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Flashcards in Reg E Deck (57):
1

What type of fund transfers does Reg E cover?

Transfer that are initiated through an electronic terminal, telephone, computer or magnetic tape.

2

What is a covered foreign remittance transfer?

- More than $15
- Made by a consumer in the US
- Sent to a person or company in a foreign country
- Includes many types of transfers (wires, ACHs)

3

How often must a payor give notice to a consumer when a consumer's account is scheduled to be credited or debited by a preauthorized transfer?

at least once every 60 days.

4

Final resolution for Reg E unauthorized transactions must occur within __ _________ days.

45 calendar

5

Under Regulation E, when a bank imposes a change that increases fees or charges related to electronic fund transfers, or restricts availability of electronic transfers, it must provide notice to its customers. How many days in advance of the change must the bank notify customers?

a. 10
b. 15
c. 21
d. 30

c. 21

6

If an institution forgets to give the initial Reg E disclosure, what is the consumer's liability for unauthorized transactions?

$0. If proper disclosure wasn't given originally, there's no liability.

7

First National Bank investigated Mr. Gilbert’s allegation of a $500 EFT error. The bank provisionally credited the account during the investigation. The bank determined that no error was made and notified Mr. Gilbert on April 5 of the results of the investigation. On April 6, the bank debited Mr. Gilbert’s account for $500, which before this debit had a balance of $700. On April 7, checks for $600 and $800 are presented for payment against the account, payable to third parties. On April 8, Mr. Gilbert comes into the bank to withdraw $100. What should First National do?

a. Return both the $600 and the $800 checks and honor the cash withdrawal
b. Pay both checks and honor the cash withdrawal
c. Pay the $600 check and honor the cash withdrawal
d. Pay the $600 check and refuse the cash withdrawal

d. Pay the $600 check and refuse the cash withdrawal

The bank must honor checks payable to third parties for five business days after the transmittal of the notice of the investigation. The bank does not have to honor checks that would not have been paid if the debit had not occurred. Therefore, the $800 check would not be paid. Because the $600 check would have been paid but for the debit of the $500, the bank must pay the $600. The $600 check the bank does have to pay now overdraws the account by $400. (Remember, the account has a real balance of $200.) The bank, therefore, does not have to honor a cash withdrawal—there are no funds in the account and only checks payable to third parties fall under this rule.

8

You are doing a review of the bank's consumer deposit account periodic statements for Regulation E compliance. As part of the review, you should check for:

a. The actual date the transfer was conducted
b. The authorization code for the transaction
c. The total amount of credits applied
d. The amount of any fees assessed for EFTs

d. The amount of any fees assessed for EFTs

9

What is the base liability for unauthorized transactions?

$50 base liability. This is often waived by the institution or by Visa/Mastercard (contractual provision).

10

The customer must notify the institution within __ days of the delivery of the periodic statement containing the transaction or else face _________ liability for the transactions after that.

60
unlimited

11

Your bank has decided to discontinue offering debit cards to business customers. Debit cards are currently in the hands of only about 100 business customers who have business checking accounts at the bank. You are asked about what kind of notice, if any, is needed to these customers to discontinue the debit cards that these customers already have. Your first step should be to:

a. Review Regulation B adverse action notice requirements
b. Review Regulation Z change in terms notification requirements
c. Review the cardholder agreement for notification requirements
d. Review Regulation E change in terms notification requirements

c. Review the cardholder agreement for notification requirements

Reg E isn't relevant because these are business customers and Reg E applies to consumers. I think the most important source is going to be the cardholder agreement that was provided to the customers when they received their cards. That will determine what, if any, disclosure notice is going to be necessary.

12

Can a bank have special terms or conditions on an account depending on whether or not the consumer opts in to debit card overdraft protection?

No. This is prohibited by Reg E. The bank must offer the same terms whether or not the consumer opts in.

13

When must a customer give notice of an unauthorized transaction?

Within 60 days of when the periodic statement containing the transaction was delivered.

