Question & Answer

Question: Do we have to give Regulation E disclosures if the customer signs an agreement to have payments to their Christmas savings account or payments on their loan made electronically?

Answer: It depends, but the best idea (and the easiest way to manage compliance) is to give Regulation E disclosures any time an electronic transfer is involved.

Regulation E applies to "any electronic fund transfer that authorizes a financial institution to debit or credit a consumer's account." There is an exception for certain "intra-bank" transfers in Section 205.3(c)(5)(i). The difficulty in using this exception is counting on staff throughout the bank to recognize and apply it correctly. For example, deposits to a Christmas club account from the customer's checking account with the same bank would be exempt.

This intra-bank exemption would not apply to transfers from another bank for the same purpose. And, it would not apply to transfers from an affiliate, such as the bank making loan payments by electronic transfer to an affiliate mortgage company. We lean toward always giving Regulation E notices and rights. It is simply a good idea.

Copyright © 1999 Compliance Action. Originally appeared in Compliance Action, Vol. 4, No. 13 & 14, 11/99