[Federal Register: August 25, 2005 (Volume 70, Number 164)]
[Proposed Rules]
[Page 49891-49894]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25au05-16]
=======================================================================
-----------------------------------------------------------------------
FEDERAL RESERVE SYSTEM
12 CFR Part 205
[Regulation E; Docket No. R-1234]
Electronic Fund Transfers
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Proposed rule; official staff interpretation.
-----------------------------------------------------------------------
SUMMARY: The Board is publishing for comment a proposal to amend
Regulation E, which implements the Electronic Fund Transfer Act (EFTA).
The proposal would also revise the official staff commentary to the
regulation. The commentary interprets the requirements of Regulation E
to facilitate compliance primarily by financial institutions that offer
electronic fund transfer services to consumers.
The proposed revisions would clarify the disclosure obligations of
automated teller machine (ATM) operators with respect to fees imposed
on a consumer for initiating an electronic fund transfer or a balance
inquiry at an ATM. The Board is withdrawing previously proposed
revisions to the Regulation E staff commentary that would have
addressed this issue.
DATES: Comments must be received on or before October 7, 2005.
ADDRESSES: You may submit comments, identified by Docket No. R-1234, by
any of the following methods:
Agency Web site: http://www.federalreserve.gov Follow the instructions for submitting comments at http://www.federalreserve.gov/.
.
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
E-mail: regs.comments@federalreserve.gov. Include docket
number in the subject line of the message.
FAX: 202/452-3819 or 202/452-3102.
Mail: Jennifer J. Johnson, Secretary, Board of Governors
of the Federal Reserve System, 20th Street and Constitution Avenue,
NW., Washington, DC 20551.
All public comments are available from the Board's Web site at
http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as
submitted, unless modified for technical reasons. Accordingly, your
comments will not be edited to remove any identifying or contact
information. Public comments may also be viewed electronically or in
paper in Room MP-500 of the Board's Martin Building (20th and C
Streets, NW.) between 9 a.m. and 5 p.m. on weekdays.
FOR FURTHER INFORMATION CONTACT: Ky Tran-Trong, Senior Attorney, or
Daniel G. Lonergan, David A. Stein, Natalie E. Taylor or John C. Wood,
Counsels, Division of Consumer and Community Affairs, Board of
Governors of the Federal Reserve System, Washington, DC 20551, at (202)
452-2412 or (202) 452-3667. For users of Telecommunications Device for
the Deaf (TDD) only, contact (202) 263-4869.
SUPPLEMENTARY INFORMATION:
I. Background
The Electronic Fund Transfer Act (EFTA or Act) (15 U.S.C. 1693 et
seq.), enacted in 1978, establishes the rights, liabilities, and
responsibilities of participants in electronic fund transfer (EFT)
systems. The Board's Regulation E (12 CFR part 205) implements the
EFTA. Examples of types of transfers covered by the Act and regulation
include transfers initiated through an automated teller machine (ATM),
point-of-sale (POS) terminal, automated clearinghouse (ACH), telephone
bill-payment plan, or remote banking service. The Act and regulation
require disclosure of terms and conditions of an EFT service;
documentation of electronic transfers by means of terminal receipts and
periodic account activity statements; limitations on consumer liability
for unauthorized transfers; procedures for error resolution; and
certain rights related to preauthorized EFTs.
The Official Staff Commentary (12 CFR part 205 (Supp. I)) is
designed to facilitate compliance and provide protection from liability
under sections 915 and 916 of the EFTA for financial institutions and
persons subject to the Act. 15 U.S.C. 1593m(d)(1). The commentary is
updated periodically, as necessary, to address significant questions
that arise.
II. Summary of Proposed Revisions
Section 205.16 provides that an ATM operator that imposes a fee on
a consumer for initiating an EFT or a balance inquiry must post notices
at ATMs that a fee will be imposed. Section 205.16(b) would be revised
to clarify the operation of the ATM signage rule when fees are not
imposed by the ATM operator on all consumers. The revised language
specifically clarifies the intent of the rule that ATM operators may
provide a notice that a fee may be imposed if there are circumstances
in which an ATM fee will not be charged for a particular transaction,
such as where the card has been issued by a foreign bank or the card
issuer has entered into a contractual relationship with the ATM
operator regarding surcharges.
