Electronic Fund Transfers

[Federal Register Volume 64, Number 177 (Tuesday, September 14, 1999)]
[Proposed Rules]
[Pages 49699-49713]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-23139]


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FEDERAL RESERVE SYSTEM

12 CFR Part 205

[Regulation E; Docket No. R-1041]


Electronic Fund Transfers

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Proposed rule.

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SUMMARY: The Board is requesting comment on proposed revisions to 
Regulation E, which implements the Electronic Fund Transfer Act. The 
Board previously published an interim rule that permits financial 
institutions to use electronic communication (for example, 
communication via personal computer and modem) to provide disclosures 
required by the act and regulation, if the consumer agrees to such 
delivery. (A similar rule was also proposed under various other 
consumer financial services and fair lending regulations administered 
by the Board.) In response to comments received on the interim rule 
(and the proposals), the

[[Page 49700]]

Board is publishing for comment an alternative proposal on the 
electronic delivery of disclosures, together with proposed commentary 
that would provide further guidance on electronic communication issues. 
The interim rule remains in effect. The Board is also publishing for 
comment technical amendments involving error resolution notices.

DATES: Comments must be received by October 29, 1999.

ADDRESSES: Comments, which should refer to Docket No. R-1041, may be 
mailed to Jennifer J. Johnson, Secretary, Board of Governors of the 
Federal Reserve System, 20th Street and Constitution Avenue, NW, 
Washington, DC 20551. Comments addressed to Ms. Johnson also may be 
delivered to the Board's mail room between 8:45 a.m. and 5:15 p.m. 
weekdays, and to the security control room at all other times. The mail 
room and the security control room, both in the Board's Eccles 
Building, are accessible from the courtyard entrance on 20th Street 
between Constitution Avenue and C Street, NW. Comments may be inspected 
in room MP-500 between 9:00 a.m. and 5:00 p.m., pursuant to 
Sec. 261.12, except as provided in Sec. 261.14 of the Board's Rules 
Regarding the Availability of Information, 12 CFR 261.12 and 261.14.

FOR FURTHER INFORMATION CONTACT: Michael L. Hentrel, Staff Attorney, or 
John C. Wood, Senior Attorney, Division of Consumer and Community 
Affairs, at (202) 452-2412 or (202) 452-3667. Users of 
Telecommunications Device for the Deaf (TDD) only, contact Diane 
Jenkins at (202) 452-3544.

SUPPLEMENTARY INFORMATION:

I. Background

    The Electronic Fund Transfer Act (EFTA), 15 U.S.C. 1693 et seq., 
provides a basic framework establishing the rights, liabilities, and 
responsibilities of participants in electronic fund transfer (EFT) 
systems. The Board's Regulation E (12 CFR part 205) implements the act. 
Types of transfers covered by the act and regulation include transfers 
initiated through an automated teller machine (ATM), point-of-sale 
terminal, automated clearinghouse, telephone bill-payment plan, or 
home-banking program. The act and regulation prescribe restrictions on 
the unsolicited issuance of ATM cards and other access devices; 
disclosure of terms and conditions of an EFT service; documentation of 
EFTs by means of terminal receipts and periodic account statements; 
limitations on consumer liability for unauthorized transfers; 
procedures for error resolution; and certain rights related to 
preauthorized EFTs.
    The EFTA and Regulation E require a number of disclosures to be 
provided in writing, presuming that institutions provide paper 
documents. Under many laws that call for information to be in writing, 
information in electronic form is considered to be ``written.'' 
Information produced, stored, or communicated by computer is also 
generally considered to be a writing, where visual text is involved.
    In May 1996, the Board revised Regulation E (Electronic Fund 
Transfers) following a comprehensive review. During that process, the 
Board determined that electronic communication for delivery of 
information required by federal laws governing financial services could 
effectively reduce compliance costs without adversely affecting 
consumer protections. Consequently, the Board simultaneously issued a 
proposed rule to permit financial institutions to use electronic 
communication to deliver disclosures that Regulation E requires to be 
given in writing. (61 FR 19696, May 2, 1996.) The 1996 proposal 
required that disclosures be provided in a form the consumer may 
retain, a requirement that institutions could satisfy by providing 
information in a format that may be printed or downloaded. The proposed 
rule also allowed consumers to request a paper copy of a disclosure for 
up to one year after its original delivery.
    Following a review of the comments, on March 25, 1998, the Board 
issued an interim rule under Regulation E (the ``interim rule''), 63 FR 
14528. The Board also published proposals under Regulations DD (Truth 
in Savings), 63 FR 14533, M (Consumer Leasing), 63 FR 14538, Z (Truth 
in Lending), 63 FR 14548, and B (Equal Credit Opportunity), 63 FR 
14552, (collectively, the ``March 1998 proposed rules''). The rules 
would apply to financial institutions, creditors, lessors, and other 
entities that are required to give disclosures to consumers and others. 
(For ease of reference this background section uses the terms 
``financial institutions,'' ``institutions,'' and ``consumers.'') The 
interim rule and the March 1998 proposed rules were similar to the May 
1996 proposed rule; however, they did not require financial 
institutions to provide paper copies of disclosures to a consumer upon 
request if the consumer previously agreed to receive disclosures 
electronically. The Board believed that most institutions would 
accommodate consumer requests for paper copies when feasible or 
redeliver disclosures electronically; and the Board encouraged 
financial institutions to do so.
    The March 1998 proposed rules and the interim rule permitted 
financial institutions to provide disclosures electronically if the 
consumer agreed, with few other requirements. The rule was intended to 
provide flexibility and did not specify any particular method for 
obtaining a consumer's agreement. Whether the parties had an agreement 
would be determined by state law. The proposals and the interim rule 
did not preclude a financial institution and a consumer from entering 
into an agreement electronically, nor did they prescribe a formal 
mechanism for doing so.
    The Board received approximately 200 written comments on the 
interim rule and the March 1998 proposed rules. The majority of 
comments were submitted by financial institutions and their trade 
associations. Industry commenters generally supported the use of 
electronic communication to deliver information required by the EFTA 
and Regulation E. Nevertheless, many sought specific revisions and 
additional guidance on how to comply with the disclosure requirements 
in particular transactions and circumstances.
    Industry commenters were especially concerned about the condition 
that a consumer had to ``agree'' to receive information by electronic 
communication, because the rule did not specify a method for 
establishing that an ``agreement'' was reached. These commenters 
believed that relying on state law created uncertainty about what 
constitutes an agreement and, therefore, potential liability for 
noncompliance. To avoid uncertainty over which state's laws apply, some 
commenters urged the Board to adopt a federal minimum standard for 
agreements or for informed consent to receive disclosures by electronic 
communication. These commenters believed that such a standard would 
avoid the compliance burden associated with tailoring legally binding 
``agreements'' to the contract laws of all jurisdictions where 
electronic communication may be sent.
    Consumer advocates generally opposed the March 1998 interim rule 
and proposed rules. Without additional safeguards, they believed, 
consumers may not be provided with adequate information about 
electronic communication before an ``agreement'' is reached. They also 
believed that promises of lower costs could induce consumers to agree 
to receive disclosures electronically without a full understanding of 
the implications. To avoid such problems, they urged the

[[Page 49701]]

