounts, we may take up to 20
business days to credit your account for the amount you think is in
error. [In some cases, an investigation may take longer,
but you will have the use of the funds in question after the 10
business days.] If we ask you to put your complaint or question in
writing and we do not receive it within 10 business days, we may not
credit your account during the investigation.
[For errors involving transactions at point-of-sale terminals in
food stores, the periods referred to above are 20 business days
instead of 10 business days.]
If we decide that there was no error, we will send you a written
explanation within three business days after we finish our
investigation. You may ask for copies of the documents that we used
in our investigation.
If you need more information about our error resolution
procedures, call us at [telephone number][the telephone number shown
above].
A-6--MODEL DISCLOSURES FOR ELECTRONIC COMMUNICATION
(Sec. 205.4(c)(3)) (Disclosures Available in Paper or Electronically)
You can choose to receive important information required by the
Electronic Fund Transfer Act in paper or electronically.
Read this notice carefully and keep a copy for your records.
You can choose to receive the following information in
paper form or electronically: (description of specific disclosures
to be provided electronically).
How would you like to receive this information
{time} I want paper disclosures.
{time} I want electronic disclosures.
[We may provide the following additional disclosures
electronically in the future: (description of specific
disclosures).]
[If you choose electronic disclosures, this information
will be available at: (specify location) for ____ days. After that,
the information will be available upon request (state how to obtain
the information). When the information is posted, we will send you a
message at the electronic mail address you designate here:
(consumer's electronic mail address).]
[If you choose electronic disclosures this information will be
sent to the electronic mail address that you designate here:
(consumer's electronic mail address).]
To receive this information you will need: (list
hardware and software requirements). Do you have access to a
computer that satisfies these requirements?
{time} Yes {time} No
Do you have access to a printer, or the ability to
download information, in order to keep copies for your records?
{time} Yes {time} No
To update your electronic address, if you have
questions about receiving disclosures, or need technical or other
assistance concerning these disclosures, contact us at (telephone
number).
A-7--MODEL DISCLOSURES FOR ELECTRONIC COMMUNICATION (Sec. 205.4(c)(3))
(Disclosures Available Only Electronically)
You will receive important information required by the
Electronic Fund Transfer Act electronically.
Read this notice carefully and keep a copy for your records.
The following information will be provided
electronically: (description of specific disclosures to be provided
electronically).
This electronic fund transfer service is not available
unless you accept electronic disclosures.
[We may provide the following additional disclosures
electronically in the future: (description of specific
disclosures).]
[If you choose electronic disclosures, this information
will be available at: (specify
[[Page 49709]]
location) for ____ days. After that, the information will be
available upon request (state how to obtain the information). When
the information is posted, we will send you a message at the
electronic mail address you designate here: (consumer's electronic
mail address).]
[If you choose electronic disclosures this information will be
sent to the electronic mail address that you designate here:
(consumer's electronic mail address).]
To receive this information you will need: (list
hardware and software requirements). Do you have access to a
computer that satisfies these requirements?
{time} Yes {time} No
Do you have access to a printer, or the ability to
download information, in order to keep copies for your records?
{time} Yes {time} No
Do you want this electronic fund transfer service with
electronic disclosures?
{time} Yes {time} No
To update your electronic address, if you have
questions about receiving disclosures, or need technical or other
assistance concerning these disclosures, contact us at (telephone
number).
A-8--MODEL NOTICE FOR DELIVERY OF INFORMATION POSTED AT CERTAIN
LOCATIONS (Sec. 205.4(c)(4))
Information about your (identify account) is now available at
[website address or other location]. The information discusses
(describe the disclosure). It will be available for ____ days.
BILLING CODE 6210-01-P
[[Page 49710]]
[GRAPHIC] [TIFF OMITTED] TP14SE99.000
[[Page 49711]]
[GRAPHIC] [TIFF OMITTED] TP14SE99.001
BILLING CODE 6210-01-C
[[Page 49712]]
4. In Supplement I to Part 205, under Section 205.4--General
Disclosure Requirements; Jointly Offered Services, the following
amendments are made:
a. Under paragraph 4(a) Form of Disclosures, paragraph 2. is
removed; and
b. A new paragraph 4(c) Electronic Communication is added.
The additions read as follows:
Supplement I To Part 205--Official Staff Interpretations
* * * * *
SECTION 205.4--GENERAL DISCLOSURE REQUIREMENTS; JOINTLY OFFERED
SERVICES
* * * * *
4(c) Electronic Communication
Paragraph 4(c)(1)--Definition
1. Coverage. Information transmitted by facsimile may be
received in paper form or electronically, although the party
initiating the transmission may not know at the time the disclosures
are sent which form will be used. A financial institution that
provides disclosures by facsimile should comply with the
requirements for electronic communication unless the institution
knows that the disclosures will be received in paper form.
Paragraph 4(c)(2)--Electronic Communication between Financial
Institution and Consumer
1. Disclosures provided on institution's equipment. Institutions
that control equipment providing electronic disclosures to consumers
(for example, computer terminals in an institution's lobby or kiosks
located in public places) must ensure that the equipment satisfies
the regulation's requirements to provide disclosures in a clear and
readily understandable format and in a form the consumer may keep. A
financial institution that controls the equipment may provide a
printer for consumers' use in lieu of sending the information to the
consumer's electronic mail address or posting the information at
another location such as the institution's website.
