What Is Regulation E? (2024)

Federal regulations provide a variety of protections for bank accounts and the people who use them. Regulation E is one of them and if you have a checking account or savings account, it’s important to know how it works.

Regulation E, or Reg E for short, applies to electronic funds transfers and outlines your rights and responsibilities when managing bank accounts.

Regulation E, Explained

Regulation E was issued by the Consumer Financial Protection Bureau (CFPB), pursuant to the Electronic Fund Transfer Act. This Act “establishes the basic rights, liabilities, and responsibilities of consumers who use electronic funds transfer and remittance transfer services and of financial institutions or other persons that offer these services.”

Federal Regulation E was designed to provide a framework for implementing the measures outlined in the Electronic Fund Transfer Act. In a nutshell, the Act and the resulting regulation are meant to protect banking customers who use electronic methods to transfer money. It also provides guidelines for electronic debit card issuers.

What Transactions Does Regulation E Cover?

Regulation E applies to electronic funds transfers, including a wide variety of transactions that you may make with your bank regularly. Specifically, Regulation E applies to:

• Point-of-sale transfers
• Automated teller machine (ATM) transfers
• Direct deposits or withdrawals of funds
• Transfers initiated by telephone
• Debit card transactions

Some electronic transfers are excluded, however. For example, the CFPB doesn’t consider checks or wire transfers to meet the definition of electronic transfers, as covered under Regulation E.

It’s also important to understand what types of accounts are covered by Regulation D. As it stands currently, Regulation D only applies to consumer accounts that use electronic funds transfers, such as checking accounts, money market accounts and savings accounts.

It doesn’t apply to business accounts, including business checking and business savings accounts. And it doesn’t cover credit cards either. Credit cards, however, are protected under the Fair Credit Billing Act, which outlines your rights and responsibilities for disputing unauthorized charges.

Regulation E Protections for Disputing Errors

If you have a bank account, Regulation E offers some important benefits. Specifically, it outlines your rights for disputing ATM or debit card transactions if you believe an electronic funds transfer has been made in error.

This includes fraudulent errors as well as accidental ones. For example, say you decide to cancel a TV streaming subscription service, but you see an additional charge for membership after the cancellation. You could ask the streaming service for a refund and, if they refuse, you could dispute the transaction with your bank under Regulation E rules.

Regulation E lets you dispute the following types of errors:

• Unauthorized electronic funds transfers
• Incorrect electronic funds transfers to or from your account
• Omission of an electronic funds transfer from your bank statement
• Computational or bookkeeping errors made by your bank regarding an electronic funds transfer
• Receipt of an incorrect amount of money from an ATM or other electronic terminal
• Errors involving preauthorized transfers
• Requests for additional information or clarification concerning an electronic funds transfer

CFPB rules don’t cover all types of electronic transactions, however. Excluded from the list are:

• Routine inquiries about account balances
• Requests for information for tax or recordkeeping purposes
• Requests for duplicate copies of documentation, such as bank statements

The process for initiating a dispute can vary based on your bank’s policies. For example, your bank might allow you to initiate a dispute online using an electronic form, or you may have to visit a branch and fill out the dispute paperwork in person.

When disputing what you believe to be an error, there are certain pieces of information you may need to provide. For example, you may need to tell your bank:

• When the disputed transaction or error occurred
• The dollar amount of the transaction you want to dispute
• The type of purchase involved, i.e., paying for services, purchasing merchandise, etc.
• The date the transaction or error occurred
• When the transaction posted to your account

If your dispute involves a lost or stolen debit card, you’ll also need to tell the bank when you first noticed your card had gone missing. In terms of timing, Regulation E offers guidelines banks need to follow for resolving disputes.

Specifically, banks are required to investigate claims and determine whether an error occurred within 10 business days of receiving a dispute. This can be extended to up to 20 days for new accounts if a disputed error occurs within the first 30 days of making an initial deposit. Assuming the bank finds that your claim is valid and an error did occur, they have to credit you back for the amount being disputed.

In some cases, it could take longer for your bank to investigate your claim and resolve it. Regulation E allows for up to 45 days for resolution in those scenarios, but, during that time, the bank must typically issue a provisional credit for the disputed amount. If the bank finds that no error occurred, they must notify you of that in writing. The bank can then take steps to debit any provisionally credited amounts back out of your account.

And if your bank doesn’t carry out its obligations under Regulation E to investigate a dispute in a timely manner, there’s another remedy available. You could sue the bank for damages or have any incorrectly applied electronic funds transfer amounts credit back to your account.

Fraud Liability Under Regulation E

Another key protection under Regulation E centers on your personal liability for fraudulent or unauthorized transactions if your debit card is lost or stolen. There are specific limits on liability in the case of a lost or stolen debit card, which hinge on when you first notify your bank.

Under Regulation E, these fraud liability limits apply:

In other words, the longer you wait to report a lost or stolen debit card, the more liability you assume for any unauthorized charges. Regulation E does allow for these time limits to be extended, but only if you can prove extenuating circ*mstances that kept you from reporting the loss or theft of your debit card sooner.

How to Protect Your Bank Accounts

Bank accounts can be a convenient and safe way to manage your money, grow your savings and pay bills. While Regulation E, as well as other consumer banking regulations, protect you, there are some things you can do to be proactive in protecting yourself.

If you’d rather avoid a scenario where you have to exercise your rights under Regulation E, keep these tips in mind:

• Avoid sharing your account information unnecessarily. Don’t disclose your debit card or bank account number or PIN to anyone you don’t know. If someone asks for your debit card over the phone or via email, don’t hand it over without verifying that the request is legitimate.

• Keep a secure record of account information. Whether you have one bank account or several, it’s important to know your account numbers. Keeping this information in a secure location, such as a safe or a password-protected computer file, can help to keep it out of the hands of identity thieves. And, if you do need to file a Regulation E dispute, you’ll have it readily available.

• Use banking alerts. Setting up bank alerts and notifications can help you monitor your accounts for potentially suspicious activity. For example, you could set up a transaction alert to notify you any time money is credited to or debited from your account. You can then log in to online banking to check the transaction details.

• Review your statements. Check your statements each month to look for any unusual or suspicious charges. If you spot something that looks incorrect or fraudulent, notify your bank right away to minimize your liability for any losses.
• Consider using a mobile wallet app. Connecting your debit card to a secure mobile wallet app could offer an additional layer of protection against identity theft and fraud. Mobile wallet apps secure your bank account details by issuing a unique identification token for each transaction. This token is good for one-time use, so it can’t be duplicated to make additional charges with your debit card.

Your bank may be able to provide you with some additional features or tools for protecting your accounts. For example, you may be able to set up two-factor authentication for online or mobile banking. That could make managing your money even more secure.