[Federal Register: March 6, 2001 (Volume 66, Number 44)]
[Rules and Regulations]
[Page 13409-13413]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06mr01-8]
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FEDERAL RESERVE SYSTEM
12 CFR Part 205
[Regulation E; Docket No. R-1077]
Electronic Fund Transfers
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Final rule.
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SUMMARY: The Board is publishing revisions to Regulation E, which
implements the Electronic Fund Transfer Act. The revisions implement
amendments to the act contained in the Gramm-Leach-Bliley Act that
require the disclosure of certain fees associated with automated teller
machine (ATM) transactions. The amendments require ATM operators that
impose a fee for providing electronic fund transfer services to post a
notice in a prominent and conspicuous location on or at the ATM. The
operator must also disclose that a fee will be imposed and the amount
of the fee, either on the screen of the machine or on a paper notice,
before the consumer is committed to completing the transaction. In
addition, when the consumer contracts for an electronic fund transfer
service, financial institutions are required to provide initial
disclosures, including a notice that a fee may be imposed for
electronic fund transfers initiated at an ATM operated by another
entity.
DATES: This rule is effective March 9, 2001; however, to provide
adequate time to make any necessary systems changes, mandatory
compliance date is delayed until October 1, 2001.
FOR FURTHER INFORMATION CONTACT: John C. Wood, Counsel, or David A.
Stein, Attorney, Division of Consumer and Community Affairs, Board of
Governors of the Federal Reserve System, Washington, DC 20551, at (202)
452-2412 or (202) 452-3667.
SUPPLEMENTARY INFORMATION:
I. The Electronic Fund Transfer Act
The Electronic Fund Transfer Act (EFTA or Act), 15 U.S.C. 1693 et
seq.,
[[Page 13410]]
enacted in 1978, 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 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
EFT services 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 EFT services.
The Official Staff Commentary (12 CFR part 205 (Supp. I))
interprets the regulation, and provides guidance to financial
institutions in applying the regulation to specific transactions. The
commentary is a substitute for individual staff interpretations; it is
updated periodically, as necessary, to address significant questions
that arise.
EFTA coverage is not limited to traditional financial institutions
holding consumers' asset accounts. For EFT services made available by
entities other than an account-holding financial institution, the act
directs the Board to assure, by regulation, that the provisions of the
act are made applicable.
II. The Gramm-Leach-Bliley Amendments to the EFTA
The Gramm-Leach-Bliley Act (GLBA), Pub. L. 106-102, 113 Stat. 1338,
amended the EFTA. Sections 702, 703, and 705 of the GLBA require
disclosure of ATM fees (sometimes referred to as ``surcharges'')
imposed by ATM operators. Many ATM operators--including financial
institutions that impose such a fee--currently disclose information
about the fee to satisfy existing regulatory and network requirements.
Section 702 of the GLBA amends section 904(d) of the EFTA regarding
services provided by entities other than the account-holding
institution. An ATM operator that imposes a fee on a consumer for EFT
services is required to post a notice of that fact in a prominent and
conspicuous location on or at the ATM. The ATM operator must also
disclose that a fee will be imposed and the amount of the fee, either
on the screen of the ATM or on a paper notice, before the consumer is
committed to completing the transaction. No fee may be imposed unless
proper notice is provided and the consumer elects to complete the
transaction.
Section 703 of the GLBA amends section 905(a) of the EFTA regarding
the disclosure of terms and conditions at the time a consumer signs up
for EFT services. The financial institution holding the consumer's
account must include in its initial disclosures a notice that a fee may
be imposed by (1) An ATM operator not holding the consumer's account,
or (2) any national, regional, or local network used to complete the
transaction.
Section 705 of the GLBA amends section 910 of the EFTA regarding
liability of financial institutions. ATM operators are not liable for
failing to comply with the requirement to post notice if the notice
posted at an ATM is subsequently removed, damaged, or altered by any
person other than the ATM operator.
