Federal Reserve Creates Exception to Regulation E

Effective August 6, 2007, financial institutions are no longer required to make a receipt available for electronic fund transfers of $15 or less. 

Previously, under Regulation E, the Electronic Fund Transfer Act required financial institutions to make receipts available for all electronic fund transfers at electronic terminals, regardless of how nominal the transaction.  The Board of Governors of the Federal Reserve System (“Board”) noted in its notice of proposed rulemaking, issued on December 1, 2006, that such a requirement may be impractical for small-dollar environments, such as vending machines or mass transit systems that accept debit cards for payment.  The costs associated with installing and servicing equipment to generate receipts at these terminals for these types of transactions would have been burdensome.  The Board additionally noted that consumers are less likely to retain receipts for small-dollar transactions, and consumers would still be able to contest errors with their financial institutions upon receipt of their periodic statements.

In carving out this exception to the Electronic Fund Transfer Act, the Board reviewed approximately 56 comment letters from financial institutions, consumer groups, and individuals.  Generally, the financial institutions actually desired the Board to increase the dollar threshold from $15 to $25 to be more consistent with current rules regarding waiving of personal identification numbers and signature authorization for certain merchants, while consumer group advocates desired the Board to decrease the dollar threshold to $5 in order to protect consumers who may have to challenge their financial institutions about these transactions and are unable to produce a receipt as proof.  Ultimately, the Board determined that the $15 threshold amount was a good balance between the needs of the industry and of consumers.

The full text of the final rule and official staff interpretation can be found here:  http://www.ots.treas.gov/docs/8/86393.pdf.

For more information contact Mary A. Zambreno of Dickinson, Mackaman, Tyler & Hagen, P.C.