2. Retainability. Institutions must provide electronic
disclosures in a retainable format (for example, they can be printed
or downloaded). Consumers may communicate electronically with
financial institutions through a variety of means and from various
locations. Depending on the location (at home, at work, in a public
place such as a library), a consumer may not have the ability at a
given time to preserve EFTA disclosures presented on-screen. To
ensure that consumers have an adequate opportunity to retain the
disclosures, the institution also must send them to the consumer's
designated electronic mail address or to another location, for
example, on the institution's website, where the information may be
retrieved at a later date.
3. Timing and delivery. When a consumer signs up for and is able
to use an EFT service on the Internet, for example, in order to meet
the timing and delivery requirements, institutions must ensure that
disclosures applicable at that time appear on the screen and are in
a retainable format. The delivery requirements would not be met if
disclosures do not either appear on the screen or if the consumer is
allowed to sign up for and use an EFT service before receiving the
disclosures. For example, an institution can provide a link to
electronic disclosures appearing on a separate page as long as
consumers cannot bypass the link and they are required to access the
disclosures before completing the sign-up process or using the EFT
service.
Paragraph 4(c)(2)(ii)--In-person Exception
1. Initial disclosures in paper form. If a consumer contracts
for an EFT service in person the financial institution generally
must provide initial disclosures in paper form. For example, if a
consumer visits a financial institution's branch office to sign up
for an ATM card while opening an account, initial disclosures are
required before the consumer contracts for the service or before the
first transaction and they must be provided in paper form; directing
the consumer to disclosures posted on the institution's website
would not be sufficient. If, however, a consumer makes a request on
the Internet to open an account and obtain an ATM card, a financial
institution may send disclosures electronically at or around that
time even though the financial institution's procedures require the
consumer to visit a branch office at a later time to complete the
agreement (for example, to execute a signature card).
Paragraph 4(c)(3)--Disclosure Notice
1. Consumer's affirmative responses. Even though a consumer
accepts electronic disclosures in accordance with
Sec. 205.4(c)(3)(ii), a financial institution may deliver
disclosures by electronic communication only if the consumer
provides an electronic address where one is required, and responds
affirmatively to questions about technical requirements and the
ability to print or download information (see Sample Forms A-9 and
A-10) in appendix A to this part.
Paragraph 4(c)(3)(i)--Notice by Financial Institution
1. Toll-free telephone number. The number must be toll-free for
nonlocal calls made from an area code other than the one used in the
institution's dialing area. Alternatively, a financial institution
may provide any telephone number that allows a consumer to call for
information and reverse the telephone charges.
2. Institution's address. Financial institutions have the option
of providing either an electronic or postal address for consumers'
use in addition to a toll-free telephone number.
3. Discontinuing electronic disclosures. Consumers may use the
toll-free number (or optional address) if they wish to discontinue
receiving electronic disclosures. In such cases, the institution
must inform consumers whether the EFT service is also available with
disclosures in paper form.
Paragraph 4(c)(3)(ii)--Response by Consumer
1. Nature of consent. Consumers must agree to receive
disclosures by electronic communication knowingly and voluntarily.
An agreement to receive electronic disclosures is not implied from
consumers' use of an account or acceptance of general account terms.
Paragraph 4(c)(3)(iii)--Changes
1. Examples. Examples of changes include a change in technical
requirements, such as upgrades to computer software affecting the
institution's disclosures provided on the Internet.
2. Timing for notices. A notice of a change must be sent a
reasonable period of time before the effective date of the change.
The length of a reasonable notice period may vary, depending on the
type of change involved; however, fifteen days is a reasonable time
for providing notice in all cases.
3. Delivery of notices. An institution meets the delivery
requirements if the notice of a change is sent to the address
provided by the consumer for receiving other disclosures. For
example, if the consumer provides an electronic address to receive
notices about periodic statements posted at the institution's
website, the same electronic address may be used for the change
notice. The consumer's postal address must be used, however, if the
consumer consented to additional disclosures by electronic
communication when receiving the initial notice under
Sec. 205.4(c)(3)(i), but provided a postal address to receive
periodic statements in paper form.
4. Toll-free number. See comment 4(c)(3)(i)-1.
5. Institution's address. See comment 4(c)(3)(i)-2.
6. Consumer inquiries. Consumers may use the toll-free number
(or optional address) for questions or assistance with problems
related to a change, such as an upgrade to computer software that is
not provided by the institution. Consumers may also use the toll-
free number if they wish to discontinue receiving electronic
disclosures; in such cases, the institution must inform consumers
whether the EFT service is also available with disclosures in paper
form.
Paragraph 4(c)(4)--Address or Location to Receive Electronic
Communication Paragraph 4(c)(4)(i)
1. Electronic address. A consumer's electronic address is an
electronic mail address that may be used by the consumer for
receiving communications transmitted by parties other than the
financial institution.
Paragraph 4(c)(4)(ii)
1. Identifying account involved. A financial institution is not
required to identify an account by reference to the account number.
For example, where the consumer does not have multiple accounts, and
no confusion would result, the financial institution may refer to
``your checking account,' or when the consumer has multiple accounts
the institution may use a truncated account number.
2. Availability. Information that is not sent to a consumer's
electronic mail address must be available for at least 90 days from
the date the information becomes available or from
[[Page 49713]]
the date the notice required by Sec. 205.4(c)(4)(ii) is sent to the
consumer, whichever occurs later.
* * * * *
By order of the Board of Governors of the Federal Reserve
System, August 31, 1999.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 99-23139 Filed 9-13-99; 8:45 am]
BILLING CODE 6210-01-P