Section 205.16 does not require that any sign be posted if no fee
is charged to the consumer by the ATM operator. The rule is intended to
allow consumers to identify immediately ATMs that generally charge a
fee for use. It is not intended to represent a complete disclosure to
the consumer regarding the fees associated with the particular type of
transaction the consumer seeks to conduct. Rather, a more detailed
[[Page 49892]]
disclosure of whether in fact a fee will be charged for the type of
transaction contemplated by the consumer and the amount of the fee is
required to be made either on the ATM screen or on an ATM receipt
before the transaction is completed. See Sec. 205.16(c).
III. Section-by-Section Analysis of the Proposed Revisions
Section 205.16 Disclosures at Automated Teller Machines
Under section 904(d) of the EFTA, as amended by the Gramm-Leach-
Bliley Act of 1999 (GLB Act), an ATM operator that imposes a fee on any
consumer for providing EFT services is required to provide notice of
the fee to the consumer in a prominent and conspicuous location on or
at the ATM on which the EFT is initiated.\1\ An ATM operator is any
person who operates an ATM at which consumers initiate an EFT or a
balance inquiry, and that does not hold the account to or from which
the transfer is made, or about which an inquiry is made. See EFTA
904(d)(3)(D)(i); Sec. 205.16(a). In addition to posting notice of the
fee on or at the ATM, the ATM operator must also disclose that a fee
will be imposed and the amount of the fee, either on the screen of the
ATM or on a paper notice, before the consumer is committed to
completing the transaction. These requirements are implemented in Sec.
205.16 of Regulation E. See 66 FR 13409 (March 6, 2001).
---------------------------------------------------------------------------
\1\ Pub. L. 106-102, Sec. 702, 113 Stat. 1338, 1463-64 (1999).
---------------------------------------------------------------------------
Several large institutions have asked whether it is permissible
under Sec. 205.16 to provide notice on the ATM that a fee ``may be''
charged for providing EFT services, because many ATM operators, in
particular those owned or operated by banks, apply ATM surcharges to
some categories of their ATM users, but not others. For example, an ATM
operator might not charge a fee to cardholders of foreign banks,
cardholders whose card issuer has entered into a special contractual
relationship with the ATM operator with respect to surcharges, and
persons who carry cards that are issued under electronic benefit
transfer governmental programs. (While many financial institutions do
not impose ATM surcharges on their own cardholders, they are not ATM
operators with respect to those cardholders for purposes of Sec.
205.16 because the institutions hold the cardholders' accounts.) Also,
an ATM operator might charge a fee for cash withdrawals, but not for
balance inquiries. As a result, a disclosure on the ATM that a fee
``will'' be imposed in all instances could be overly broad with respect
to consumers who would not be assessed a fee for usage of the ATM.
In September 2004, as part of an update to Regulation E, the Board
proposed to revise comment 205.16(b)(1)-1 to clarify that ATM operators
may disclose on the ATM signage that a fee may be imposed or may
specify the type of EFTs or consumers for which a fee is imposed, if
there are circumstances in which an ATM surcharge will not be charged
for a particular transaction. See 69 FR 55996, 56005 (September 17,
2004). The Board's proposal acknowledged that a strict requirement to
post a notice that a fee will be imposed in all instances could result
in an inaccurate disclosure of the ATM operators' surcharge practices
and is not mandated by the current language in Sec. 205.16.
Industry commenters overwhelmingly agreed with the Board's
proposal, stating that the proposed staff commentary was consistent
with sections 904(d)(3)(A) and (B) of the EFTA, and would help ATM
operators more accurately disclose their surcharging practices.
Industry commenters cited a press release issued by the original act's
sponsor, Rep. Marge Roukema, stating that the act ``simply puts
existing practice into law.'' \2\ According to these commenters, the
common practice of many banks at the time of the ATM surcharge
amendments was to state that a fee may be imposed.
---------------------------------------------------------------------------
\2\ Banking Committee OKs Roukema ATM Fee Disclosure (March 10,
1999), http://financialservices.house.gov/banking/31099rou.htm.