14

First National Bank has an overdraft privilege program available to its deposit customers. Under this program the bank generally pays checks, ACH items and recurring debit card transactions presented against accounts up to a pre-set limit. The bank does not pay overdrafts originated as ATM transactions or as one-time debit card transactions. From time to time, however, point of sale transactions initiated by debit cards are presented as preapproved items and, according to the rules of the card association, the bank must pay the transaction as presented. Therefore the bank does have a few overdrafts originated as one-time debit card transactions. Which of the following is a true statement for the bank?

a. The bank must provide an opt in notice to all its customers
b. The bank does not have to provide an opt in notice, but it cannot charge an overdraft fee on the inadvertent overdrafts created by ATM and debit card transactions
c. The bank does not have to provide an opt in notice to its customers and it may still charge for inadvertent overdrafts created by ATM and one-time debit card transactions
d. If the bank pays overdrafts originated by check, it must also pay those originated by ATM and one-time debit transactions

b. The bank does not have to provide an opt in notice, but it cannot charge an overdraft fee on the inadvertent overdrafts created by ATM and debit card transactions

Institutions that do not authorize payments of overdrafts on ATM or one-time debit transactions are not required to give the notice of affirmative consent to opt-in, but they may not charge a fee for those transactions.

15

Which of the following actions is prohibited under EFTA/Regulation E?

a. Imposing a fee for EFTs
b. Requiring a consumer to authorize payments to a credit account as a condition of an extension of credit
c. Requiring a consumer to provide a written confirmation of an oral stop payment order
d. Requiring a consumer to request an access device in writing

b. Requiring a consumer to authorize payments to a credit account as a condition of an extension of credit

16

If a consumer wants to stop payment on a preauthorized EFT, the consumer must notify the bank...

a. At least 3 business days before the transfer is scheduled to occur
b. At least 1 day before the transfer is scheduled to occur
c. At least 14 days before the transfer is scheduled to occur
d. At least 10 days before the transfer is scheduled to occur

a. At least 3 business days before the transfer is scheduled to occur

17

The receipt of an EFT must include which of the following terms, as applicable?

a. Posting date of the transaction
b. Institution's toll-free telephone number
c. Calendar date of the transaction
d. Institution's address

c. Calendar date of the transaction

18

What is a preauthorized transfer?

A transfer that is authorized in advance to occur at substantially regular intervals.

19

The receipt of an EFT must include which of the following terms, as applicable?

a. Posting date of the transaction
b. Institution's toll-free telephone number
c. Calendar date of the transaction
d. Institution's address

c. Calendar date of the transaction

20

Mr. Edwards has a First National Bank debit card. The card allows him to withdraw funds from his checking account to pay for goods or services by using major credit card networks. Providers of services that accept MasterCard or VISA will accept Mr. Edwards debit card. Mr. Edwards travels often. In March, while at home, he reviews his checking account statement and notices three ATM transactions whereby funds were debited from his account using the debit card. The transactions were made in San Diego during February. Mr. Edwards never went to San Diego. None of his family members have debit cards. He called the bank and asked to be reimbursed for the $750 that was taken from his account but not authorized by him. What may the bank do?

a. Point out to him the language in his account agreement where he agrees to be liable for all withdrawals, whether or not authorized, and tell him that they will not credit his account for the funds
b. Tell him that they will investigate and the funds should be credited within 20 business days
c. Provisionally credit the account within 10 business days and take up to 45 days to investigate the unauthorized debit
d. Provisionally credit the account within 20 business days

c. Provisionally credit the account within 10 business days and take up to 45 days to investigate the unauthorized debit

This is an unauthorized transfer of funds. The bank cannot contract with the customer for the customer to waive his or her rights. Time periods for error resolutions are not extended for ATM transactions using debit cards initiated within a state.

21

With one exception, the following transactions are considered electronic funds transfers for purposes of Regulation E. Which transaction is NOT considered an EFT?

a. Withdrawing cash from a checking account through an ATM
b. Paying for groceries through a point-of-sale debit of funds from a checking account
c. Transferring funds from a savings account to a checking account at an ATM
d. Transferring funds from a savings account to a checking account by the customer's telephone call to a bank officer and asking for the funds to be transferred

d. Transferring funds from a savings account to a checking account by the customer's telephone call to a bank officer and asking for the funds to be transferred

All of the choices listed are covered by Regulation E except the transfer of funds initiated by a telephone call from the consumer to the bank.

22

A customer calls to notify the bank that a withdrawal made at an ATM located in a local supermarket has been debited from the wrong account. The bank employee applies the point-of-sale error resolution procedures. What should the bank do?

a. Ask the supermarket to credit the customer's account
b. Freeze the customer's account until the problem can be resolved
c. Retrain the employee to distinguish point-of-sale transactions from ATM transactions
d. Provide immediate credit, and file a SAR

c. Retrain the employee to distinguish point-of-sale transactions from ATM transactions

The employee used the wrong procedures. The ATM transaction is not a point-of-sale transaction, so the bank should first retrain the employee.