Board, for example, either to require institutions to disclose to 
consumers that their account with the institution will not be adversely 
affected if they do not agree to receive electronic disclosures, or to 
permit institutions to offer electronic disclosures only to consumers 
who initiate contact with the institution through electronic 
communication. They also noted that some consumers will likely consent 
to electronic disclosures believing that they have the technical 
capability to retrieve information electronically, but might later 
discover that they are unable to do so. They questioned consumers' 
willingness and ability to access and retain disclosures posted on 
Internet websites, and expressed their apprehension that the goals of 
federally mandated disclosure laws will be lost.
    Consumer advocates and others were particularly concerned about the 
use of electronic disclosures in connection with home-secured loans and 
certain other transactions that consumers typically consummate in 
person (citing as examples automobile loans and leases, short-term 
``payday'' loans, or home improvement financing contracts resulting 
from door-to-door sales). They asserted that there is little benefit to 
eliminating paper disclosures in such transactions and that allowing 
electronic disclosures in those cases could lead to abusive practices. 
Accordingly, consumer advocates and others believed that paper 
disclosures should always accompany electronic disclosures in mortgage 
loans and certain other transactions, and that consumers should have 
the right to obtain paper copies of disclosures upon request for all 
types of transactions (deposit account, credit card, loan or lease, and 
other transactions).
    A final issue raised by consumer advocates was the integrity of 
disclosures sent electronically. They stated that there may be 
instances when the consumer and the institution disagree on the terms 
or conditions of an agreement and consumers may need to offer 
electronic disclosures as proof of the agreed-upon terms and to enforce 
rights under consumer protection laws. Thus, to assure that electronic 
documents have not been altered and that they accurately reflect the 
disclosures originally sent, consumer advocates recommended that the 
Board require that electronic disclosures be authenticated by an 
independent third party.
    The Board's Consumer Advisory Council considered the electronic 
delivery of disclosures in 1998 and again in 1999. Many Council members 
shared views similar to those expressed in written comment letters on 
the 1998 proposals. For example, some Council members expressed concern 
that the Board was moving too quickly in allowing electronic 
disclosures for certain transactions, and suggested that the Board 
might go forward with electronic disclosures for deposit accounts while 
proceeding more slowly on credit and lease transactions. Others 
expressed concern about consumer access and consumers' ability to 
retain electronic disclosures. They believed that, without specific 
guidance from the Board, institutions would provide electronic 
disclosures without knowing whether consumers could retain or access 
the disclosures, and without establishing procedures to address 
technical malfunctions or nondelivery. The Council also discussed the 
integrity and security of electronic documents.

II. Overview of Proposed Revisions

    Based on a review of the comments and further analysis, the Board 
is requesting comment on a modified proposed rule that is more detailed 
than the interim rule and March 1998 proposed rules. It is intended to 
provide specific guidance for institutions that choose to use 
electronic communication to comply with Regulation E's requirements to 
provide written disclosures, and to ensure effective delivery of 
disclosures to consumers through this medium. Though detailed, the 
proposal provides flexibility for compliance with the electronic 
communication rules. The modified proposal recognizes that some 
disclosures may warrant different treatment under the rule. Where 
written disclosures are made to consumers who are transacting business 
in person, these disclosures generally would have to be made in paper 
form.
    The Board is soliciting comment on a modified approach that 
addresses both industry and consumer group concerns. Under the 
proposal, financial institutions would have to provide specific 
information about how the consumer can receive and retain electronic 
disclosures--through a standardized disclosure statement--before 
obtaining consumers' acceptance of such delivery, with some exceptions. 
If they satisfy these requirements and obtain consumers' affirmative 
consent, financial institutions would be permitted to use electronic 
communication. As a general rule an institution would be permitted to 
offer the option of receiving electronic disclosures to all consumers, 
whether they initially contact the institution by electronic 
communication or otherwise. To address concerns about potential abuses, 
however, the proposal provides that if a consumer contracts for an EFT 
service in person, initial disclosures must be given in paper form.
    Financial institutions would have the option of delivering 
disclosures to an e-mail address designated by the consumer or making 
disclosures available at another location such as the institution's 
website, for printing or downloading. If the disclosures are posted at 
a website location, financial institutions generally must notify 
consumers at an e-mail address about the availability of the 
information. (Financial institutions may offer consumers the option of 
receiving alert notices at a postal address.) The disclosures must 
remain available at that site for 90 days.
    Disclosures provided electronically would be subject to the ``clear 
and readily understandable'' standard, and the existing format, timing, 
and retainability rules in Regulation E. For example, to satisfy the 
timing requirement, if disclosures are due at the time a consumer 
contracts for an EFT service, the disclosures would have to appear on 
the screen before the consumer could complete the transaction.
    Financial institutions generally must provide a means for consumers 
to confirm the availability of equipment to receive and retain 
electronic disclosure documents. A financial institution would not 
otherwise have a duty to verify consumers' actual ability to receive, 
print, or download the disclosures. Some commenters suggested that 
institutions should be required to verify delivery by return receipt. 
The Board solicits comment on the need for such a requirement and the 
feasibility of that approach.
    As previously mentioned, consumer advocates and others have 
expressed concerns that electronic documents can be altered more easily 
than paper documents. The issue of the integrity and security of 
electronic documents affects electronic commerce in general and is not 
unique to the written disclosures required under the consumer 
protection laws administered by the Board. Consumers' ability to 
enforce rights under the consumer protection laws could be impaired in 
some cases, however, if the authenticity of disclosures that they 
retain cannot be demonstrated. Signatures, notary seals, and other 
established verification procedures are used to detect alterations for 
transactions memorialized in paper form. The development of similar 
devices for electronic communication should reduce uncertainty over 
time

[[Page 49702]]

about the ability to use electronic documents for resolving disputes.
    The Board's rules require financial institutions to retain evidence 
of compliance with Regulation E. Specific comment is solicited on the 
feasibility of complying with a requirement that financial institutions 
provide disclosures in a format that cannot be altered without 
detection, or have systems in place capable of detecting whether or not 
information has been altered, as well as the feasibility of requiring 
use of independent certification authorities to verify disclosure 
documents.
    The interim rule for Regulation E adopted by the Board in 1998 
remains in effect. To the extent the interim rule is modified when 
final action is taken on the current proposal, the Board will provide a 
reasonable time period before the mandatory compliance date for any new 
requirements.
    Elsewhere in today's Federal Register, the Board is publishing 
similar proposals for comment under Regulations B, M, Z, and DD. In a 
separate notice the Board is publishing an interim rule under 
Regulation DD, which implements the Truth in Savings Act, to permit 
depository institutions to use electronic communication to deliver 
disclosures on periodic statements. For ease of reference, the Board 
has assigned new docket numbers to the modified proposals published 
today.

III. Section-by-Section Analysis

    Pursuant to its authority under section 904 of the EFTA, the Board 
proposes to amend Regulation E to permit institutions to use electronic 
communication to provide the information required by this regulation in 
writing. Below is a section-by-section analysis of the rules for 
providing disclosures by electronic communication, including references 
to proposed commentary provisions.