---------------------------------------------------------------------------
Consumer groups believed that a general statement on ATM signage
that a fee ``may'' be imposed could significantly weaken consumer
notice, and that the current staff commentary permitting ATM operators
to specify the type of EFTs for which a fee is imposed provides
sufficient flexibility to address concerns about overbroad ATM signage
disclosures. A consumer rights attorney stated that a disclosure that
an ATM fee ``may'' be imposed is too general to be useful, and further
asserted that the Congress intended that ATM signs must state that a
fee will be charged whenever there is a possibility that a surcharge
will be imposed on any consumer. This commenter believed that section
904(d) of the EFTA did not provide a basis for ATM operators to avoid
providing notice on ATM signage to consumers to whom a fee would be
imposed even if some consumers would not have a fee imposed or if there
are other transactions for which a fee would not be imposed. The
commenter also challenged industry commenters' characterizations
regarding common industry practice at the time the amendments were
adopted, stating that existing practice of many ATM operators at the
time was to post signs on the machines stating that a fee will be
imposed for cash withdrawals.
The Board continues to believe that a literal interpretation of the
current rule could lead to overly broad disclosures of an ATM
operator's surcharge practices where some consumers would not be
assessed a fee for usage of the ATM, and that a reasonable
interpretation of the statute and regulation would allow ATM operators
to provide an alternative disclosure that a fee ``may'' be imposed to
avoid potential consumer confusion. Upon further analysis and after
consideration of the comments received, however, the Board believes it
would be appropriate to make this clarification in the regulation
rather than in the commentary. Therefore, the Board is withdrawing its
proposed commentary revisions addressing this issue and is instead
proposing to exercise its authority under section 904(a) of the EFTA to
amend both the regulation and the commentary. A re-proposal allows the
Board to elicit additional comments to better understand ATM disclosure
practices, both at the time of the passage of the GLB Act and
currently.
As proposed, Sec. 205.16(b) would be revised to explicitly clarify
that ATM operators may disclose in all cases that a fee will be
imposed, or in the alternative, disclose that a fee may be imposed on
consumers initiating an EFT or a balance inquiry if there are
circumstances under which some consumers would not be charged for such
services. Before an ATM operator may impose an ATM fee on a consumer
for initiating an electronic fund transfer or a balance inquiry, the
ATM operator must provide to the consumer notice, either on-screen or
via paper receipt, that an ATM fee will be imposed and the amount of
the fee, and the consumer must elect to continue the transaction or
inquiry after receiving such notice. See Sec. 205.16(e). Comment
16(b)(1)-1 would be revised to reflect the proposed rule, and to
clarify that ATM operators that impose an ATM surcharge in all cases
must provide notice on the ATM signage that a fee will be charged.
Comment is solicited on the current disclosure practices of ATM
operators that impose surcharges on some, but not all, consumers. Under
what types of circumstances might an ATM operator not impose a
surcharge for providing electronic transfer services or responding to
balance inquiries? If
[[Page 49893]]
surcharges are not imposed on all consumers, how do ATM operators
disclose their surcharge practices? What adverse impact on consumers,
if any, might result from a disclosure that states that an ATM
surcharge will be imposed when the operator's practice is not to impose
a surcharge on certain consumers? Conversely, what adverse impact on
consumers who are charged an ATM fee, if any, might result if ATM
signage states that a fee may be imposed? In addition, comment is
solicited on disclosure practices of ATM operators with respect to
surcharges at the time the GLB Act was passed.
IV. Form of Comment Letters
Comment letters should refer to Docket No. R-1234 and, when
possible, should use a standard typeface with a font size of 10 or 12;
this will enable the Board to convert text submitted in paper form to
machine-readable form through electronic scanning, and will facilitate
automated retrieval of comments for review. Comments may be mailed
electronically to regs.comments@federalreserve.gov.
V. Solicitation of Comments Regarding the Use of ``Plain Language''
Section 722 of the Gramm-Leach-Bliley Act of 1999 requires the
Board to use ``plain language'' in all proposed and final rules
published after January 1, 2000. The Board invites comments on whether
the proposed rules are clearly stated and effectively organized, and
how the Board might make the proposed text easier to understand.
VI. Initial Regulatory Flexibility Analysis
In accordance with section 3(a) of the Regulatory Flexibility Act,
the Board has reviewed the proposed amendments to Regulation E. A final
regulatory flexibility analysis will be conducted after consideration
of comments received during the public comment period.
1. Statement of the objectives of the proposal. The Board is
proposing revisions to Regulation E to allow ATM operators flexibility
to disclose that ATM surcharges will or may be imposed on consumers
initiating an EFT or a balance inquiry when there are circumstances
under which such surcharges will not be charged.