III. Revisions to Regulation E Implementing the GLBA Amendments to
the EFTA
In July 2000, the Board published proposed revisions to Regulation
E to implement the EFTA amendments made by the GLBA. (65 FR 44481, July
18, 2000.) The proposal paralleled the statutory provisions for the
most part. The Board received approximately 50 comment letters. The
majority of comments on the proposed revisions were from financial
institutions and industry associations. Several commenters requested
action outside the scope of the Board's authority, such as deleting the
statutory requirement to post a sign about fees at the ATM as
unnecessary and burdensome or prohibiting ATM surcharges.
In general, most commenters supported the Board's proposed
revisions. Many industry commenters, however, requested a longer period
than 30 days after issuance to comply with a final rule. They stated
that while the proposed revisions will not require extensive software
or other system changes, ATM operators will need more than 30 days to
implement them. In response to comments received, the mandatory
compliance date for the final rule is October 1, 2001.
Pursuant to its authority under section 904(a) of the EFTA, the
Board is adopting a final rule amending Regulation E to implement
sections 702 and 703 of the GLBA. The final rule is substantially
similar to the proposal with some technical and editorial revisions. To
facilitate compliance, a new Sec. 205.16 addresses in a single location
most of the rules related to disclosure of fees by ATM operators. Below
is a section-by-section analysis of the final rule.
IV. Section-by-Section Analysis of the Final Rule
Section 205.3--Coverage
3(b) Electronic Fund Transfer
Section 205.3(b) generally defines the term ``electronic fund
transfer.'' The GLBA treats a balance inquiry as an EFT for purposes of
the ATM fee disclosure requirement. Therefore, the proposed rule added
balance inquiries at ATMs to the list of examples of an EFT in
paragraph (b), but only for purposes of ATM fee disclosure
requirements. Based on comments, the final rule does not include a
balance inquiry as an example of an ``electronic fund transfer,'' since
such an inquiry does not fit within the literal definition of a ``fund
transfer.''
Section 205.7--Initial Disclosures
7(b) Content of Disclosures
Section 205.7(b) is revised substantially as proposed to implement
section 703 of the GLBA. At the time a consumer contracts for an EFT
service or before the first EFT, a financial institution is required to
provide initial disclosures related to the EFT service, such as fees
imposed and a summary of the consumer's liability for unauthorized
transfers. Section 703 of the GLBA amends section 905(a) of the EFTA by
adding to the initial disclosures a notice that a fee may be imposed
for an EFT or balance inquiry at an ATM by an ATM operator or by a
national, regional, or local network used to complete the transfer.
The Board solicited specific comment on whether national, regional,
or local networks separately impose fees and thus should be
distinguished, or whether it is sufficient to refer to ``any network''
in the disclosures as an alternative to the statutory language. Many
commenters, including network owners, indicated that while networks
currently charge an interchange fee to a financial institution whose
customers use the network, they do not separately impose a fee on the
consumer.
Commenters requested clarification that reference to network-
imposed fees may be excluded from the disclosure in paragraph
Sec. 205.7(b)(11), if networks are not imposing fees on consumers.
Disclosures are generally required only to the extent applicable.
Therefore, an institution may omit any reference to a network fee if
the disclosure does not apply to the consumer's account. Model language
in appendix A-2 regarding ATM fees is amended to reflect this
flexibility. If networks begin to impose
[[Page 13411]]
fees on consumers to complete an EFT or a balance inquiry, institutions
that choose to exclude the reference to network fees from their section
7(b) disclosures will be required to send a change-in-terms notice to
account holders who contract for EFT services on or after October 1,
2001.
Section 205.16--Disclosures at Automated Teller Machines
A new Sec. 205.16 is added, as proposed, to implement section 702
of the GLBA. Section 205.16(a) defines ATM operator. The ATM disclosure
requirements are set forth in Secs. 205.16(b) and (c).
