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EFTA Rights: How the Electronic Funds Transfer Act Works

Every electronic funds transfer including direct deposits, point of sale (POS), debit cards withdrawals, ATM cards, and credit cards sales are covered under a federal law called Electronic Funds Transfer Act (EFTA). Violations of your EFTA rights may entitle you to up to $1,000 in statutory damages, plus actual damages, plus payment of your attorney fees. Electronic Fund Transfer Act (15 U.S.C. §§ 1693-1693r, as amended)

What are EFTA rights and what is required?

The Electronic Fund Transfer Act (“EFTA”) protects consumers by regulating banks and others that collect payments through electronic transfer or charge fees for the use of debit cards and ATMs. The EFTA also requires prompt investigation of consumer complaints and errors regarding electronic debits or credits from the consumer’s bank account.

Who is regulated?
Common examples of entities which may violate your EFTA rights and are regulated by this law include banks, credit unions, service providers such as a cellular providers or a utility company, credit card companies,  debt collectors, payday lenders and companies to which automatic monthly payments are made by a consumer (such as a lender for a car loan).

When does the law apply?
When entities such as cellular providers or debt collectors call you to arrange a payment by phone, there are certain things that the entity must do such as get your permission in writing for certain types of payments. There are many types of electronic payments that are regulated by the EFTA. Examples include:

  • Payments using a check over the phone
  • Automatic bill pay

The EFTA also regulates banks that charge ATM and debit card overdraft fees. There are certain disclosures that the bank is required to make before it can lawfully:

  • Charge an overdraft fee
  • Charge a fee for using an ATM

This Act also provides you with certain rights when you make a consumer complaint such as a complaint that you were charged a fee which you did not agree to pay or a complaint that money was taken out of your account which you did not agree to have taken out. The financial institution is required to promptly investigate your consumer complaint and any errors that you complain about in regard to an amount of money that was electronically debited or credited from your bank account.

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