What Is Regulation E and How Can It Help You?

What Is Regulation E?

The purpose of Regulation E is to protect consumers when they use electronic fund transfers like debit transactions and direct deposits. Established by the Federal Reserve Board as part of the Electronic Funds Transfer Act (EFTA), Regulation E defines rights, responsibilities and liabilities for both consumers and their financial institutions when using electronic transfers. Regulation E caps consumer liability for unauthorized transactions, and requires financial institutions to investigate and resolve issues quickly.

What Does Regulation E Cover?

Regulation E applies to electronic transactions made from checking or savings accounts, as well as some prepaid accounts, like payroll cards or gift cards. Electronic funds transfers are made using a computer, electronic terminal, telephone or magnetic tape. Here are some common examples:

• Debit card transactions
• ATM transactions
• Direct deposits
• Automated clearing house (ACH) transfers
• Prepaid gift cards
• Overdraft transactions
• Point of sale transfers
• Remittances (international money transfers)
• Telephone transfers

Regulation E sets rules for the resolution of unauthorized transactions and errors. Here are a few quick examples of issues Regulation E is meant to address:

• Unauthorized transfers made by someone other than you (or another authorized account holder) with no benefit to you, such as fraudulent transactions using stolen credentials
• Incorrect transactions moving money to or from your account
• Missing transactions that do not show on your account statement; for example, a missing Social Security payment
• Computational or bookkeeping errors related to EFTs
• ATM problems, such as receiving the wrong amount of cash when you make an ATM withdrawal

What Does Regulation E Not Apply To?

Regulation E does not apply to credit card transactions, bank-to-bank wire transfers, paper checks or authorized scam payments.

• Credit card transactions: Credit card transactions are covered under Regulation Z, which offers consumer protections for disputed credit card transactions.
• Wire transfers: Regulation E specifically excludes bank-to-bank wire transfers, which are covered under separate regulation. Peer-to-peer (P2P) payment systems are typically covered under Regulation E, as are account-to-account ACH transfers.
• Paper checks: Although paper check transactions are not covered, e-check transactions that transfer money from your checking account using your bank routing and account numbers typically are.
• Authorized scam payments: If you're tricked into voluntarily paying a scammer, you may not be protected under Regulation E, since your payment is technically authorized. However, this is a gray area in which the law may be evolving. The CFPB includes EFTs initiated by a person who obtained access through fraud or robbery as unauthorized transactions. If this happens to you, report the fraud to your financial institution, the police, the Federal Trade Commission and the CFPB.

Learn more: How to Place a Fraud Alert

How to File a Regulation E Dispute

If you discover an error or unauthorized use involving an EFT, follow these steps to resolve your issue.

1. Contact Your Financial Institution

Report an error, unauthorized activity, or a lost or stolen card to your financial institution immediately. Your potential liability is capped at $50 if you report a problem within two business days of learning about it. After that, your potential liability jumps to $500. After 60 days, you could be responsible for the entire amount yourself.

Call the number on the back of your debit card or contact your bank (preferably by phone) at the number listed on its website.

2. Submit Written Forms and Documents

Your bank may ask you to file a police report on unauthorized charges and/or submit information about your issue in writing. Be prepared to provide detailed information: your account number, transaction date and amount; the recipient of any fraudulent or erroneous payments; and the reason you're disputing the transaction. Gather up the required documents and send them to your bank as soon as possible, preferably by certified mail.

Tip: While your bank can ask for additional information from you, they can't use the request to delay starting an investigation. They must begin their investigation promptly after they receive written or verbal notice of the error. They cannot delay their investigation if they're waiting on information from you.

3. Follow Up

Your financial institution has 10 days to investigate your claim and determine whether an error or fraud has occurred. They then have three days to report their findings to you. If they find an error, they have one day to correct it.

If their investigation is not complete after 10 days, they may extend their inquiry for up to 45 days if they provide a provisional credit for the disputed amount. Be aware: The provisional credit may be debited back if their investigation finds there was no error or fraud.

4. Contact the CFPB

If you can't resolve the issue with your financial institution, you can file a complaint with the Consumer Financial Protection Bureau (CFPB) by visiting their website or calling them at 855-411-2372.

Frequently Asked Questions

The Bottom Line

Knowing your rights and responsibilities under Regulation E can mitigate your losses and save you money when you have problems involving EFTs. If you discover errors, missing transactions or potential fraud involving your debit card, bill pay or ATM transactions, direct deposits or other electronic funds transfers, notify your financial institution immediately. Under Regulation E, you may be able to limit your liability and get a prompt resolution.