The EFTA was enacted to provide a basic framework establishing the
rights, liabilities, and responsibilities of participants in electronic
fund transfer systems. The primary objective of the EFTA is the
provision of individual consumer rights. 15 U.S.C. 1693. The EFTA and
Regulation E require disclosure of terms and conditions of an EFT
service; documentation of electronic transfers by means of terminal
receipts and periodic statements; limitations on consumer liability for
unauthorized transfers; procedures for error resolution; and certain
rights related to preauthorized EFTs. The Act and regulation also
prescribe restrictions on the unsolicited issuance of ATM cards and
other access devices. The EFTA authorizes the Board to prescribe
regulations to carry out the purpose and provisions of the statute. 15
U.S.C. 1693b(a). The Act expressly states that the Board's regulations
may contain ``such classifications, differentiations, or other
provisions, * * * as, in the judgment of the Board, are necessary or
proper to carry out the purposes of [the Act], to prevent circumvention
or evasion [of the act], or to facilitate compliance [with the Act].''
15 U.S.C. 1693b(c). The Act also states that ``[i]f electronic fund
transfer services are made available to consumers by a person other
than a financial institution holding a consumer's account, the Board
shall by regulation assure that the disclosures, protections,
responsibilities, and remedies created by [the Act] are made applicable
to such persons and services.'' 15 U.S.C. 1693b(d). The Board believes
that the proposed revisions to Regulation E discussed above are within
the Congress' broad grant of authority to the Board to adopt provisions
that carry out the purposes of the statute.
2. Small entities affected by the proposal. The number of small
entities affected by this proposal is unknown. ATM operators that do
not impose ATM surcharges in all instances would be permitted to
disclose that surcharges may be disclosed on signage appearing on ATMs.
ATM operators that choose to make the proposed alternative disclosure
may have to revise their signs on their ATMs.
3. Other Federal rules. The Board believes no Federal rules
duplicate, overlap, or conflict with the proposed revisions to
Regulation E.
4. Significant alternatives to the proposed revisions. The Board
welcomes comment on any significant alternatives that would minimize
the impact of the proposed rule on small entities.
VII. Paperwork Reduction Act
In accordance with the Paperwork Reduction Act (PRA) of 1995 (44
U.S.C. 3506; 5 CFR part 1320 Appendix A.1), the Board reviewed the
proposed rule under the authority delegated to the Board by the Office
of Management and Budget (OMB). The proposed rule contains requirements
subject to the PRA. The collection of information that is required by
this proposed rule is found in 12 CFR 205.16(c) and in Appendix A. The
Federal Reserve may not conduct or sponsor, and an organization is not
required to respond to, this information collection unless it displays
a currently valid OMB control number. The OMB control number is 7100-
0200. This information is required to obtain a benefit for consumers
and is mandatory (15 U.S.C. 1693 et seq.). The respondents/
recordkeepers are for-profit financial institutions, including small
businesses. Institutions are required to retain records for 24 months.
All depository institutions, of which there are approximately
19,300, potentially are affected by this collection of information
because all depository institutions are potential ATM operators subject
to Regulation E and are required to provide notice to consumers of an
ATM surcharge, and thus are respondents for purposes of the PRA.
However, the extent to which this collection of information affects a
particular depository institution depends on the number of ATMs an
institution operates.
The proposed revision is not expected to significantly increase the
ongoing annual burden of Regulation E; rather this would be a one-time
burden increase for those institutions that, although not required,
decide to revise their ATM signage disclosures. For purposes of the
PRA, the Federal Reserve estimates that it would take depository
institutions, on average, 8 hours (one business day) to revise and
update ATM signage; therefore, the Federal Reserve estimates that the
total annual burden for all depository institutions for this
requirement would be 154,400 hours. With respect to the 1,289 Federal
Reserve-regulated institutions which must comply with Regulation E, it
is estimated that the total annual burden for this requirement would be
10,312 hours.
The preceding estimate represents an average across all respondents
and reflect variations between institutions based on their size,
complexity, and practices. The other federal agencies are responsible
for estimating and reporting to OMB the total paperwork burden for the
institutions for which they have administrative enforcement authority.
They may, but are not required to, use the Federal Reserve's burden
estimates.
