Electronic Fund Transfer Act (EFTA)

What Is The Electronic Fund Transfer Act (EFTA)?

EFTA, or the Electronic Fund Transfer Act, is a federal law that protects consumers during electronic transactions. It applies to the use of ATMs, debit cards, bank account withdrawals, and more.

EFTA Explained

The EFTA, sometimes called the EFT Act, is the Electronic Fund Transfer Act. President Jimmy Carter signed it into law in 1978. The need for the Act arose due to increasing ATM usage and electronic banking.

After the EFTA became law, the Consumer Financial Protection Bureau issued Regulation E. This regulation provides a framework for carrying out the measures outlined in the EFTA.

Electronic fund transfers are transactions that involve the electronic movement of money using computers or phones. Examples include debit card and ACH transactions, ATM withdrawals, and online banking. Transactions initiated via telephone are also covered. There are some exceptions—credit card transactions aren’t included.

The EFTA outlines customers’ rights and responsibilities when participating in electronic transactions. One of its core purposes is to give customers the ability to dispute errors that occur during an electronic fund transfer. It also limits their liability for charges resulting from a lost or stolen card.

Some errors that people can dispute under EFTA include the following:

• An unauthorized EFT
• An EFT for an incorrect amount
• An EFT missing from a consumer’s statement
• Receiving an incorrect amount of money from an ATM

The Act also covers requesting information or clarification about an EFT.

As a consumer, you must follow specific steps to resolve an error properly.

You should contact your financial institution as soon as you realize there is a problem. The contact needs to occur no later than 60 days after you receive an erroneous statement. And, you should provide your name, account number, and an explanation of the error.

Financial institutions also have to follow procedures when responding to a reported error. They need to investigate the issue within ten days in most cases, though there are some exceptions. When their investigation is complete, they should report the results to you within three business days. Finally, they should correct the error within one business day.

If no error has occurred, the financial institution should explain its findings in writing.

As a customer, if your debit card is lost or stolen, you should report it promptly. Doing so helps limit your financial liability for fraudulent transactions.

The EFTA only covers lost or stolen debit cards. The Fair Credit Billing Act limits cardholders’ liability for unauthorized credit card charges.

EFTA Examples

The EFTA protects consumers whose debit cards are lost or stolen. However, you need to report the loss or theft within a certain timeframe.

Suppose you just realized that your debit card is not in your wallet, but you’re not sure what happened to it.

In our first example, you report your card lost or stolen immediately. No fraudulent charges are ever made using your card. You don’t need to worry about being liable for any fraudulent charges.

In our next example, you report your card missing within two business days. In this case, you’re liable for a maximum of $50 in fraudulent charges.

In our third example, you wait more than two business days. Some time passes, and you receive your credit card statement, which reminds you that your card is missing. You report your lost card within 60 calendar days of your statement being sent to you. In this case, you’re liable for a maximum of $500 in fraudulent charges.

For our final example, you don’t report your card lost or stolen. Eventually, your bank realizes something is wrong with your account. They close your account, but it’s been more than 60 calendar days since you lost your card. In this case, you’re liable for all of the fraudulent activity on your card.