|
The Safe Harbor in the Current Model Text Might Have Vanished
Financial institutions should seriously consider amending the Terminal Transfer paragraph in their initial Reg E disclosure to inform the consumer that he/she may not get a receipt if the amount of the transfer is $15 or less. In fact, using the current model text may no longer provide a safe harbor. Under the Electronic Funds Transfer Act (EFTA), using model language only provides a safe harbor if it is "appropriate." However, since the model language says the consumer can get a receipt for "any transfer" at an ATM or point of sale terminal, an argument can very easily be made that the current model text is inaccurate, potentially deceptive, and no longer appropriate. In the past, the Federal Reserve has stated that financial institutions are free to adjust the model text as necessary to fit the situation. This appears to be one of those situations.
If You Say It, It Better Be True
Your disclosures are part of your contract. If you continue to use the current model language, you are telling consumers that they can get a receipt for any transaction. Nothing good can come from a situation where you don’t fulfill your responsibilities as described in your account documentation. Failing a documented obligation may be a regulatory violation, breach of contract, or even an unfair or deceptive trade practice. The bottom line is that financial institutions will have no control over whether a receipt will be made available on any given transaction. Given that reality, a financial institution does not want to be bound, contractually or otherwise, to provide a receipt for all transactions. The easy solution is to amend your initial Reg E disclosure to make sure that it accurately describes what will happen.
Providing a Change Notice: Good Customer Service … and More
Reg E does not require a change notice under these circumstance because none of the section 205.8 criteria (increased fees, increased liability, fewer types of transfers, or stricter dollar/frequency limitations) are present. However, the same concerns discussed above exist and a financial institution does not want to be contractually bound to provide a receipt to any consumer – whether they are a new or existing accountholder – when whether a receipt is actually made available is out of the financial institution’s control. As a result, financial institutions would be well-advised to send a change notice to existing consumer accountholders.
Financial institutions should also keep customer service in mind. Many consumers rely on receipts for recording-keeping. These consumers will not like the changes brought about by this rule. The consumer’s need for a receipt, whether real or perceived, was made readily apparent in the consumer comment letters that the Board received. The consumer comment letters overwhelmingly indicated a need/preference for receipts. By providing consumers with a change notice, financial institutions will not only be putting themselves in a better position from a contractual standpoint, but will also be helping to educate consumers about the change; and that could reduce the number of customer service inquiries.
State Law Considerations
Of interest, some states have laws that require a receipt to be provided (e.g., Colorado, Massachusetts and Michigan). Under EFTA, state laws that are more protective of the consumer are not altered or annulled by EFTA or Reg E. As a result, it appears that these states still have receipt requirements regardless of the dollar amount. This, however, should not affect a financial institution’s decision to update its’ disclosure text to inform the consumer that he/she may not get a receipt if the amount of the transfer is $15 or less. Just because one state requires a receipt doesn’t mean a consumer won’t use his or her card in a state without such a requirement.
The Effective Date
As mentioned, the rule is effective August 6, 2007. This creates some degree of urgency for financial institutions to act. However, the short effective date means it will be virtually impossible to update in time to meet the effective date. Financial institutions can take some comfort in the fact that few, if any, retailers will have receipt-less equipment installed by August 6 th either.
Conclusion
The bottom line is that the legal framework for receipt-less, small dollar, transactions will be in place effective August 6, 2007. Financial institutions should act promptly and prudently to update their disclosures and send change notices but not panic about the short time between the rule and the effective date.
Back to Top |
|
|
|