23

Jonathan Fry’s debit card is stolen on October 1, and $100 is taken from his account on October 2. Jonathan notices that his card is missing on October 5. On October 8, $100 is taken from his account. On October 10, the bank sends his monthly statement on the account, showing the two unauthorized transfers. On November 3, $500 is taken from his account. On November 10, another statement on the account is mailed, showing the November 3 unauthorized transfer. On December 5, another $100 is taken from his account. On December 10, the bank sends the monthly statement on the account, showing the December 5 unauthorized transfer. On December 15, Jonathan notifies the bank of the card’s loss. For how much of the loss is Jonathan liable?

a. $700
b. $500
c. $600
d. $250

b. $500

Two time periods must be considered when calculating the liability for unauthorized transactions under Regulation E. The first is the time up to 60 days from the date of the transmittal of the periodic statement. The second is the time following this 60 day period. Because no transactions occurred after the sixtieth day from the time the first statement was transmitted, the only period to consider in this case is the time up to the sixtieth day after the transmission of the first statement. For this time period, Jonathan's liability has an overall limit of $500. He is liable for up to $50 between the time of the loss and two days after he learns of the loss. He is also liable for losses that would not have occurred had he notified the bank within two days after he noticed the loss. Because the amount taken during this time period exceeds $500, his total liability is $500.

24

Under Reg E, when must a Bank provide a periodic statement?

Statements are mandatory if the account is able to be accessed via EFT. One must be provided at least quarterly AND in each month in which a transaction occurred.

25

Are there any special requirements for preauthorized transaction DEBITS under Reg E?

- Written authorization is required (from someone - should be the accountholder) before these transactions can begin
- Customers do have the right to stop payment on them (make sure you understand what the customer wants to stop)

26

Regulation E disclosures must FIRST be provided to an EFT customer either at the time the account is opened or at what other time?

a. With the first periodic statement
b. Before the first EFT occurs
c. Within three business days of opening the account
d. Within three business days of receiving the customer's request for EFT services

b. Before the first EFT occurs

27

Under Regulation E, which of the following pieces of information must be included on an ATM receipt?

a. The account balance
b. The location of the terminal
c. The time of day the transfer occurred
d. The fact that the transaction will overdraw the account

b. The location of the terminal

28

Final resolution for a POS or foreign ATM transaction and new accounts must occur within __ __________ days.

90 calendar

29

What is "EFT" and what is the definition?

An EFT is an Electronic Fund Transfer. It's any transfer of funds that instructs a FI to debit or credit an account, other than that originated by a check, draft, or paper instrument.

30

Alicia Perez telephoned the customer service department at First National Bank and requested to have $300 debited from her account and sent to her sister in Peru three days later. Which of the following alternatives best states the bank’s responsibilities to Ms. Perez?

a. Provide a written prepayment disclosure and receipt to Ms. Perez as soon as possible, but before the transfer is made.
b. Provide a written prepayment disclosure within one business day of the request; a receipt is not required
c. Provide an oral prepayment disclosure at the time of the request
d. Provide an oral prepayment disclosure at the time of the request and the receipt information on the next account statement

d. Provide an oral prepayment disclosure at the time of the request and the receipt information on the next account statement

When the entire transaction is conducted orally by telephone, a prepayment disclosure may be provided orally (but must be in the language in which the sender conducts the transaction). If the transaction is conducted solely by phone and the funds are debited from the sender's account at the institution, the receipt may be provided on the next periodic statement.

31

What does Reg E cover?

All institutions with consumer accounts that can be accessed by EFT devices or that provide EFT services to consumers.

32

Transfers that vary in amount must be communicated to the designed payee within __ days before the scheduled transfer or may give the consumer the option of receiving notice only when a transfer falls outside a specified range of amounts.

10

33

Mrs. Walters uses her ATM card each week to withdraw cash. To remember her access code, she writes it on the card in permanent ink. On March 1, her card is stolen. On March 2, $500 is taken from her account. On March 3, she notices the card is missing and notifies the bank the same day. Later on March 3, another $100 is taken from her account. For how much of the loss is Mrs. Walters liable?

a. $50
b. $600, because she was negligent in writing her access code on the card
c. $100
d. $500, because she was negligent in writing her access code on the card

a. $50

Mrs. Walters notified the bank within the time periods prescribed in Regulation E; therefore, she can be held liable only for $50. Her negligence is irrelevant under Regulation E and the Electronic Fund Transfer Act.

