Regulation E sets forth the basic rules for participants involved in electronic fund transfer (EFT) systems. These include transfers with automated teller machines (ATMs), point-of-sale (POS) terminals, telephone bill-pay services, and direct deposit payment systems. Certain peer-to-peer (P2P) payments may also fall under the definition of EFT transactions. Regulation E applies to both the consumers using EFT services as well as to the financial institutions offering such services.

The Federal Reserve Board, the main governing body of the Federal Reserve, created Regulation E. Among other things, Regulation E implements the Electronic Fund Transfer Act of 1978 (EFTA). The EFTA protects individual consumers engaging in EFT transactions. The Consumer Protection Financial Bureau (CFPB) is the government agency tasked with interpreting the provisions of the EFTA.

Under Regulation E, an unauthorized ETF is defined as an EFT “from a consumer’s account initiated by a person other than the consumer without actual authority to initiate the transfer and from which the consumer receives no benefit.”

When a consumer notifies a financial institution of errors involving an EFT, the financial institution is under an obligation to investigate the claim in a timely manner. Within 10 days of receiving a consumer notice, the financial institution must complete an investigation and report its conclusions. For more complex claims, the financial institution has a maximum of 45 days to conclude the investigation. In the interim period, the bank must provisionally credit the allegedly lost money to the consumer’s account.

If a consumer discovers that unauthorized electronic fund transfers have been made in their account, the consumer must report the unauthorized transfers in a timely manner in order to recover some of their money under Regulation E. One common situation of unauthorized ETFs involves unapproved debit card withdrawals. If a consumer reports the unauthorized ETF to the applicable financial institution within 2 business days, the consumer’s losses are capped at $50. If a consumer reports the unauthorized ETF within 60 days, the consumer’s losses are capped at $500. Beyond the 60-day reporting window, a consumer may be at risk of extensive losses.

A 2023 opinion issued by the U.S. District Court for the Southern District of New York (SDNY) indicated that cryptocurrencies are subject to the EFTA and Regulation E. The court characterized cryptocurrencies as “funds” under the EFTA, allowing the plaintiffs to proceed with their claims against a cryptocurrency exchange operator.

Regulation E does not apply to credit card transactions, checks, or wire transfers. Regulation Z offers consumer protections from unfair credit practices. Regulation Z implements the Truth in Lending Act (TILA). The Consumer Protection Financial Bureau (CFPB) is tasked with interpreting the provisions of the TILA. Regulation CC implements the Expedited Funds Availability Act (EFAA) and the Check Clearing for the 21^st Century Act (Check 21). Additionally, Regulation E does not apply to commercial or business accounts. The regulation is intended to provide protections to individual accounts primarily used for personal purposes, not accounts used primarily for business purposes.