State-Law Rules the Affect Electronic Funds Transfers

In this section, we will summarize state-law rules that affect electronic funds transfers (EFTs). In general, we limited the survey to laws that might alter or add to the Regulation E rules described in this chapter—namely, those affecting your relationship with your customer. Laws not affecting your relationship with your customer, such as those requiring the sharing of ATMs among institutions or mandating security measures at ATMs, are not summarized. Due to the difficulty of monitoring the laws of all 50 states and the District of Columbia, we cannot guarantee that this survey is comprehensive. However, it does represent our best effort to determine the effect of state laws on the Regulation E rules, and it should be helpful to you if your state is listed below. If your state is not listed, we were unable to find any state law affecting electronic funds transfers.

When looking at your state rules, you should think about whether Regulation E “preempts” some or all of your state rules. To “preempt” a state rule means to override the state rule or cause it to be of no effect. Regulation E preempts only those state rules that are inconsistent with Regulation E, and then only to the extent of the inconsistency. [12 CFR 1005.12(b)] State rules that are more protective of the consumer are not considered inconsistent with Regulation E. [12 CFR 1005.12(b)] According to Regulation E, inconsistencies may exist when the state law [12 CFR 1005.12(b)(2)(i)(iv)]:
  1. Requires or permits a practice or act prohibited by Regulation E.
  2. Provides for consumer liability for unauthorized electronic funds transfers that exceeds that imposed by Regulation E.
  3. Provides for longer time periods than Regulation E for investigation and correction of errors alleged by a consumer, or fails to provide for the recrediting of the consumer’s account during the institution’s investigation of errors.
  4. Provides for initial disclosures, periodic statements, or receipts that are different in content from those required by Regulation E—except to the extent that the disclosures relate to rights granted to consumers by the state law and not by Regulation E.

The Federal Reserve Board will make determinations on request whether a particular state law is preempted by Regulation E. So far, the only such determination is for the state of Michigan, and we discuss it in the Michigan section below.[Commentary 12 CFR 1005.12(b)-2] However, the general analysis used by the Board in that determination might be of interest to anyone in a state where preemption is an issue:

If the State law is the same as Federal law, no preemption occurs. If the State law is different from Federal law, but financial institutions can comply with both, State law is not preempted and institutions must comply with both laws. If State law is different from Federal law, and institutions may violate State law by complying with Federal law, the laws are inconsistent…In this case, if State law is more protective of the consumer, State law is not preempted. Otherwise, Federal law preempts State law and institutions need comply only with Federal law.

Finally, the Commentary to Regulation E makes clear that state law may be preempted, even if the Board has not issued a preemption determination. [Commentary, 12 CFR 1005.12(b)-1]

The states are presented in alphabetical order.