Because the records would be maintained at state member banks and
the notices are not provided to the Federal Reserve, no issue of
[[Page 49894]]
confidentiality arises under the Freedom of Information Act.
Comments are invited on: (a) Whether the proposed collection of
information is necessary for the proper performance of the Federal
Reserve's functions; including whether the information has practical
utility; (b) the accuracy of the Federal Reserve's estimate of the
burden of the proposed information collection, including the cost of
compliance; (c) ways to enhance the quality, utility, and clarity of
the information to be collected; and (d) ways to minimize the burden of
information collection on respondents, including through the use of
automated collection techniques or other forms of information
technology. Comments on the collection of information should be sent to
Michelle Long, Federal Reserve Board Clearance Officer, Division of
Research and Statistics, Mail Stop 41, Board of Governors of the
Federal Reserve System, Washington, DC 20551, with copies of such
comments sent to the Office of Management and Budget, Paperwork
Reduction Project (7100-0200), Washington, DC 20503.
Text of Proposed Revisions
Certain conventions have been used to highlight the proposed
changes to the text of the regulation and staff commentary. New
language is shown inside bold-faced arrows, while language that would
be deleted is set off with bold-faced brackets. Comments are numbered
to comply with Federal Register publication rules.
List of Subjects in 12 CFR Part 205
Consumer protection, Electronic fund transfers, Federal Reserve
System, Reporting and recordkeeping requirements.
For the reasons set forth in the preamble, the Board proposes to
amend 12 CFR part 205 and the Official Staff Commentary, as follows:
PART 205--ELECTRONIC FUND TRANSFERS (REGULATION E)
1. The authority citation for part 205 would continue to read as
follows:
Authority: 15 U.S.C. 1693b.
2. Section 205.16 would be amended by republishing paragraph (b)
and revising paragraph (c)(1) as follows:
Sec. 205.16 Disclosures on automated teller machines.
* * * * *
(b) General. An automated teller machine operator that imposes a
fee on a consumer for initiating an electronic fund transfer or a
balance inquiry shall--
(1) Provide notice that a fee will be imposed for providing
electronic fund transfer services or a balance inquiry; and
(2) Disclose the amount of the fee.
(c) Notice requirement. An automated teller machine operator must
comply with the following:
(1) On the machine. Post [lsqbb]the notice required by paragraph
(b)(1) of this section[rsqbb] in a prominent and conspicuous location
on or at the automated teller machine [rtrif] a notice that:
(i) A fee will be imposed for providing electronic fund transfer
services or a balance inquiry; or
(ii) A fee may be imposed for providing electronic fund transfer
services or a balance inquiry, but this notice may be substituted only
if there are circumstances under which a fee will not be imposed for
such services[ltrif]; and
(2) Screen or paper notice. Provide the notice required by
paragraphs (b)(1) and (b)(2) of this section either by showing it on
the screen of the automated teller machine or by providing it on paper,
before the consumer is committed to paying a fee.
2. In Supplement I to part 205, under Section 205.16--Disclosures
at Automated Teller Machines, under 16(b) General, under Paragraph
16(b)(1), paragraph 1. would be revised.
SUPPLEMENT I TO PART 205--OFFICIAL STAFF INTERPRETATIONS
* * * * *
Section 205.16--Disclosures on Automated Teller Machines
1. Specific notices. An ATM operator that imposes a fee for a
specific type of transaction[rtrif]--[ltrif] such as [rtrif]for[ltrif]
a cash withdrawal, but not [rtrif] for [ltrif]a balance inquiry,
[rtrif] or for some cash withdrawals (such as where the card was issued
by a foreign bank or by a card issuer that has entered into a special
contractual relationship with the ATM operator regarding surcharges),
but not for others--[ltrif] may provide a general
[lsqbb]statement[rsqbb] [rtrif] notice [ltrif] on or at the ATM machine
[ltrif] that a fee will [rtrif] or may [ltrif] be imposed for providing
EFT services or may specify the type of EFT for which a fee is imposed.
[rtrif] If, however, a fee will be imposed in all instances, the notice
must state that a fee will be imposed.[ltrif]
* * * * *
By order of the Board of Governors of the Federal Reserve
System, August 19, 2005.
Robert deV. Frierson,
Deputy Secretary of the Board.
[FR Doc. 05-16801 Filed 8-24-05; 8:45 am]
BILLING CODE 6210-01-P