When a Non Account-Holding Institution Issues an Access Device

Regulation E has some special rules that apply when a financial institution issues an access device that the consumer can use to access accounts at another financial institution. The special rules apply if the two institutions do not have an agreement between themselves regarding the EFT service. [12 CFR 1005.14(a)] The rules are designed to establish which institution is responsible for meeting the obligations imposed by Regulation E. Generally speaking, the “service provider,” or the institution which issued the access device, is responsible for complying with Regulation E as opposed to the “account-holding institution.” As we saw in the Regulation E Account Opening Responsibilities chapter of this manual, the service provider must supply the initial disclosure to the consumer. [12 CFR 1005.14(b)(1)] The service provider also is generally responsible for the requirements that we have gone over in this chapter. In addition, Regulation E provides the following rules for this situation:

• The service provider must extend the time period for reporting billing errors (the 60-day time period) by a reasonable period if the delay is due to the consumer initially reporting the error to the account-holding institution. [12 CFR 1005.14(b)(2)(i)]
• The service provider must disclose to the consumer the date on which it initiates a transfer to effect a provisional credit if it is required to do so. [12 CFR 1005.14(b)(2)(ii)]
• If the service provider determines an error occurred, it must transfer funds to or from the consumer’s account in the appropriate amount and within the applicable time period under the billing error rules. [12 CFR 1005.14(b)(2)(iii)]
• If funds were provisionally credited and the service provider determines no error occurred, it may reverse the credit. The service provider must notify the account-holding institution of the period during which the account-holding institution must honor debits to the account. If there is an overdraft, the service provider must promptly reimburse the account-holding institution in the amount of the overdraft. [12 CFR 1005.14(b)(2)(iv)]
  While the service provider is generally responsible for meeting the Regulation E requirements, it need not send periodic statements if the following conditions are met [12 CFR 1005.14(b)(1)]:

  • The debit card (or other access device) issued to the consumer bears the service provider’s name and an address or telephone number for making inquiries or giving notice of an error.
  • The consumer receives a notice concerning the use of the debit card.
  • The consumer receives, on or with the ATM receipts, the address and telephone number to be used for an inquiry, to give notice of an error, or to report the loss or theft of the debit card.
  • The service provider transmits to the account-holding institution the information to be included in the transaction information disclosure on the periodic statement in the format prescribed by the automated clearing house system used to clear the funds transfers.
  • The service provider extends the time period for notice of loss or theft of a debit card from two business days to four business days after the consumer learns of the loss or theft, and extends the time periods for reporting unauthorized transfers or errors, from 60 days to 90 days following the transmittal of a periodic statement by the account-holding institution.

The account-holding institution also has some responsibilities.

• The account-holding institution must provide a periodic statement that describes each EFT initiated by the consumer with the access device issued by the service provider. The account-holding institution has no liability for the failure to comply with this requirement if the service provider did not provide the necessary information. [12 CFR 1005.14(c)(1)]
• Upon request, the account-holding institution must provide information or copies of documents needed by the service provider to investigate errors or to furnish copies of documents to the consumer. The account-holding institution must also honor debits to the account as required under the billing-error rules. [12 CFR 1005.14(c)(2)]