Regulation E and Disclosing the Right to Charge a Fee

Issue/Inquiry

Does Regulation E require the Bank to disclose that it reserves the right to assess ACH fees, if it does not charge such fees? If this is required, does the Bank need to re-disclose to all of its customers, or is it acceptable to simply change the disclosure going forward?

Response Detail

If the Bank reserves the right to charge fees for ACH transactions, it must disclose that fact in the initial EFT disclosures. If it did not do so, then it must revise the disclosure statement given to new consumer customers and mail or deliver a change-in-terms notice to existing consumer customers, at least, 21 days prior to the effective date of the change.

Response Summary

Under Regulation E, the initial disclosure given when a consumer contracts for an electronic fund service must include any fees imposed by the financial institution for electronic fund transfers (“EFTs”) or for the right to make such transfers. This means that the institution is required to disclose all fees for EFTs or for the right to make them. 12 CFR §1005.7(b)(5); Official Interpretations, 1005.7(b)(5) – 1.

An EFT includes transfers sent via ACH. Official Interpretations, 1005.3(b)(1) – 1.ii.

If the financial institution subsequently makes a change that affects the terms or conditions of the initial disclosures, it must provide its existing consumer customers with a written notice, (the “change-in-terms notice”) that is mailed or delivered at least 21 days prior to the effective date of the change. 12 CFR §1005.8(a).

In this case, if the Bank reserves the right to charge fees for ACH transfers, it was required to disclose that fact to its customers when the EFT services were contracted for. If the disclosure was not made at that time, the Bank must now do so with a change-in-terms notice.

There is no specific form or wording required for a change-in-terms notice. It may appear on a periodic statement or by sending a copy of the revised disclosure statement, provided that attention is directed to the change, as with a cover letter. Official Interpretations, 1005.8(a) – 1.

Going forward, the Bank would also revise the disclosure statement given to new consumer customers.

It should be noted that Regulation E covers only consumer EFT transactions. However, if the Bank provided EFT disclosures to business customers, it may have incorporated Regulation E requirements by contract. In such case, it would be required to fulfill those requirements with regard to a change-in-terms.

 

This entry was posted on Monday, September 26th, 2016 at 2:00 pm.