[Code of Federal Regulations]
[Title 12, Volume 2]
[Revised as of January 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 12CFR205.10]

[Page 134-135]
 
                       TITLE 12--BANKS AND BANKING
 
                   CHAPTER II--FEDERAL RESERVE SYSTEM
 
PART 205--ELECTRONIC FUND TRANSFERS (REGULATION E)--Table of Contents
 
Sec. 205.10  Preauthorized transfers.

    (a) Preauthorized transfers to consumer's account--(1) Notice by 
financial institution. When a person initiates preauthorized electronic 
fund transfers to a consumer's account at least once every 60 days, the 
account-holding financial institution shall provide notice to the 
consumer by:
    (i) Positive notice. Providing oral or written notice of the 
transfer within two business days after the transfer occurs; or
    (ii) Negative notice. Providing oral or written notice, within two 
business days after the date on which the transfer was scheduled to 
occur, that the transfer did not occur; or
    (iii) Readily-available telephone line. Providing a readily 
available telephone

[[Page 135]]

line that the consumer may call to determine whether the transfer 
occurred and disclosing the telephone number on the initial disclosure 
of account terms and on each periodic statement.
    (2) Notice by payor. A financial institution need not provide notice 
of a transfer if the payor gives the consumer positive notice that the 
transfer has been initiated.
    (3) Crediting. A financial institution that receives a preauthorized 
transfer of the type described in paragraph (a)(1) of this section shall 
credit the amount of the transfer as of the date the funds for the 
transfer are received.
    (b) Written authorization for preauthorized transfers from 
consumer's account. Preauthorized electronic fund transfers from a 
consumer's account may be authorized only by a writing signed or 
similarly authenticated by the consumer. The person that obtains the 
authorization shall provide a copy to the consumer.
    (c) Consumer's right to stop payment--(1) Notice. A consumer may 
stop payment of a preauthorized electronic fund transfer from the 
consumer's account by notifying the financial institution orally or in 
writing at least three business days before the scheduled date of the 
transfer.
    (2) Written confirmation. The financial institution may require the 
consumer to give written confirmation of a stop-payment order within 14 
days of an oral notification. An institution that requires written 
confirmation shall inform the consumer of the requirement and provide 
the address where confirmation must be sent when the consumer gives the 
oral notification. An oral stop-payment order ceases to be binding after 
14 days if the consumer fails to provide the required written 
confirmation.
    (d) Notice of transfers varying in amount--(1) Notice. When a 
preauthorized electronic fund transfer from the consumer's account will 
vary in amount from the previous transfer under the same authorization 
or from the preauthorized amount, the designated payee or the financial 
institution shall send the consumer written notice of the amount and 
date of the transfer at least 10 days before the scheduled date of 
transfer.
    (2) Range. The designated payee or the institution shall inform the 
consumer of the right to receive notice of all varying transfers, but 
may give the consumer the option of receiving notice only when a 
transfer falls outside a specified range of amounts or only when a 
transfer differs from the most recent transfer by more than an agreed-
upon amount.
    (e) Compulsory use--(1) Credit. No financial institution or other 
person may condition an extension of credit to a consumer on the 
consumer's repayment by preauthorized electronic fund transfers, except 
for credit extended under an overdraft credit plan or extended to 
maintain a specified minimum balance in the consumer's account.
    (2) Employment or government benefit. No financial institution or 
other person may require a consumer to establish an account for receipt 
of electronic fund transfers with a particular institution as a 
condition of employment or receipt of a government benefit.