Cut me some slack. It's not always easy to come up with good titles for blog posts.
I've been getting the following question more frequently lately. Eventually, I'll get links to these regulations up in the Research section of the IIABNY Web site. Until then, here's what I told one member.
Question from an IIABNY member: Our agency would like to know the guidelines for processing an insured payment from the insured’s bank account and what guidelines as an agency that we need to follow. Do we have to have a letter signed and kept on file? Please advise if you have any guidelines for us to follow.
Answer: The best source for guidelines is actually the federal regulation itself, Federal Reserve Regulation E. There are two parts that apply. The first part explains what must happen when you initiate an electronic funds transfer (ETF) using the consumer’s check as the information source:
(ii) The person initiating an electronic fund transfer using the consumer’s check as a source of information for the transfer must provide a notice that the transaction will or may be processed as an EFT, and obtain a consumer’s authorization for each transfer. A consumer authorizes a onetime electronic fund transfer (in providing a check to a merchant or other payee for the MICR encoding, that is, the routing number of the financial institution, the consumer’s account number and the serial number) when the consumer receives notice and goes forward with the underlying transaction. For point-of-sale transfers, the notice must be posted in a prominent and conspicuous location, and a copy thereof, or a substantially similar notice, must be provided to the consumer at the time of the transaction.
(iii) The person that initiates an electronic fund transfer using the consumer’s check as a source of information for the transfer shall also provide a notice to the consumer at the same time it provides the notice required under paragraph (b)(2)(ii) that when a check is used to initiate an electronic fund transfer, funds may be debited from the consumer’s account as soon as the same day payment is received, and, as applicable, that the consumer’s check will not be returned by the financial institution holding the consumer’s account. For point-of-sale transfers, the person initiating the transfer may post the notice required in this paragraph (b)(2)(iii) in a prominent and conspicuous location and need not include this notice on the copy of the notice given to the consumer under paragraph (b)(2)(ii). The requirements in this paragraph (b)(2)(iii) shall remain in effect until December 31, 2009.
(iv) A person may provide notices that are substantially similar to those set forth in appendix A–6 to comply with the requirements of this paragraph (b)(2).
I know it says that paragraph (iii) expired on Dec. 31, 2009, but I didn’t find anything to indicate that it had been replaced. The second part is Appendix A. You will find the sample notice (A-6) if you scroll toward the bottom.