The Electronic Funds Transfer Act (EFT Act or EFTA) was implemented in 1979. It was designed to protect consumers when they make electronic payments to pay bills or manage their finances. The EFT Act addresses electronic payments from your debit card or bank account to service providers.
Protections Under the Electronic Fund Transfer Act
The EFTA allows consumers to challenge errors that they find because of an electronic funds transfer. If you find that money has left your account that you did not authorize, you need to notify your bank or other financial institution within 45 days of the transfer.
If a mistake was made, the bank is required to fix it within one business day. However, it can take the bank up to 45 days to conduct an investigation. Once the review has concluded, your financial institution is required to report the results of the investigation to you within three days.
Addressing Theft and Unauthorized Transactions
You can also limit liability if your debit card is stolen or if someone accesses your account and removes funds without your permission. If you suspect that someone has stolen money out of your account, then you have 60 days to report the unauthorized transaction.
This 60-day period starts the first day that you receive a periodic statement from your financial institution. Most consumers get monthly statements, for example, so your 60-day period would begin to run after that monthly statement is available to you. The financial institution will then conduct an investigation to determine how the charges occurred.
Limited Liability for Lost or Stolen Cards
The EFTA also limits your liability if your debit card is lost or stolen. If you report to your bank that you lost or someone stole your card within two days, then the EFTA limits the liability for any unauthorized transaction to just $50. If you report it within 60 days, your liability is limited to $500. However, if you do not report it within 60 days, you risk unlimited liability for the authorized transactions.
In most cases, once you report that your card was lost or stolen, your bank will often shut the card off, which can be very effective in limiting your liability. In some cases, if the account is not frozen immediately, you may be able to get punitive damages from the bank or other financial institution for up to $1,000, plus court fees and attorney’s fees, if necessary.
What Kind of Transfers Fall Under the EFT Act?
Any time you use a computer, phone, or magnetic strip to make a payment, the Electronic Funds Transfer Act is involved. It covers everything from ATM visits to making a payment with a debit card over the phone. The EFT Act protects the following transactions.
- ATM transactions
- Direct deposits (including automatic debit payments)
- Pay-by-phone services
- Payments over the internet
- Debit card purchases
- Electronic check conversion
Any transfer that allows someone else to take money out of your account through electronic means should be covered under the EFT Act.
Automatic Debit Payments and the EFT Act
Transfers under the EFT Act will also cover regular payments or recurring charges. Some common examples include:
- Utility payments
- Rent or mortgage payments
- Gym fees
- Childcare expenses
- Car payments
- Credit card bills
The Electronic Funds Transfer Act likely covers anything that you set up to automatically withdraw from your account on a regular basis. Even though you may not be using your card, you are still authorizing someone else to use your card or bank information to make the transfer. As a result, the EFT Act comes into play.
Using the EFT to Stop Automatic Debit Payments
You have rights under the EFT to stop automatic payments, even if you previously authorized the payments. In most cases, you can contact the entity taking out the payments and have them stop. However, there are situations where the payments continue to be taken out of your account without your permission.
You might be able to take the following actions to get the payment stop.
- Call and write the company to let them know you are revoking your authorization for automatic payments.
- Call and write your bank to tell them that you have revoked authorization for that company to take money out of your account.
- Give the bank a stop payment order, which instructs your bank to stop allowing the company to take payments from your account.
If you give the bank a stop payment order, you must provide it at least three business days before the withdrawal is set to occur.
Your bank may also request that you give them a written stop payment order in addition to your verbal direction. If your bank asks for this type of documentation, you must provide it to them within 14 days of your oral request to stop payment.
Get Help Asserting Your Rights Under the EFTA
If you are having trouble with a company or your bank taking funds out of your account, you can and should assert your rights under the EFTA. Cardoza Law Corporation can help. Learn more by setting up a free phone consultation.