Some ATM operators only impose a fee for a specific type of
transfer such as a cash withdrawal, and not for a balance inquiry. In
such cases, the notice in Sec. 205.16(b)(1) may contain a general
statement that a fee will be imposed for providing EFT services or may
specify the type of service for which a fee is imposed. If a financial
institution provides a specific notice, and subsequently imposes fees
on a broader category of transactions, the notice must be revised to
reflect changes in an ATM operator's practice. Comment 16(b)(1)-1 is
added to provide this guidance.
Several commenters requested guidance on how the requirements in
Sec. 205.4(a), that disclosures be clear and readily understandable and
in a form the consumer may keep, apply to the ATM disclosure
requirements. The notice required to be posted on or at the ATM under
Sec. 205.16(c)(1) must be placed in a prominent and conspicuous
location. The ``clear and readily understandable'' standard applies to
the content of the notice.
Regulation E provides that disclosures required to be given to a
consumer must generally be in a retainable format. The notices posted
on the screen (and, of course, those provided on or at the ATM) need
not be in retainable format. If a paper notice is provided to comply
with Sec. 205.16(c)(2), the notice must be provided in a form that may
be retained by the consumer.
Based on the comments received, Sec. 205.16(c) is revised from the
proposed language to clarify that two notices are required--one on or
at the ATM and another on the screen or in paper form. Editorial
changes are for clarity; no substantive change is intended.
Section 205.16(d) provides, in accordance with the statute, that
the requirement for a disclosure on the screen or on a paper notice
does not apply--through December 31, 2004--to any ATM that lacks the
technical capability to provide such information. Commenters noted that
many ATM operators are already providing notices about ATM fees in
compliance with state law or network rules and guidelines. A few
commenters urged the Board to eliminate the temporary exemption. The
exemption is statutory and is adopted as proposed. The burden of proof
rests on any ATM operator relying on the temporary exemption.
Appendix A to Part 205--Model Disclosure Clauses and Forms
Model language added to Appendix A-2 reflects the new disclosure in
Sec. 205.7(b)(11) regarding fees that may be imposed by an ATM operator
and by any network. Brackets indicate that institutions may omit terms
and conditions not applicable to the consumer's account, such as fees
imposed directly by networks.
V. Revisions to the Official Staff Commentary
Section 205.7--Initial Disclosures
Comment 7(b)(5)-3 to Sec. 205.7(b)(5), which addresses interchange
system fees, is revised to provide a cross-reference to
Sec. 205.7(b)(11).
Section 205.9--Receipts at Electronic Terminals; Periodic Statements
Section 205.9(a)(1) requires financial institutions that include in
the transaction amount a fee for completing an EFT at an electronic
terminal to disclose the amount of the fee on the receipt and to
display it on or at the terminal. Comment 9(a)(1)-1, which provides
guidance on complying with the disclosure requirement, is revised to
provide a cross-reference to the notice requirements in Sec. 205.16 for
ATM operators. The cross-reference is intended to alert financial
institutions of additional requirements in Sec. 205.16. In addition, a
new comment 9(a)(1)-2 is added to give guidance on the relationship
between Sec. 205.9(a)(1) and Sec. 205.16.
Section 205.16--Disclosures at Automated Teller Machines
Comment 16(b)(1)-1 is added to clarify that an institution may
state generally that a fee will be imposed for providing EFT services
or may specify the type of service for which a fee is imposed.
VI. 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
amendments to Regulation E. The amendments impose disclosure
requirements on ATM operators and account-holding financial
institutions about ATM fees. In accordance with the GLBA, the final
rule exempts ATMs lacking technical capabilities from certain notice
requirements until December 31, 2004.
The amendments are not expected to have any significant impact on
small entities. Many financial institutions that impose a fee for
carrying out a transaction at an ATM already disclose the fee to
satisfy existing requirements under Sec. 205.9(a)(1). The amendment
would require that a disclosure regarding the fee be posted at the
terminal and on the screen. The notice is generic, however, and can
easily be programmed for display on the screen and at the terminal.