34

Which of the following items is required to be included in the Initial Disclosure provided to consumers for EFT services?

a. Circumstances under which information may be provided to third parties
b. Circumstances under which terms of the EFT service may be changed
c. Circumstances under which a consumer may discontinue the EFT service
d. Circumstances under which a consumer may request additional authorized users on the account

a. Circumstances under which information may be provided to third parties

Sec. 1005.7(9) Confidentiality. The circumstances under which, in the ordinary course of business, the financial institution may provide information concerning the consumer's account to third parties.

35

The consumer protections of Regulation E cover which of the following transactions?

a. A wire transfer made through the Fedline system by Bill Rogers to make his mortgage payment
b. A $250 automatic transfer made from Ben Stillwater's checking account to his savings account at the same institution
c. The check Mrs. Flower gave to the dress shop for her daughter's prom dress and used by the shop to collect information to send a one-time ACH debit to Mrs. Flower's account pursuant to a notice posted in the dress shop
d. The $175 loan payment made by Juan Pena to First National by depositing it in one of the bank's ATMs

c. The check Mrs. Flower gave to the dress shop for her daughter's prom dress and used by the shop to collect information to send a one-time ACH debit to Mrs. Flower's account pursuant to a notice posted in the dress shop

When a merchant uses a check to obtain account information to initiate an ACH with the consumer's consent, the transaction is covered by Regulation E.

36

What type of accounts are covered under Reg E?

It must be a consumer asset account, not a credit account, established primarily for personal, family or household purposes.

37

The customer must notify the institution within __ days of discovering the loss or theft of the device, or else the customer faces a $___ liability.

2
$500

38

Are there any special requirements for preauthorized CREDITS under Reg E?

There aren't any notification requirements for money coming into the account (e.g., payroll).

39

First National Bank received a notice from James Gilbert that a $500 electronic withdrawal from his checking account, which was shown on his monthly statement, appeared to be an error. What must First National do?

a. Investigate the error and make any corrections within 30 calendar days
b. Provisionally credit Mr. Gilbert's account for the $500, notify Mr. Gilbert of the credit, investigate the error, and make any corrections within 10 business days
c. Provisionally credit Mr. Gilbert's account for the $500 within 10 business days, notify Mr. Gilbert of the credit, investigate the error within 45 calendar days, and make any necessary corrections within 1 business day
d. Provisionally credit Mr. Gilbert's account for the $500 within 10 business days, investigate the error, notify Mr. Gilbert of the credit, and make any corrections within 30 calendar days

c. Provisionally credit Mr. Gilbert's account for the $500 within 10 business days, notify Mr. Gilbert of the credit, investigate the error within 45 calendar days, and make any necessary corrections within 1 business day

The bank must either investigate and correct the error within 10 business days or provisionally recredit the account, notify Mr. Gilbert of the recredit, and correct any error within 45 calendar days.

40

Which of the following actions is prohibited under EFTA/Regulation E?

a. Imposing a fee for EFTs
b. Requiring a consumer to authorize payments to a credit account as a condition of an extension of credit
c. Requiring a consumer to provide a written confirmation of an oral stop payment order
d. Requiring a consumer to request an access device in writing

b. Requiring a consumer to authorize payments to a credit account as a condition of an extension of credit

41

Marion Evans’s bank debit card is stolen on March 1, a Tuesday. On March 2, $100 is taken from her account with the card. She notices that her card is missing from her purse on March 3 and begins a search for the card. On March 6, another $100 is taken from her account. On March 8, $500 is taken from her account. On March 10, she notifies the bank. For how much of the amount taken can Marion be held liable?

a. $500
b. $600
c. $100
d. $50

a. $500

Marion may be responsible for up to $50 of any loss for the first two business days if she notifies the bank within two business days of the discovery of the loss. If not, she is responsible for unauthorized transactions that would not have occurred if she had notified the bank within two days of her notice of the loss up to a maximum of $50 in the first two days and, for those made afterward, up to a total of $500. She learned of the loss of her card on March 3. However, to limit her liability to $50, she would have to have notified the bank by midnight of March 5. She did not notify the bank until March 10. Therefore, she is potentially liable for $100 of the funds taken on March 6 (after the two-day period to limit liability to $50) and the time she notifies the bank (March 10) up to $500. Of the $600, she is liable for $500.