Section 205.4  General Disclosure Requirements; Jointly Offered 
Services

4(a) Form of Disclosures
4(a)(2) Foreign Language Disclosures
    To provide consistency among the regulations, the guidance 
currently contained in comment 4(a)-2 permitting disclosures to be made 
in languages other than English (provided they are available in English 
upon request) would be set forth in a new Sec. 205.4(a)(2).
4(c) Electronic Communication
4(c)(1) Definition
    The definition of the term ``electronic communication'' in the 
interim rule remains unchanged. Section 205.4(c)(1) limits the term to 
a message transmitted electronically that can be displayed on equipment 
as visual text, such as a message that is displayed on a computer 
monitor screen. Most commenters supported the term as defined in the 
interim rule. Some commenters favored a more expansive definition that 
would encompass communications such as audio and voice response 
telephone systems. Because the proposal is intended to permit 
electronic communication to satisfy the statutory requirement for 
written disclosures, the Board believes visual text is an essential 
element of the definition.
    Commenters asked the Board to clarify the coverage of certain types 
of communications. A few commenters asked about communication by 
facsimile. Facsimiles are initially transmitted electronically; the 
information may be received either in paper form or electronically 
through software that allows a consumer to capture the facsimile, 
display it on a monitor, and store it on a computer diskette or drive. 
Thus, information sent by facsimile may be subject to the provisions 
governing electronic communication. When disclosures are sent by 
facsimile, a financial institution should comply with the requirements 
for electronic communication unless it knows that the disclosures will 
be received in paper form. Proposed comment 4(c)(1)-1 contains this 
guidance.
4(c)(2) Electronic Communication between Financial Institution and 
Consumer
    Section 205.4(c)(2)(i) would permit financial institutions to 
provide disclosures using electronic communication, if the institution 
complies with provisions in new Sec. 205.4(c)(3), discussed below.
1. Presenting Disclosures in a Clear and Readily Understandable Format
    The Board does not intend to discourage or encourage specific types 
of technologies. Regardless of the technology, however, disclosures 
provided electronically must be presented in a clear and readily 
understandable format as is the case for all written disclosures under 
the act and regulation. See Sec. 205.4(a).
    When consumers consent to receive disclosures electronically and 
they confirm that they have the equipment to do so, financial 
institutions generally would have no further duty to determine that 
consumers are able to receive the disclosures. Institutions do have the 
responsibility of ensuring the proper equipment is in place in 
instances where the institution controls the equipment. Proposed 
comment 4(c)(2)-1 contains this guidance.
2. Providing Disclosures in a Form the Consumer May Keep
    As with other written disclosures, information provided by 
electronic communication must be in a form the consumer can retain. 
Under the 1998 proposals and interim rule, a financial institution 
would satisfy this requirement by providing information that can be 
printed or downloaded. The modified proposal adopts the same approach 
but also provides that the information must be sent to a specified 
location to ensure that consumers have an adequate opportunity to 
retain the information.
    Consumers communicate electronically with financial institutions 
through a variety of means and from various locations. Depending on the 
location (at home, at work, in a public place such as a library), a 
consumer may not have the ability at a given time to preserve EFTA 
disclosures presented on-screen. Therefore, when a financial 
institution provides disclosures by electronic communication, to 
satisfy the retention requirements, the institution must send the 
disclosures to a consumer's e-mail address or other location where 
information may be retrieved at a later date. Proposed comment 4(c)(2)-
2 contains this guidance; see also the discussion under 
Sec. 205.4(c)(4), below. In instances where an institution controls an 
electronic terminal used to provide electronic disclosures, an 
institution may provide equipment for the consumer to print a paper 
copy in lieu of sending the information to the consumer's e-mail 
address or posting the information at another location such as the 
institution's website. See proposed comment 4(c)(2)-1.
3. Timing
    Institutions must ensure that electronic disclosures comply with 
all relevant timing requirements of the regulation. For example, 
initial disclosures must be provided at the time a consumer contracts 
for an EFT service or before the first transaction. The rule ensures 
that consumers have an opportunity to read important information about 
costs and other terms before contracting for or using the service.
    To illustrate the timing requirements for electronic communication, 
assume that an existing customer of a bank is interested in signing up 
for an on-line bill-payment service and uses a personal

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computer at home to access the bank's website on the Internet. The bank 
provides disclosures to the consumer about the use of electronic 
communication (the Sec. 205.4(c)(3) disclosures discussed below) and 
the consumer responds affirmatively. If the bank's procedures permit 
the consumer to sign up for and use the EFT service at that time, 
disclosures required under Sec. 205.7 would have to be provided. Thus, 
the disclosures must automatically appear on the screen or the consumer 
must be required to access the information before contracting for the 
service (or before the first transaction). The timing requirements for 
providing initial disclosures would not be met if, in this example, the 
bank permitted the consumer to sign up for and immediately use an EFT 
service and sent initial disclosures to an e-mail address thereafter. 
Proposed comment 4(c)(2)-3 contains this guidance.
    On the other hand, assume that a consumer requests an EFT service 
and the institution delays processing the consumer's request until the 
required disclosures have been delivered by e-mail. In that case the 
information would not have to also appear on the screen; delivery to 
the consumer's e-mail address would be sufficient. In either case, the 
consumer must receive the disclosures before contracting for the 
service or before the first transaction.
4(c)(2)(ii) In-Person Exception
    The proposal contains an exception to the general rule allowing 
information required by Regulation E to be provided by electronic 
communication; where the exception applies, paper disclosures would be 
required. The exception, contained in Sec. 205.4(c)(2)(ii), seeks to 
address concerns about potential abuses where consumers are transacting 
business in person but are offered disclosures in electronic form. In 
such transactions, there is a general expectation that consumers would 
be given paper copies of disclosures along with paper copies of other 
documents evidencing the transaction.
    Under Sec. 205.4(c)(2)(ii), if a consumer contracts for an EFT 
service in person, the financial institution must provide initial 
disclosures in paper form. For example, if a consumer signs up for an 
ATM card while opening an account at a financial institution, initial 
disclosures are required before contracting for the card (or the first 
transaction) and they must be provided in paper form; directing the 
consumer to disclosures posted on the institution's website would not 
be sufficient. An institution also complies if a consumer signs up for 
an EFT service on the Internet and is sent disclosures electronically 
at or around that time, even though the institution's procedures 
requires the consumer to visit the institution at a later time to 
complete the transaction (for example, to complete a signature card). 
Proposed comment 4(c)(2)(ii)-1 contains this guidance.
4(c)(3) Disclosure Notice
    Section 205.4(c)(3) would identify the specific steps required 
before an institution could use electronic communication to satisfy the 
regulation's disclosure requirements. Proposed Model Forms A-6 and A-7, 
and Sample Forms A-9 and A-10 are published to aid compliance with 
these requirements.
4(c)(3)(i) Notice by Financial Institution
    Section 205.4(c)(3)(i) outlines the information that financial 
institutions must provide before electronic disclosures can be given. 
The financial institution must: (1) describe the information to be 
provided electronically and specify whether the information is also 
available in paper form or whether the EFT service is offered only with 
electronic disclosures; (2) identify the address or location where the 
information will be provided electronically, and if it will be 
available at a location other than the consumer's electronic address, 
specify for how long and where it can be obtained once that period 
ends; (3) specify any technical requirements for receiving and 
retaining information sent electronically, and provide a means for the 
consumer to confirm the availability of equipment meeting those 
requirements; and (4) provide a toll-free telephone number and, at the 
institution's option, an electronic or postal address for questions 
about receiving electronic disclosures or for updating consumers' 
electronic addresses, and for seeking assistance with technical or 
other difficulties (see proposed comments to 4(c)(3)(i)). The Board 
requests comment on whether other information should be disclosed 
regarding the use of electronic communication and on any format changes 
that might improve the usefulness of the notice for consumers.
    The Board also solicits comment on the benefits of requiring an 
annual notice in paper form to consumers who receive disclosures by 
electronic communication. The notice would contain general information 
about receiving electronic disclosures including, for example, a 
reminder of the toll-free number where consumers may contact the 
institution if they have questions regarding their electronic 
disclosures.
    Under the proposal, the Sec. 205.4(c)(3)(i) disclosures must be 
provided, as applicable, before the financial institution uses 
electronic communication to deliver any information required by the 
regulation. The approach of requiring a standardized disclosure 
statement addresses, in several ways, the concern that consumers may be 
steered into using electronic communication without fully understanding 
the implications. Under this approach, the specific disclosures that 
would be delivered electronically must be identified, and consumers 
must be informed whether there is also an option to receive the 
information in paper form. Consumers must provide an e-mail address 
where one is required. Technical requirements must also be stated, and 
consumers must affirm that their equipment meets the requirements, and 
that they have the capability of retaining electronic disclosures by 
downloading or printing them (see proposed comment 4(c)(3)-1). Thus, 
the Sec. 205.4(c)(3)(i) disclosures should allow consumers to make 
informed judgments about receiving electronic disclosures.
    Some commenters requested clarification of whether a financial 
institution may use electronic communication to provide some required 
disclosures while using paper for others. The proposed rule would 
permit institutions to do so; the disclosure given under 
Sec. 205.4(c)(3)(i) must specify which EFTA disclosures will be 
provided electronically.
    Commenters requested further guidance on a financial institution's 
obligation under the regulation if the consumer chooses not to receive 
information by electronic communication. A financial institution could 
offer a consumer the option of receiving disclosures in paper form, but 
it would not be required to do so. A financial institution could 
establish accounts or services for which disclosures are given only by 
electronic communication. Section 205.4(c)(3)(i)(A) would require 
financial institutions to tell consumers whether or not they have the 
option to receive disclosures in paper form. Section 205.4(c)(3)(i)(D) 
would require financial institutions to provide a toll-free number that 
consumers could use to inform institutions if they wish to discontinue 
receiving electronic disclosures. In such cases the institution must 
inform the consumer whether the EFT service is also available with 
disclosures in paper form. Proposed sample disclosure statements in 
which

