By the Division of Banks

Unauthorized Electronic Funds Transfers Disclosures Regarding Customer Liability

In 1983, the Board of Governors of the Federal Reserve System determined that Mass. Gen. Laws chapter 167B was not pre-empted by the federal Electronic Funds Transfer Act or Regulation E. Accordingly, the terms and conditions of electronic funds transfers involving a consumer's account shall be disclosed in writing under Mass. Gen. Laws chapter 167B § 8. Such disclosures must include the customer's liability for unauthorized electronic funds transfers and notice of the advisability of prompt reporting of any loss, theft, or unauthorized use of an access device. In total, sixteen items must be addressed in a bank's consumer disclosure material. The applicable error resolution procedure for a financial institution to follow when oral or written notice of an account error is received from a consumer is set forth by Mass. Gen. Laws chapter 167B § 17. These procedures apply if the bank receives oral or written notice from a consumer with 60 days after providing a periodic statement or other required notification of an electronic funds transfer. The condition under which a consumer may be liable for unauthorized transfers are set forth under Mass. Gen. Laws chapter 167B § 18. A consumer may be liable for a maximum of $50.00 provided specific conditions of liability are met and the unauthorized transfer occurs before the consumer has notified the issuer that such a transfer has occurred or may occur.

The consumer liability provisions differ between state and federal law. Banks are subject to compliance with state law provisions and should tailor their consumer disclosures to reflect these provisions. Accordingly, banks cannot use the liability chart which depicts the liability levels imposed under the federal Regulation E.