42

Before paying a remittance transfer fee, the disclosure must be provided to the consumer that contains what three things?

- Exchange rate
- Fees
- Amount of money to be delivered

43

From the date of notice, resolution must occur or a provisional credit to the account must occur within __ ________ days. This requirement is __ days for new accounts that are 30 days old or less.

10 business
20 business

44

Is a payment where the consumer has to take a specific action to initiate the transfer (such as entering instructions on a touch-tone telephone or on the internet) considered a preauthorized EFT?

No.

45

Is a wire transfer between banks or business sent through Fedwire or a similar wire transfer system considered an EFT?

No. This transaction is not considered an EFT.

46

A bank must keep records of EFT disputes resolved for a period of:

a. 2 months
b. 1 year
c. Permanently
d. 2 years

d. 2 years

47

First National Bank is expanding its deposit services and would like to send out debit cards to a group of its customers. However, these cards have not been requested by the customers and the bank does not want to violate Regulation E. How can First National accomplish this?

a. No cards may be sent except in response to a request. The bank must send letters soliciting a request for the cards.
b. Cards may be sent if they are not validated, if disclosures of consumer's rights are enclosed, and if the card can only be validated by a request from the consumer with proper identification.
c. No cards may be sent and no direct solicitation for cards may be made. The bank must rely on general advertising.
d. Ready-to-use cards may be sent to the customers provided proper disclosures of the consumer's rights are included along with a notice that use of the card will validate it for all purposes.

b. Cards may be sent if they are not validated, if disclosures of consumer's rights are enclosed, and if the card can only be validated by a request from the consumer with proper identification.

Access devices may be sent to customers who have not requested them provided the device is not validated, the consumer's rights disclosures accompany the device, an explanation of how the device can be validated is included, and the institution validates the device only after a request and with reasonable means of identification such as photograph, fingerprint, or signature.

48

Which of the following pieces of information must be included on a periodic statement according to Regulation E?

a. The financial institution's business days
b. The name of any third party to whom funds were transferred
c. A summary of the consumer's liability for unauthorized transfers
d. The balance in the consumer's account after each transfer

b. The name of any third party to whom funds were transferred

49

Is a payroll account that's established by an employer on behalf of a consumer covered under Reg E?

Yes because it's a consumer asset account that was established for personal, family or household purposes.

50

This foreign remittance disclosure repeats the information in the first disclosure and is a receipt that tells consumers the date the money will arrive in the foreign country.

proof of payment

51

T/F: All disputed transactions are considered unauthorized until demonstrated otherwise.

True. Must go through procedure and document every transaction.

52

When must the initial Reg E disclosure be provided to consumers?

At the time a consumer contracts for an EFT service or before the first EFT is made.

53

Your bank has decided to discontinue offering debit cards to business customers. Debit cards are currently in the hands of only about 100 business customers who have business checking accounts at the bank. You are asked about what kind of notice, if any, is needed to these customers to discontinue the debit cards that these customers already have. Your first step should be to:

a. Review Regulation B adverse action notice requirements
b. Review Regulation Z change in terms notification requirements
c. Review the cardholder agreement for notification requirements
d. Review Regulation E change in terms notification requirements

d. Review Regulation E change in terms notification requirements

54

If provisional credit is made to a customer for an alleged error on an ATM cash withdrawal, Regulation E requires a bank to determine whether an error has occurred and to notify the customer NO LATER THAN how many days after the bank receives notice of the alleged error?

a. 10 business days
b. 10 calendar days
c. 45 business days
d. 45 calendar days

d. 45 calendar days

Forty-five days is the longest amount of time a financial institution can take to conduct research and make a conclusion about an alleged unauthorized transaction. There are three exceptions to this rule: when the account is new, when the transaction did not take place within a state, and when the transaction involved a debit card in a point-of-sale transaction.

55

How long do consumer have to cancel the foreign remittance transfer and get a refund?

30 minutes

56

Which of the following items is required to be included in the Initial Disclosure provided to consumers for EFT services?

a. Circumstances under which information may be provided to third parties
b. Circumstances under which terms of the EFT service may be changed
c. Circumstances under which a consumer may discontinue the EFT service
d. Circumstances under which a consumer may request additional authorized users on the account

a. Circumstances under which information may be provided to third parties

57

What is the exception for providing receipts at electronic terminals (ATM/POS) under Reg E?

If the transaction is $15 or less, no receipt is required.