VII. Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
3506; 5 CFR 1320 Appendix A.1), the Board reviewed the 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, an information collection
unless it displays a currently valid OMB number. The OMB control number
for Regulation E is 7100-0200.
The information collection requirements relevant to this rulemaking
are in 12 CFR part 205 and Appendix A. This information collection is
mandatory (15 U.S.C. 1693 et seq.) to evidence compliance with the
requirements of Regulation E and the Electronic Fund Transfer Act
(EFTA). The revised requirements help ensure adequate disclosure of
fees imposed for electronic fund transfers at ATMs owned by a party
other than the account-holding financial institution. The respondents/
recordkeepers are for-profit financial institutions, including small
businesses. Institutions are required to retain records for 24 months.
This regulation applies to all types of financial 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 revisions are not expected to increase the ongoing annual
burden of Regulation E. With respect to state member banks, it is
estimated that there are 884 respondents/recordkeepers and an average
frequency of about 85,800 responses per respondent each year. The
current annual burden is estimated to be approximately 480,786 hours.
The Federal Reserve estimates that there
[[Page 13412]]
would be associated start-up cost of $3,500 with a range from $1,600 to
$5,000 per respondent, depending on size and location, for changing
disclosures (or disclosure producing software) to include disclosures
relating to ATM surcharges and for posting a notice regarding the
surcharge on or at the ATM and on the screen of the ATM.
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 Board has a continuing interest in the public's opinion of the
Federal Reserve's collections of information. Comments regarding the
burden estimates, or any other aspect of this collection of
information, including suggestions for reducing the burden estimate,
may be sent at any time to: Secretary, Board of Governors of the
Federal Reserve System, 20th and C Streets, NW., Washington, DC 20551;
and to the Office of Management and Budget, Paperwork Reduction Project
(7100-0200), Washington, DC 20503.
List of Subjects in 12 CFR Part 205
Consumer protection, Electronic fund transfers, Federal Reserve
System, Reporting and recordkeeping requirements.
For the reasons set forth in the preamble, the Board amends
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 205.7 is amended by adding a new paragraph (b)(11) to
read as follows:
Sec. 205.7 Initial disclosures.
* * * * *
(b) Content of disclosures. * * *
(11) ATM fees. A notice that a fee may be imposed by an automated
teller machine operator as defined in Sec. 205.16(a)(1), when the
consumer initiates an electronic fund transfer or makes a balance
inquiry, and by any network used to complete the transaction.
* * * * *
3. A new Sec. 205.16 is added to read as follows:
Sec. 205.16 Disclosures at automated teller machines.
(a) Definition. Automated teller machine operator means any person
that operates an automated teller machine at which a consumer initiates
an electronic fund transfer or a balance inquiry and that does not hold
the account to or from which the transfer is made, or about which an
inquiry is made.
(b) General. An automated teller machine operator that imposes a
fee on a consumer for initiating an electronic fund transfer or a
balance inquiry shall:
(1) Provide notice that a fee will be imposed for providing
electronic fund transfer services or a balance inquiry; and
(2) Disclose the amount of the fee.
(c) Notice requirement. An automated teller machine operator must
comply with the following:
(1) On the machine. Post the notice required by paragraph (b)(l) of
this section in a prominent and conspicuous location on or at the
automated teller machine; and
(2) Screen or paper notice. Provide the notice required by
paragraphs (b)(1) and (b)(2) of this section either by showing it on
the screen of the automated teller machine or by providing it on paper,
before the consumer is committed to paying a fee.
(d) Temporary exemption. Through December 31, 2004, the notice
requirement in paragraph (c)(2) of this section does not apply to any
automated teller machine that lacks the technical capability to provide
such information.
(e) Imposition of fee. An automated teller machine operator may
impose a fee on a consumer for initiating an electronic fund transfer
or a balance inquiry only if
(1) The consumer is provided the notices required under paragraph
(c) of this section, and
(2) The consumer elects to continue the transaction or inquiry
after receiving such notices.
