CFPB releases EFTA FAQs

Federal Issues CFPB Consumer Finance EFTA Electronic Fund Transfer Regulation E

On December 13, the CFPB released updated Electronic Fund Transfers FAQs, which pertain to compliance with the Electronic Fund Transfer Act (EFTA) and Subpart A to Regulation E. The updated topics include transaction coverage, financial institution coverage, error resolution, and unauthorized EFT error resolution. Highlights from the updated FAQs include:

• Person-to-person (P2P) payments can be unauthorized electronic transfers under Regulation E.
• “[A] ‘pass-through’ payment transfers funds from the consumer’s account held by an external financial institution to another person’s account held by an external financial institution,” which is “initiated through a financial institution that does not hold a consumer’s account, for example, a non-bank P2P provider.”
• “Regulation E section 1005.2(i) defines financial institution under EFTA and Regulation E to include banks, savings associations, credit unions, and: any other person that directly or indirectly holds an account belonging to a consumer, or any other person that issues an access device and agrees with a consumer to provide electronic fund transfer (EFT) services.”
• “Any P2P payment provider that meets the definition of a financial institution, as discussed in Electronic Fund Transfers Coverage: Financial Institutions Question 1, is a financial institution under Regulation E.” Therefore, “if a P2P payment provider directly or indirectly holds an account belonging to a consumer, they are considered a financial institution under Regulation E.”
• The transfer is considered to be an unauthorized EFT under Regulation E if a consumer’s account is obtained from a third party through fraudulent means (hacking), and a hacker utilizes that information to make an unauthorized electronic transfer from the consumer’s account.
• “Although private network rules and other commercial agreements may provide for interbank finality and irrevocability, they do not reduce consumer protections against liability for unauthorized EFTs afforded by the Electronic Fund Transfer Act…. Accordingly, any financial institution in this transaction must comply with the error resolution requirements discussed in Electronic Fund Transfers Error Resolution Question 2, as well as the liability protections for unauthorized transfers.”