For those of you who offer online banking but limit transfer capabilities to internal transactions only, did you put a clause in your consumer contract for "Consumer Liability for Unauthorized Transactions"? - Reg E exempts automatic transfers between a consumer's accounts within the same financial institution, even if the account holders on the two accounts are not identical. But from all of the sample contracts I have obtained, it seems like several banks have that provision still in their contract. Why would banks include this language in their contracts if it was not required? Thoughts?

We did, but our inclusion was based on an examble that we knew was reviewed by an attorney, as was our final disclosure product. Better safe than sorry?

Reg E only exempts pre-authorized intra-bank EFTs among accounts of the same family. Section 205.c(5) reads:

(5) Automatic transfers by account-holding institution. Any transfer of funds under an agreement between a consumer and a financial institution which provides that the institution will initiate individual transfers without a specific request from the consumer:
(i) Between a consumer's accounts within the financial institution;
(ii) From a consumer's account to an account of a member of the consumer's family held in the same financial institution; or
(iii) Between a consumer's account and an account of the financial institution, except that these transfers remain subject to Sec. 205.10(e) regarding compulsory use and sections 915 and 916 of the act regarding civil and criminal liability.

Individually requested transfers (those without a standing order) are still subject to Regulation E and error resolution requirements, as are recurring transfers to persons not in the account owner's family.

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Any transfer of funds under an agreement between a consumer and a financial institution which provides that the institution will initiate individual transfers without a specific request from the consumer:

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Right. Our Online Banking system is only going to allow for internal transfers initiated by a customer who has signed an Online Banking Agreement with us, therefore it would make this disclosure "not applicable" for contract purposes.

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Individually requested transfers (those without a standing order) are still subject to Regulation E and error resolution requirements,

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I dont know what you mean by this. ???

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as are recurring transfers to persons not in the account owner's family.

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We would not allow transfer to accounts not owned by the same individual(s) so this would "not be applicable" either.

Please tell me I am understanding this properly.

I was attempting to draw the distinction between automatic transfers -- sometimes referred to as preauthorized EFTs -- and individually-authorized transfers.

An example of the former is the automatic monthly transfer from checking to a club account, or the weekly transfer from Mom & Dad's account to son College Joe's account within the same bank. These are all exempt from Reg. E under §205.3(c)(5).

An example of the latter is a one-time transfer initiated and authorized by the customer to move funds from his/her savings account to his/her checking account (whether in the same bank or not). These are not considered automatic or preauthorized under the Regulation and are therefore covered. You have to have all the section 205.7 disclosures for these possible transactions (unless you don't allow them).

You will get written up on this as a violation of Reg E if you don't mention in your EFT disclosure that Online Banking is an EFT service and describe what actions you can do ie Make transfer, initiate payments, etc. Also, in your online banking contract, make sure you don't tell your customer that you accept no liability for errors or problems. Reg E governs online banking transactions.

These are my opinions and not those of my employer.