Protecting Paperless Money: The Electronic Funds Transfer Act

With each passing year, technology becomes more integrated into fundamental parts of our lives. Our bank accounts and financial transactions are no exception. Today, more and more transactions are conducted electronically without the passing of a check or paper money. Some examples of electronic fund transfers include: transactions conducted at an ATM, transactions conducted with an ATM or debit card, regularly scheduled preauthorized transfers including automatic payroll deposits and automatic payments and one time authorized transfers. Consumers who make these types of transactions are protected by the Electronic Fund Transfer Act.
The Electronic Fund Transfer Act Protections
The Electronic Funds Transfer Act provides certain protects to consumers who make electronic transactions. Significantly, the Act allows consumers to:
·         Get a receipt for all transactions: The receipt must show the amount of the transaction, the date and the name of the other party to the transaction. All of this information must also show up on your regular bank statement.
·         Correct mistakes: You have the right to correct mistakes that were made with regard to your account. In order to correct mistakes you must notify the financial institution within 60 days of the time that the first statement showing the error was sent to you. It is important to make your claim in writing and to provide all of the relevant detail. The financial institution then has approximately 45-90 days to resolve the error, depending on the particular circumstances. If an error is found then it must be corrected and if no error is found then the financial institution must provide you with a detailed written explanation of how it came to that conclusion.
·         Protect themselves from theft: However, the protection that accompanies this right is dependent on how quickly you notify the financial institution of the suspected theft. If you notify the financial institution within 2 business days of learning of the theft then your liability is limited to $50. If you do not report the transaction within 2 business days but do so within 60 days then you could lose up to $500 for unauthorized transactions. If you do not report the transaction within 60 days of receiving a statement that shows an unauthorized transaction then you may be responsible for all amounts associated with the theft of your debit card or bank account information.
·         Refuse to pay a creditor with electronic funds: The law is explicit that a consumer cannot be required to pay a loan or other credit obligation with electronic funds. However, it is important to note that employers and government agencies can require employees and citizens to receiving payroll and other financial benefits through electronic funds. The person receiving the funds has the right to determine which account and in which financial institution the deposit is made.
Electronic fund transfers are part of the way America does business in the 21st century. While it may be impractical to avoid ATMs, debit cards and other electronic transfers it is important to understand how to protect yourself and your money at all times.

The information on this page is meant to provide a general overview of the law. The laws in your state and/or city may deviate significantly from those described here. If you have specific questions related to your situation you should speak with a local attorney.

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