Electronic Banking
Internet banking is gaining in popularity and is fast becoming a strong competitor of the traditional brick-and-mortar bank. As more customers demand convenient access to their accounts, financial institutions have integrated electronic banking into their list of products and services. Electronic banking or electronic fund transfer (EFT) involves a number of services, including automated teller machine (ATM) transactions, direct deposit of payments, direct withdrawal to pay bills automatically, Internet banking and by-phone payment systems. If you have questions regarding the legal implications of electronic banking on your business, contact our firm to schedule a consultation with an attorney.
Many regulations directly related to electronic banking deal with privacy issues. In addition, regulations have been enacted to deal with the growing use of electronic checks. The Electronic Fund Transfer Act (EFT Act) and the Check Clearing for the 21st Century Act (Check 21) are two federal laws that address these issues.
Electronic Fund Transfer Act
The Electronic Fund Transfer Act (EFT Act) deals with disclosures, errors and choice of services. The disclosure protections in the EFT Act require that a comprehensive list of transactions be stored and available for release to the customer. These include the type and frequency of transactions, notices of legal rights and a disclosure of the limits of liability of the financial institution in the event that it fails to follow the EFT Act. One purpose of the EFT Act is to make electronic banking as secure and transparent as in-person banking.
Importantly, the EFT Act sets a period of time (60 days) in which an electronic bank customer has to notify the institution of an error in a statement. If you do not meet the 60-day deadline, the financial institution is not required to investigate. If a timely notification of error has been made, then the financial institution must investigate within ten days, notify you of the results of the investigation within three days after completing it and correct an error within one business day after determining an error occurred.
Check Clearing for the 21st Century Act
The Check Clearing for the 21st Century Act (Check 21) is a federal law that allows for the use of electronic checks. Electronic checks are a substitute for paper checks that allow a bank to pay or receive money without actually sending a paper copy to another bank. Before technology permitted the transmission of an electronic likeness of a check, banks were forced to send the actual check, potentially delaying the transaction.
As a result of Check 21, businesses owners using checks may notice that their dealings are accelerated as checks are processed more quickly and money is deducted sooner from their accounts. The check writer may receive substitute checks, possibly in combination with original checks, from their bank. Either an original or a substitute may serve as a record of a transaction. In general, business owners who have traditionally floated checks while awaiting payment should be cautious. With Check 21 in effect, a quickly processed check could bounce if there are inadequate funds in the appropriate account.
Talk to a Lawyer
If you are facing legal issues involving electronic banking or finance, it is best to consult with an attorney about your individual situation. An attorney who has experience handling banking and financial matters can provide you with more information.
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