[[Page 49704]]

the consumer has an option to receive electronic or paper disclosures 
(Form A-9) or electronic disclosures only (Form A-10) are contained in 
appendix A.
4(c)(3)(ii) Response by Consumer
    Proposed Sec. 205.4(c)(3)(ii) would require financial institutions 
to provide a means for the consumer to affirmatively indicate that 
disclosures may be provided electronically. Examples include a ``check 
box'' on a computer screen or a signature line (for requests made in 
paper form). The requirement is intended to ensure that consumers' 
consent is established knowingly and voluntarily, and that consent to 
receive electronic disclosures is not inferred from consumers' use of 
the account or acceptance of general account terms. See proposed 
comment 4(c)(3)(ii)-1.
4(c)(3)(iii) Changes
    Financial institutions would be required to notify consumers about 
changes to the information that is provided in the notice required by 
Sec. 205.4(c)(3)(i)--for example, if upgrades to computer software are 
required. Proposed comment 4(c)(3)(iii)-1 contains this guidance.
    The notice must include the effective date of the change and be 
provided before that date. Proposed comment 4(c)(3)(iii)-2 would 
provide that the notice must be sent a reasonable period of time before 
the effective date of the change. Although the number of days that 
constitutes reasonable notice may vary, depending on the type of change 
involved, the comment would provide institutions with a safe harbor: 
fifteen days' advance notice would be considered a reasonable time in 
all cases. The same time period is stated in similar proposals under 
Regulations B, Z, and DD published in today's Federal Register. Comment 
is requested on whether a safe harbor of 15 days is an appropriate time 
period, and whether a uniform period for changes involving electronic 
communication is desirable. An alternative approach would adopt notice 
requirements that are consistent with change-in-terms requirements 
under the respective regulations. Under this approach, for example, the 
safe harbor would be 21 days under Sec. 205.8 for Regulation E, 15 days 
under Sec. 226.9 for Regulation Z, and 30 days under Sec. 230.5 for 
Regulation DD. Proposed comment 4(c)(3)(iii)-3 contains guidance on 
delivery requirements for the notice of change.
    The notice of a change must also include a toll-free telephone 
number or, at the institution's option, an address for questions about 
receiving electronic disclosures. For example, a consumer may call 
regarding problems related to a change, such as an upgrade to computer 
software that is not provided by the institution. Consumers may also 
use the toll-free number if they wish to discontinue receiving 
electronic disclosures. In such cases, the institution must inform 
consumers whether the EFT service is also available with disclosures in 
paper form. (See proposed comments 4(c)(3)(iii)-4 through -6.)
    If the change involves providing additional disclosures by 
electronic communication, institutions generally would be required to 
provide the notice in Sec. 205.4(c)(3)(i) and obtain the consumer's 
consent. That notice would not be required if the institution 
previously obtained the consumer's consent to the additional 
disclosures in its initial notice by disclosing the possibility and 
specifying which disclosures might be provided electronically in the 
future. Comment is specifically requested on this approach. A list of 
additional disclosures may be necessary to ensure that consumers' 
consent is informed and knowing (provided it does not cause confusion).
4(c)(4) Address or Location to Receive Electronic Communication
    Proposed Sec. 205.4(c)(4) identifies addresses and locations where 
institutions using electronic communication may send information to the 
consumer. Institutions may send information to a consumer's electronic 
address, which is defined in proposed comment 4(c)(4)(i)-1 as an e-mail 
address that the consumer also may use for receiving communications 
from parties other than the financial institution. For notices of 
preauthorized transfers, for example, a financial institution's 
responsibility to provide notice under Sec. 205.10(d) will be satisfied 
when the information is sent to the consumer's electronic address in 
accordance with the applicable proposed rules concerning delivery of 
disclosures by electronic communication.
    Guidance accompanying the interim rule provided that an institution 
would not meet delivery requirements by simply posting information to 
an Internet site such as a financial institution's ``home page'' 
without appropriate notice on how consumers can access the information. 
Industry commenters wanted to retain the flexibility of posting 
disclosures on an Internet website. They did not object to providing a 
separate notice alerting consumers about the disclosures' availability 
but requested more guidance on the issue. Consumer advocates and others 
expressed concern that the mere posting of information inappropriately 
places the responsibility to obtain disclosures on consumers, and 
undermines the purpose of the delivery requirements of the regulation.
    The Board recognizes that currently, because of security and 
privacy concerns associated with data transmissions, a number of 
institutions may choose to provide disclosures at their websites, where 
the consumer may retrieve them under secure conditions. Under 
Sec. 205.4(c)(4), a financial institution may make disclosures 
available to a consumer at a location other than the consumer's 
electronic address. The institution must notify the consumer when the 
information becomes available and identify the account involved. The 
notice must be sent to the electronic mail address designated by the 
consumer; the financial institution may, at its option, permit the 
consumer to designate a postal address. A proposed model form (Model 
Form A-8) is published below; see also proposed comment 4(c)(4)(ii)-1.
    The Board believes it would be inconsistent with the EFTA to 
require a consumer to initiate a search--for example, to search the 
website of each financial institution with which an account is held--to 
determine whether a disclosure has been provided. The proposed approach 
ensures that a consumer would not be required to check an institution's 
website repeatedly, for example, to learn whether the institution 
posted a change in a term that affects an EFT service used by the 
consumer.
    The requirements of the regulation would be met only if the 
required disclosure is posted on the website and the consumer is 
notified of its availability in a timely fashion. For example, 
financial institutions must provide a change-in-terms notice to 
consumers at least 21 days in advance of the change. (12 CFR 205.8(a).) 
For a change-in-terms notice posted on the Internet, an institution 
must both post the notice and notify consumers of its availability at 
least 21 days in advance of the change.
    Commenters sought guidance on how long disclosures posted at a 
particular location must be available to consumers. There is a variety 
of circumstances when a consumer may not be able immediately to access 
the information due to illness, travel, or computer malfunction, for 
example. Under Sec. 205.4(c)(4), institutions must post information 
that is sent to a location other than the consumer's electronic

[[Page 49705]]