4. Under Appendix A, A-2 is amended by adding a new paragraph (j)
to read as follows:
Appendix A to Part 205--Model Disclosure Clauses and Forms
* * * * *
A-2--Model Clauses for Initial Disclosures (Sec. 205.7(B))
* * * * *
(j) ATM fees (Sec. 205.7(b)(11)). When you use an ATM not owned
by us, you may be charged a fee by the ATM operator [or any network
used] (and you may be charged a fee for a balance inquiry even if
you do not complete a fund transfer).
* * * * *
5. In Supplement I to Part 205, the following amendments would be
made:
a. Under Section 205.7--Initial Disclosures, under Paragraph
7(b)(5)--Fees, paragraph 3. is revised;
b. Under Section 205.9--Receipts at Electronic Terminals; Periodic
Statements, under Paragraph 9(a)(1)--Amount, paragraph 1. is revised
and a new paragraph 2 is added; and
c. A new Section 205.16--Disclosures at Automated Teller Machines
is added.
The additions and revision read as follows:
Supplement I to Part 205--Official Staff Interpretations
* * * * *
Section 205.7--Initial Disclosures
* * * * *
7(b) Content of Disclosures
* * * * *
Paragraph 7(b)(5)--Fees
* * * * *
3. Interchange system fees. Fees paid by the account-holding
institution to the operator of a shared or interchange ATM system
need not be disclosed, unless they are imposed on the consumer by
the account-holding institution. Fees for use of an ATM that are
debited directly from the consumer's account by an institution other
than the account-holding institution (for example, fees included in
the transfer amount) need not be disclosed. (See Sec. 205.7(b)(11)
for the general notice requirement regarding fees that may be
imposed by ATM operators and by a network used to complete the
transfer.)
* * * * *
Section 205.9--Receipts at Electronic Terminals; Periodic Statements
* * * * *
Paragraph 9(a)(1)--Amount
1. Disclosure of transaction fee. The required display of a fee
amount on or at the terminal may be accomplished by displaying the
fee on a sign at the terminal or on the terminal screen for a
reasonable duration. Displaying the fee on a screen provides
adequate notice, as long as a consumer is given the option to cancel
the transaction after receiving notice of a fee. (See Sec. 205.16
for the notice requirements applicable to ATM operators that impose
a fee for providing EFT services.)
2. Relationship between Sec. 205.9(a)(1) and Sec. 205.16. The
requirements of Secs. 205.9(a)(1) and 205.16 are similar but not
identical.
i. Section 205.9(a)(1) requires that if the amount of the
transfer as shown on the receipt will include the fee, then the fee
must be disclosed either on a sign on or at the terminal, or on the
terminal screen. Section 205.16 requires disclosure both on a sign
on or at the terminal (in a prominent and conspicuous location) and
on the terminal
[[Page 13413]]
screen. Section 205.16 permits disclosure on a paper notice as an
alternative to the on-screen disclosure.
ii. The disclosure of the fee on the receipt under
Sec. 205.9(a)(1) cannot be used to comply with the alternative paper
disclosure procedure under Sec. 205.16, if the receipt is provided
at the completion of the transaction because, pursuant to the
statute, the paper notice must be provided before the consumer is
committed to paying the fee.
iii. Section 205.9(a)(1) applies to any type of electronic
terminal as defined in Regulation E (for example, to POS terminals
as well as to ATMs), while Sec. 205.16 applies only to ATMs.
* * * * *
Section 205.16--Disclosures at Automated Teller Machines
16(b) General
Paragraph 16(b)(1)
1. Specific notices. An ATM operator that imposes a fee for a
specific type of transaction such as a cash withdrawal, but not a
balance inquiry, may provide a general statement that a fee will be
imposed for providing EFT services or may specify the type of EFT
for which a fee is imposed.
* * * * *
By order of the Board of Governors of the Federal Reserve
System, February 28, 2001.
Jennifer J. Johnson,
Secretary to the Board.
[FR Doc. 01-5295 Filed 3-5-01; 8:45 am]
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