The Electronic Fund Transfer Act (EFTA) is a federal law enacted in 1978 to protect consumers when they engage in electronic fund transfers (EFTs). It sets the rights and responsibilities of both consumers and financial institutions in electronic transactions. The EFTA is implemented and regulated by the Consumer Financial Protection Bureau (CFPB).

What is Covered by the EFTA?

The EFTA governs transactions that are processed electronically. Examples include:

• ATM transactions
• Direct deposits
• Debit card transactions
• Point-of-sale (POS) transactions
• Automated clearing house (ACH) transfers
• Online and mobile banking transactions
• Preauthorized payments (e.g., recurring utility bill payments)

Key Protections Under the EFTA

1. Disclosure of Terms: Financial institutions must provide clear and accurate disclosures about terms, fees, and conditions of EFT services before a consumer begins using them.
2. Consumer Liability for Unauthorized Transfers:
   • Consumers are protected from liability for unauthorized transactions if they report the issue promptly:
     • Within 2 business days: Liability is capped at $50.
     • Between 2 and 60 days: Liability increases up to $500.
     • After 60 days: Consumers may be responsible for all unauthorized transfers after that period.
3. Error Resolution: Consumers have the right to dispute errors on their account, such as:
   • Unauthorized or incorrect transactions
   • Missing or duplicate transfers
   • Failure to stop preauthorized payments
   • Incorrect transfer amounts
   • Transaction charges for which the consumer is not liable

   Steps for resolution:

   • Notify the financial institution within 60 days of receiving the statement showing the error.
   • The institution must investigate and resolve the issue within 10 business days (or 45 days for certain situations).
4. Stop Payment Rights: Consumers can stop payment on preauthorized transfers by notifying their financial institution at least 3 business days before the scheduled payment date.
5. Receipts and Account Statements:
   • Receipts must be provided for electronic transactions at ATMs or POS terminals.
   • Financial institutions must provide periodic account statements summarizing all EFT activity.
6. Preauthorized Transfer Protections:
   • Companies must obtain a consumer’s written or electronic authorization for preauthorized payments.
   • Consumers can cancel preauthorized payments by notifying their financial institution.

What is Not Covered by the EFTA?

The EFTA does not cover:

• Wire transfers through services like Western Union
• Checks that are converted to electronic transfers (those may fall under both the EFTA and Check Clearing for the 21st Century Act)

How to File a Complaint Under the EFTA

If your rights under the EFTA have been violated, you can:

1. Contact Your Financial Institution: Start by addressing the issue with your bank or credit union.
2. File a Complaint: Submit a complaint to the Consumer Financial Protection Bureau (CFPB) at consumerfinance.gov.
3. Consult an Attorney: If the issue persists, consider seeking legal advice or filing a lawsuit. The EFTA allows consumers to recover damages, including attorney’s fees, in cases of non-compliance.

Key Takeaway

The EFTA empowers consumers with protections and ensures transparency and accountability in electronic financial transactions. By understanding your rights and responsibilities, you can safeguard your finances and address any issues that arise.