mail address for 90 days. Proposed comment 4(c)(4)(ii)-2 contains this 
guidance.
    Under the modified proposal, institutions that post information at 
a location other than the consumer's electronic mail address are 
required--after the 90 day period--to make disclosures available to 
consumers upon request for a period of not less than two years from the 
date disclosures are required to be made, consistent with the record 
retention requirements under Sec. 205.13(b). The Board requests comment 
on this approach, including suggestions for alternative means for 
providing consumers continuing access to disclosures.
4(c)(5) Consumer Use of Electronic Communication
    Proposed Sec. 205.4(c)(5) would clarify consumers' ability to 
provide certain information to financial institutions by electronic 
communication. Regulation E provides that a consumer may allege an 
error or stop payment of a preauthorized EFT by notifying the 
institution orally or in writing; the institution may require written 
confirmation of an oral notice of error or stop-payment order. The 
revised proposal differs from guidance accompanying the interim rule; 
under the proposal, consumers generally would have the option to use 
electronic communication for these written notices (including written 
confirmations) if the consumer has chosen to receive information by 
electronic communication. Because the consumer's electronic 
communication serves as written confirmation, the financial institution 
could not also require paper confirmation. Institutions could, however, 
specify a particular electronic address for receiving the notices.
    In issuing the March 1998 interim rule, the Board stated that 
financial institutions could require paper confirmation of electronic 
notices in the two instances where the regulation allows written 
confirmation--stop-payment notices and notices of error. This approach 
was consistent with guidance provided in the May 1996 proposed rule, 
where the Board stated that (as in the case of an oral communication) 
if the consumer sends an electronic communication to the financial 
institution, the institution could require paper confirmation from the 
consumer (particularly since the consumer was entitled to a paper copy 
of a disclosure upon request under the May 1996 proposal).
    Views were mixed on whether financial institutions should be 
permitted to require paper confirmations of electronic notices. Many 
industry commenters requested that the Board allow financial 
institutions to request paper confirmations; some stated that paper 
confirmations protect both the consumer and the financial institution. 
Consumer advocates and other commenters believed it would be unfair to 
require paper confirmation of an electronic communication from 
consumers who receive electronic communication from a financial 
institution.
    Based upon the comments received and further analysis, and subject 
to certain limitations discussed below, the Board is proposing that 
consumers be permitted to provide electronically any information that a 
consumer is required to provide a financial institution to preserve the 
consumer's rights under the regulation, such as the stop-payment notice 
and the notice of error. If an institution uses electronic 
communication to provide disclosures to consumers on a continuing 
basis, such as change-in-terms notices or periodic statements, it is 
appropriate to allow consumers to use electronic communication to 
provide notices to the institution. If, however, an institution limits 
its use of electronic communication to the delivery of initial 
disclosures (that is, if all subsequent disclosures regarding the EFT 
service are provided in paper form), institutions would not be required 
to accept electronic communication from consumers.
4(c)(5)(ii) Institution's Designation of Address
    Section 205.4(c)(5)(ii) would provide that an institution may 
designate the electronic address that must be used by a consumer for 
sending electronic communication as permitted by Sec. 205.4(c)(5)(i).

Appendix A to Part 205--Model Disclosure Clauses and Forms

    The Board solicits comment on three proposed model forms and two 
sample forms for use by financial institutions to aid compliance with 
the disclosure requirements of Secs. 205.4(c)(3) and (c)(4). Model 
Forms A-6 and A-7 would implement Sec. 205.4(c)(3), regarding the 
notice that financial institutions must give prior to using electronic 
communication to provide required disclosures. Model Form A-8 would 
implement Sec. 205.4(c)(4), regarding notices to consumers about the 
availability of electronic disclosures at locations such as the 
financial institution's website. Use of any modified version of these 
forms would be in compliance as long as the institution does not delete 
information required by the regulation or rearrange the format in a way 
that affects the substance, clarity, or meaningful sequence of the 
disclosure. For example, institutions that combine Regulation E and 
Regulation DD disclosures on a deposit account can modify the model 
form to provide a single disclosure statement about electronic delivery 
of those disclosures.
    Sample Form A-9 illustrates the disclosures under Sec. 205.4(c)(3) 
for an electronic banking service. The sample assumes that the 
institution also offers paper disclosures for consumers who choose not 
to receive electronic disclosures. Sample Form A-10 assumes that 
consumers must accept electronic disclosures if they want to contract 
for the EFT service.

Additional Issues

1. Signature Requirements

    Section 205.10(b) requires that preauthorized EFTs be authorized 
only by a writing signed or similarly authenticated by the consumer. 
The phrase ``or similarly authenticated'' was added in the 1996 review 
of Regulation E. The Official Staff Commentary to Regulation E states 
that an example of a consumer's authorization that is not in the form 
of a signed writing but is instead ``similarly authenticated'' is a 
consumer's authorization under Sec. 205.10(b) for using a home-banking 
system. The Board indicated in the supplementary information to the 
1996 final rule that the authentication method should provide the same 
assurance as a signature in a paper-based system. Since the publication 
of the amended regulation and accompanying commentary, the Board has 
been asked to give further guidance on this issue. In the supplementary 
information to the March 1998 interim rule, the Board expressed 
interest in learning about other ways in which authentication in an 
electronic environment might occur in lieu of a consumer's signature.
    Some commenters provided alternatives for verifying a consumer's 
identity, including alphanumeric codes (combinations of letters and 
numbers) or combinations of unique identifiers (such as account numbers 
combined with a number representing algorithms of the account numbers). 
In the supplementary information to the March 1998 interim rule, the 
Board cited security codes and digital signatures as examples of 
authentication devices that might meet the requirements of 
authentication and signatures. Many commenters stated

[[Page 49706]]

their concern that the Board approved only these or similar methods. 
These commenters urged the Board to take a flexible approach to this 
requirement. They suggested that the Board's implied or explicit 
endorsement of any particular method could hinder the development of 
new technologies. Further, these commenters requested that the Board 
take a ``wait and see'' approach to this issue, to allow the industry 
to develop alternatives that will result in more security for 
consumers.
    To avoid unduly influencing the development of electronic 
authentication methods and to encourage innovation and flexibility, the 
Board will limit its guidance to the general principle that a home-
banking or other electronic communication system must use an 
authentication device that provides the same assurance as a signature 
in a paper-based system.

2. Preemption

    A few commenters suggested that any final rule issued by the Board 
permitting electronic disclosures should explicitly preempt any state 
law requiring paper disclosures. Under Sec. 205.12(b) of the 
regulation, state laws are preempted if they are inconsistent with the 
act and regulation and only to the extent of the inconsistency. The 
proposed rule would provide financial institutions with the option of 
giving required disclosures by electronic communication as an 
alternative to paper. There is no apparent inconsistency with the act 
and regulation if state laws require paper disclosures. The Board will, 
however, review preemption issues that are brought to the Board's 
attention. Section 205.12(b)(1) outlines the Board's procedures for 
determining whether a specific law is preempted, which will guide the 
Board in any determination requested by a state, financial institution, 
or other interested party following publication of a final rule 
regarding electronic communication.

3. Technical Amendment to Error Resolution Notice

    In September 1998, the Board revised the time periods for 
investigating alleged errors involving point-of-sale and foreign-
initiated transactions. (63 FR 52115, September 29, 1998.) The 
amendments to Sec. 205.11 require financial institutions to 
provisionally credit an account within 10 business days (rather than 
20). At the same time, the Board extended the time periods to 
provisionally credit funds and investigate claims involving new 
accounts. The amended rule permits institutions to take up to 20 
business days to provisionally credit funds and up to 90 calendar days 
to complete the investigation. The Board proposes to revise the model 
error resolution notices contained in Appendix A (Forms A-3 and A-5) to 
conform with Sec. 205.11 as amended.

IV. Form of Comment Letters

    Comment letters should refer to Docket No. R-1041, and, when 
possible, should use a standard typeface with a type size of 10 or 12 
characters per inch. This will enable the Board to convert the text to 
machine-readable form through electronic scanning, and will facilitate 
automated retrieval of comments for review. Also, if accompanied by an 
original document in paper form, comments may be submitted on 3\1/2\ 
inch computer diskettes in any IBM-compatible DOS-or Windows-based 
format.

V. Initial Regulatory Flexibility Analysis

    In accordance with section 3(a) of the Regulatory Flexibility Act 
and section 904(a)(2) of the EFTA, the Board has reviewed the proposed 
amendments to Regulation E. Although the proposal would add disclosure 
requirements with respect to electronic communication, overall, the 
proposed amendments are not expected to have any significant impact on 
small entities. A financial institution's use of electronic 
communication to provide disclosures required by the regulation is 
optional. The proposed rule would give financial institutions 
flexibility in providing disclosures. A final regulatory flexibility 
analysis will be conducted after consideration of comments received 
during the public comment period.

VI. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act 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 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 number. 
The OMB control number is 7100-0200.
    The collection of information requirements that are relevant to 
this proposed rulemaking are in 12 CFR Part 205 and in Appendix A. This 
information is mandatory (15 U.S.C. 1693 et seq.) to evidence 
compliance with the requirements of the Regulation E and the Electronic 
Fund Transfer Act (EFTA). The revised requirements would be used to 
ensure adequate disclosure of basic terms, costs, and rights relating 
to services affecting consumers using certain home-banking services and 
consumers receiving certain disclosures by electronic communication. 
The respondents/recordkeepers are for-profit financial institutions, 
including small businesses. Institutions are also required to retain 
records for 24 months. This regulation applies to all types of 
depository institutions, not just state member banks; however, under 
Paperwork Reduction Act regulations, the Federal Reserve accounts for 
the burden of the paperwork associated with the regulation only for 
state member banks. Other agencies account for the paperwork burden on 
their respective constituencies under this regulation.
    The proposed revisions would allow institutions the option of using 
electronic communication (for example, via personal computer and modem) 
to provide disclosures required by the regulation. Although the 
proposal would add disclosure requirements with respect to electronic 
communication, the optional use of electronic communication would 
likely reduce the paperwork burden of financial institutions. With 
respect to state member banks, it is estimated that there are 851 
respondents/recordkeepers and an average frequency of 85,808 responses 
per respondent each year. Therefore the current amount of annual burden 
is estimated to be 462,839 hours. There is estimated to be no 
additional annual cost burden and no capital or start-up cost.
    Because the records would be maintained at state member banks and 
the notices are not provided to the Federal Reserve, no issue of 
confidentiality under the Freedom of Information Act arises; however, 
any information obtained by the Federal Reserve may be protected from 
disclosure under exemptions (b)(4), (6), and (8) of the Freedom of 
Information Act (5 U.S.C. 522 (b)(4), (6) and (8)). The disclosures and 
information about error allegations are confidential between 
institutions and the customer.
    The Federal Reserve requests comments from institutions, especially 
state member banks, that will help to estimate the number and burden of 
the various disclosures that would be made in the first year this 
proposed regulation would be effective. Comments are invited on: (a) 
the cost of compliance; (b) ways to enhance the quality, utility, and 
clarity of the information to be disclosed; and (c) ways to minimize 
the burden of disclosure on respondents, including through the use of 
automated disclosure techniques or other forms of

[[Page 49707]]

information technology. Comments on the collection of information 
should be sent to the Office of Management and Budget, Paperwork 
Reduction Project (7100-0200), Washington, DC 20503, with copies of 
such comments sent to Mary M. West, Federal Reserve Board Clearance 
Officer, Division of Research and Statistics, Mail Stop 97, Board of 
Governors of the Federal Reserve System, Washington, DC 20551.

List of Subjects in 12 CFR Part 205

    Banks, banking, Consumer protection, Electronic fund transfers, 
Reporting and record keeping requirements.

Text of Proposed Revisions

    Certain conventions have been used to highlight proposed changes to 
Regulation E. New language is shown inside bold-faced arrows, deletions 
inside bold-faced brackets.

    For the reasons set forth in the preamble, the Board proposes to 
amend Regulation E, 12 CFR part 205, as set forth below:

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. 1693-1693r.

    2. Section 205.4 is amended by redesignating paragraph (a) as 
paragraph (a)(1), adding a new paragraph (a)(2), and revising paragraph 
(c) to read as follows:


Sec. 205.4  General disclosure requirements; jointly offered services.

    (a) (1) Form of disclosures. * * *
    (2) Foreign language disclosures. Disclosures may be 
made in languages other than English, provided they are available in 
English upon request.
* * * * *
    (c) Electronic communication. (1) Definition. Electronic 
communication means a message transmitted electronically between a 
financial institution and a consumer in a format that allows visual 
text to be displayed on equipment such as a personal computer monitor.
    (2) Electronic communication between financial institution and 
consumer. (i) General. Except as provided in paragraph(c)(2)(ii) of 
this section, a financial institution that has complied with paragraph 
(c)(3) of this section may provide by electronic communication any 
information required by this regulation to be in writing.
    (ii) In-person exception. When a consumer contracts for an 
electronic fund transfer service in person, the disclosures required 
under Sec. 205.7 shall be provided in paper form, unless the consumer 
requested the service by electronic communication and disclosures were 
provided in compliance with paragraph (c)(3)(i) and (c)(3)(ii) of this 
section at or around that time.
    (3) Disclosure notice. The disclosure notice required by this 
paragraph shall be provided in a manner substantially similar to the 
applicable model form set forth in Appendix A of this part (Model Forms 
A-6 and A-7).
    (i) Notice by financial institution. A financial institution shall:
    (A) Describe the information to be provided electronically and 
specify whether the information is also available in paper form or 
whether the electronic fund transfer service is offered only with 
electronic disclosures;
    (B) Identify the address or location where the information will be 
provided electronically; and if it is made available at a location 
other than the consumer's electronic address, how long the information 
will be available, and how it can be obtained once that period ends;
    (C) Specify any technical requirements for receiving and retaining 
information sent electronically, and provide a means for the consumer 
to confirm the availability of equipment meeting those requirements; 
and
    (D) Provide a toll-free telephone number and, at the institution's 
option, an address for questions about receiving electronic 
disclosures, for updating consumers' electronic addresses, and for 
seeking technical or other assistance related to electronic 
communication.
    (ii) Response by consumer. A financial institution shall provide a 
means for the consumer to accept or reject electronic disclosures.
    (iii) Changes. (A) A financial institution shall notify affected 
consumers of any change to the information provided in the notice 
required by paragraph (c)(3)(i) of this section. The notice shall 
include the effective date of the change and must be provided before 
that date. The notice shall also include a toll-free telephone number, 
and, at the institution's option, an address for questions about 
receiving electronic disclosures.
    (B) In addition to the notice under paragraph (c)(3)(iii)(A) of 
this section, if the change involves providing additional disclosures 
by electronic communication, a financial institution shall provide the 
notice in paragraph (c)(3)(i) of this section and obtain the consumer's 
consent. A notice is not required under paragraph (c)(3)(i) of this 
section if the institution's initial notice states that additional 
disclosures may be provided electronically in the future and specifies 
which disclosures could be provided.
    (4) Address or location to receive electronic communication. A 
financial institution that uses electronic communication to provide 
information required by this Regulation E (12 CFR Part 205) shall:
    (i) Send the information to the consumer's electronic address; or
    (ii) Post the information for at least 90 days at a location such 
as a website, and send a notice to the consumer when the information 
becomes available. Thereafter the information shall be available upon 
request for a period of not less than two years from the date 
disclosures are required to be made. The notice required by this 
paragraph (c)(4) shall identify the account involved, shall be sent to 
an electronic address designated by the consumer (or to a postal 
address, at the financial institution's option), and shall be 
substantially similar to the model form set forth in Appendix A of this 
part (Model Form A-8).
    (5) Consumer use of electronic communication. (i) General. A 
consumer may use electronic communication to assert any right under 
Sec. 205.10(c) and Sec. 205.11 if the consumer has consented to receive 
information required by this regulation by electronic communication, 
except when the consumer consented to receive only the disclosures 
required under Sec. 205.7 by electronic communication.
    (ii) Institution's designation of address. A financial institution 
may designate the electronic address or location that consumers must 
use if they send electronic communication under this 
paragraph.
    3. Appendix A to Part 205 is amended by:
    a. Revising the table of contents at the beginning of the appendix;
    b. Revising Appendices A-3 and A-5; and
    c. Adding new Appendices A-6, A-7, A-8, A-9, and A-10.
    The revisions and additions read as follows:

Appendix A to Part 205--Model Disclosure Clauses and Forms

A-1--Model Clauses for Unsolicited Issuance (Sec. 205.5(b)(2))
A-2--Model Clauses for Initial Disclosures (Sec. 205.7(b))
A-3--Model Forms for Error-Resolution Notice (Secs. 205.7(b)(10) and 
205.8(b))
A-4--Model Form for Service-Providing Institutions 
(Sec. 205.14(b)(1)(ii))
A-5--Model Forms for Government Agencies (Sec. 205.15(d)(1) and (2))

[[Page 49708]]

A-6--Model Disclosures for Electronic Communication 
(Sec. 205.4(c)(3)) (Disclosures Available in Paper or 
Electronically)
A-7--Model Disclosures for Electronic Communication 
(Sec. 205.4(c)(3)) (Disclosures Available Only Electronically)
A-8--Model Notice for Delivery of Information Posted at Certain 
Locations (Sec. 205.4(c)(4))
A-9--Sample Form for Electronic Communication (Sec. 205.4(c)(3)) 
(Disclosures Available in Paper or Electronically)
A-10--Sample Form for Electronic Communication (Sec. 205.4(c)(3)) 
(Disclosures Available Only Electronically)
* * * * *

A-3--MODEL FORMS FOR ERROR RESOLUTION NOTICE (Secs. 205.7(b)(10) and 
205.8(b))

    (a) Initial and annual error resolution notice 
Secs. 205.7(b)(10) and 205.8(b)). In case of errors or questions 
about your electronic transfers telephone us at [insert telephone 
number] or write us at [insert address] as soon as you can, if you 
think your statement or receipt is wrong or if you need more 
information about a transfer listed on the statement or receipt. We 
must hear from you no later than 60 days after we sent the FIRST 
statement on which the problem or error appeared.
    (1) Tell us your name and account number (if any).
    (2) Describe the error or the transfer you are unsure about, and 
explain as clearly as you can why you believe it is an error or why 
you need more information.
    (3) Tell us the dollar amount of the suspected error.
    If you tell us orally, we may require that you send us your 
complaint or question in writing within 10 business days.
    We will determine whether an error occurred within 10 business 
days after we hear from you and will correct any error promptly. If 
we need more time, however, we may take up to 45 days to investigate 
your complaint or question. If we decide to do this, we will credit 
your account within 10 business days for the amount you think is in 
error, so that you will have the use of the money during the time it 
takes us to complete our investigation. If we ask you to put your 
complaint or question in writing and we do not receive it within 10 
business days, we may not credit your account.
    For errors involving new accounts, point-of-sale, and 
foreign-initiated transactions, we may take up to 90 days to 
investigate your complaint or question. For new accounts, we may 
take up to 20 business days to credit your account for the amount 
you think is in error.
    We will tell you the results within three business days after 
completing our investigation. If we decide that there was no error, 
we will send you a written explanation.
    You may ask for copies of the documents that we used in our 
investigation.
* * * * *

A-5--MODEL FORMS FOR GOVERNMENT AGENCIES (Sec. 205.15(d)(1) AND (2))

    (1) Disclosure by government agencies of information about 
obtaining account balances and account histories 
Sec. 205.15(d)(1)(i) and (ii). You may obtain information about the 
amount of benefits you have remaining by calling [telephone number]. 
That information is also available [on the receipt you get when you 
make a transfer with your card at (an ATM)(a POS terminal)][when you 
make a balance inquiry at an ATM][when you make a balance inquiry at 
specified locations].
    You also have the right to receive a written summary of 
transactions for the 60 days preceding your request by calling 
[telephone number]. [Optional: Or you may request the summary by 
contacting your caseworker.]
    (2) Disclosure of error resolution procedures for government 
agencies that do not provide periodic statements 
Sec. 205.15(d)(1)(iii) and (d)(2)). In case of errors or questions 
about your electronic transfers telephone us at [telephone number] 
or write us at [address] as soon as you can, if you think an error 
has occurred in your [EBT][agency's name for program] account. We 
must hear from you no later than 60 days after you learn of the 
error. You will need to tell us:
    •  Your name and [case] [file] number.
    •  Why you believe there is an error, and the dollar 
amount involved.
    •  Approximately when the error took place.
    If you tell us orally, we may require that you send us your 
complaint or question in writing.
    [We will generally complete our investigation within 10 business 
days and correct any error promptly.]
    We will determine whether an error occurred within 10 
business days after we hear from you and will correct any error 
promptly. If we need more time, however, we may take up to 45 days 
to investigate your complaint or question. If we decide to do this, 
we will credit your account within 10 business days for the amount 
you think is in error, so that you will have the use of the money 
during the time it takes us to complete our investigation. If we ask 
you to put your complaint or question in writing and we do not 
receive it within 10 business days, we may not credit your account.
    For errors involving new accounts, point-of-sale, and foreign-
initiated transactions, we may take up to 90 days to investigate 
your complaint or question. For new accounts, we may take up to 20 
business days to credit your account for the amount you think is in 
error. [In some cases, an investigation may take longer, 
but you will have the use of the funds in question after the 10 
business days.] If we ask you to put your complaint or question in 
writing and we do not receive it within 10 business days, we may not 
credit your account during the investigation.
    [For errors involving transactions at point-of-sale terminals in 
food stores, the periods referred to above are 20 business days 
instead of 10 business days.]
    If we decide that there was no error, we will send you a written 
explanation within three business days after we finish our 
investigation. You may ask for copies of the documents that we used 
in our investigation.
    If you need more information about our error resolution 
procedures, call us at [telephone number][the telephone number shown 
above].

A-6--MODEL DISCLOSURES FOR ELECTRONIC COMMUNICATION 
(Sec. 205.4(c)(3)) (Disclosures Available in Paper or Electronically)

    You can choose to receive important information required by the 
Electronic Fund Transfer Act in paper or electronically.
    Read this notice carefully and keep a copy for your records.
    •  You can choose to receive the following information in 
paper form or electronically: (description of specific disclosures 
to be provided electronically).
    •  How would you like to receive this information
      {time}  I want paper disclosures.
      {time}  I want electronic disclosures.
    •  [We may provide the following additional disclosures 
electronically in the future: (description of specific 
disclosures).]
    •  [If you choose electronic disclosures, this information 
will be available at: (specify location) for ____ days. After that, 
the information will be available upon request (state how to obtain 
the information). When the information is posted, we will send you a 
message at the electronic mail address you designate here: 
(consumer's electronic mail address).]
    [If you choose electronic disclosures this information will be 
sent to the electronic mail address that you designate here: 
(consumer's electronic mail address).]
    •  To receive this information you will need: (list 
hardware and software requirements). Do you have access to a 
computer that satisfies these requirements?
     {time}  Yes      {time}  No
    •  Do you have access to a printer, or the ability to 
download information, in order to keep copies for your records?
     {time}  Yes      {time}  No
    •  To update your electronic address, if you have 
questions about receiving disclosures, or need technical or other 
assistance concerning these disclosures, contact us at (telephone 
number).

A-7--MODEL DISCLOSURES FOR ELECTRONIC COMMUNICATION (Sec. 205.4(c)(3)) 
(Disclosures Available Only Electronically)

    You will receive important information required by the 
Electronic Fund Transfer Act electronically.
    Read this notice carefully and keep a copy for your records.
    •  The following information will be provided 
electronically: (description of specific disclosures to be provided 
electronically).
    •  This electronic fund transfer service is not available 
unless you accept electronic disclosures.
    •  [We may provide the following additional disclosures 
electronically in the future: (description of specific 
disclosures).]
    •  [If you choose electronic disclosures, this information 
will be available at: (specify

[[Page 49709]]

location) for ____ days. After that, the information will be 
available upon request (state how to obtain the information). When 
the information is posted, we will send you a message at the 
electronic mail address you designate here: (consumer's electronic 
mail address).]
    [If you choose electronic disclosures this information will be 
sent to the electronic mail address that you designate here: 
(consumer's electronic mail address).]
    •  To receive this information you will need: (list 
hardware and software requirements). Do you have access to a 
computer that satisfies these requirements?
     {time}  Yes      {time}  No
    •  Do you have access to a printer, or the ability to 
download information, in order to keep copies for your records?
     {time}  Yes      {time}  No
    •  Do you want this electronic fund transfer service with 
electronic disclosures?
     {time}  Yes      {time}  No
    •  To update your electronic address, if you have 
questions about receiving disclosures, or need technical or other 
assistance concerning these disclosures, contact us at (telephone 
number).

A-8--MODEL NOTICE FOR DELIVERY OF INFORMATION POSTED AT CERTAIN 
LOCATIONS (Sec. 205.4(c)(4))

    Information about your (identify account) is now available at 
[website address or other location]. The information discusses 
(describe the disclosure). It will be available for ____ days.

BILLING CODE 6210-01-P

[[Page 49710]]

[GRAPHIC] [TIFF OMITTED] TP14SE99.000



[[Page 49711]]

[GRAPHIC] [TIFF OMITTED] TP14SE99.001



BILLING CODE 6210-01-C

[[Page 49712]]

    4. In Supplement I to Part 205, under Section 205.4--General 
Disclosure Requirements; Jointly Offered Services, the following 
amendments are made:
    a. Under paragraph 4(a) Form of Disclosures, paragraph 2. is 
removed; and
    b. A new paragraph 4(c) Electronic Communication is added.
    The additions read as follows:

Supplement I To Part 205--Official Staff Interpretations

* * * * *

SECTION 205.4--GENERAL DISCLOSURE REQUIREMENTS; JOINTLY OFFERED 
SERVICES

* * * * *

4(c) Electronic Communication

Paragraph 4(c)(1)--Definition

    1. Coverage. Information transmitted by facsimile may be 
received in paper form or electronically, although the party 
initiating the transmission may not know at the time the disclosures 
are sent which form will be used. A financial institution that 
provides disclosures by facsimile should comply with the 
requirements for electronic communication unless the institution 
knows that the disclosures will be received in paper form.

Paragraph 4(c)(2)--Electronic Communication between Financial 
Institution and Consumer

    1. Disclosures provided on institution's equipment. Institutions 
that control equipment providing electronic disclosures to consumers 
(for example, computer terminals in an institution's lobby or kiosks 
located in public places) must ensure that the equipment satisfies 
the regulation's requirements to provide disclosures in a clear and 
readily understandable format and in a form the consumer may keep. A 
financial institution that controls the equipment may provide a 
printer for consumers' use in lieu of sending the information to the 
consumer's electronic mail address or posting the information at 
another location such as the institution's website.
    2. Retainability. Institutions must provide electronic 
disclosures in a retainable format (for example, they can be printed 
or downloaded). Consumers may communicate electronically with 
financial institutions through a variety of means and from various 
locations. Depending on the location (at home, at work, in a public 
place such as a library), a consumer may not have the ability at a 
given time to preserve EFTA disclosures presented on-screen. To 
ensure that consumers have an adequate opportunity to retain the 
disclosures, the institution also must send them to the consumer's 
designated electronic mail address or to another location, for 
example, on the institution's website, where the information may be 
retrieved at a later date.
    3. Timing and delivery. When a consumer signs up for and is able 
to use an EFT service on the Internet, for example, in order to meet 
the timing and delivery requirements, institutions must ensure that 
disclosures applicable at that time appear on the screen and are in 
a retainable format. The delivery requirements would not be met if 
disclosures do not either appear on the screen or if the consumer is 
allowed to sign up for and use an EFT service before receiving the 
disclosures. For example, an institution can provide a link to 
electronic disclosures appearing on a separate page as long as 
consumers cannot bypass the link and they are required to access the 
disclosures before completing the sign-up process or using the EFT 
service.

Paragraph 4(c)(2)(ii)--In-person Exception

    1. Initial disclosures in paper form. If a consumer contracts 
for an EFT service in person the financial institution generally 
must provide initial disclosures in paper form. For example, if a 
consumer visits a financial institution's branch office to sign up 
for an ATM card while opening an account, initial disclosures are 
required before the consumer contracts for the service or before the 
first transaction and they must be provided in paper form; directing 
the consumer to disclosures posted on the institution's website 
would not be sufficient. If, however, a consumer makes a request on 
the Internet to open an account and obtain an ATM card, a financial 
institution may send disclosures electronically at or around that 
time even though the financial institution's procedures require the 
consumer to visit a branch office at a later time to complete the 
agreement (for example, to execute a signature card).

Paragraph 4(c)(3)--Disclosure Notice

    1. Consumer's affirmative responses. Even though a consumer 
accepts electronic disclosures in accordance with 
Sec. 205.4(c)(3)(ii), a financial institution may deliver 
disclosures by electronic communication only if the consumer 
provides an electronic address where one is required, and responds 
affirmatively to questions about technical requirements and the 
ability to print or download information (see Sample Forms A-9 and 
A-10) in appendix A to this part.

Paragraph 4(c)(3)(i)--Notice by Financial Institution

    1. Toll-free telephone number. The number must be toll-free for 
nonlocal calls made from an area code other than the one used in the 
institution's dialing area. Alternatively, a financial institution 
may provide any telephone number that allows a consumer to call for 
information and reverse the telephone charges.
    2. Institution's address. Financial institutions have the option 
of providing either an electronic or postal address for consumers' 
use in addition to a toll-free telephone number.
    3. Discontinuing electronic disclosures. Consumers may use the 
toll-free number (or optional address) if they wish to discontinue 
receiving electronic disclosures. In such cases, the institution 
must inform consumers whether the EFT service is also available with 
disclosures in paper form.

Paragraph 4(c)(3)(ii)--Response by Consumer

    1. Nature of consent. Consumers must agree to receive 
disclosures by electronic communication knowingly and voluntarily. 
An agreement to receive electronic disclosures is not implied from 
consumers' use of an account or acceptance of general account terms. 
Paragraph 4(c)(3)(iii)--Changes
    1. Examples. Examples of changes include a change in technical 
requirements, such as upgrades to computer software affecting the 
institution's disclosures provided on the Internet.
    2. Timing for notices. A notice of a change must be sent a 
reasonable period of time before the effective date of the change. 
The length of a reasonable notice period may vary, depending on the 
type of change involved; however, fifteen days is a reasonable time 
for providing notice in all cases.
    3. Delivery of notices. An institution meets the delivery 
requirements if the notice of a change is sent to the address 
provided by the consumer for receiving other disclosures. For 
example, if the consumer provides an electronic address to receive 
notices about periodic statements posted at the institution's 
website, the same electronic address may be used for the change 
notice. The consumer's postal address must be used, however, if the 
consumer consented to additional disclosures by electronic 
communication when receiving the initial notice under 
Sec. 205.4(c)(3)(i), but provided a postal address to receive 
periodic statements in paper form.
    4. Toll-free number. See comment 4(c)(3)(i)-1.
    5. Institution's address. See comment 4(c)(3)(i)-2.
    6. Consumer inquiries. Consumers may use the toll-free number 
(or optional address) for questions or assistance with problems 
related to a change, such as an upgrade to computer software that is 
not provided by the institution. Consumers may also use the toll-
free number if they wish to discontinue receiving electronic 
disclosures; in such cases, the institution must inform consumers 
whether the EFT service is also available with disclosures in paper 
form.

Paragraph 4(c)(4)--Address or Location to Receive Electronic 
Communication Paragraph 4(c)(4)(i)

    1. Electronic address. A consumer's electronic address is an 
electronic mail address that may be used by the consumer for 
receiving communications transmitted by parties other than the 
financial institution.

Paragraph 4(c)(4)(ii)

    1. Identifying account involved. A financial institution is not 
required to identify an account by reference to the account number. 
For example, where the consumer does not have multiple accounts, and 
no confusion would result, the financial institution may refer to 
``your checking account,' or when the consumer has multiple accounts 
the institution may use a truncated account number.
    2. Availability. Information that is not sent to a consumer's 
electronic mail address must be available for at least 90 days from 
the date the information becomes available or from

[[Page 49713]]

the date the notice required by Sec. 205.4(c)(4)(ii) is sent to the 
consumer, whichever occurs later.
* * * * *
    By order of the Board of Governors of the Federal Reserve 
System, August 31, 1999.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 99-23139 Filed 9-13-99; 8:45 am]
BILLING CODE 6210-01-P