Regulation E - Electronic Fund Transfers
May 6, 1996
Circular No. 10848

Comment Invited by August 1 on Stored-Value Card Proposal - Revisions to Regulation and Official Staff Commentary

To All Depository Institutions, and Others Concerned in the Second Federal Reserve District:

Proposal on Stored-Value Cards

Following is the text of a statement by the Board of Governors of the Federal Reserve System:

The Federal Reserve Board has requested comment on proposed amendments to Regulation E (Electronic Fund Transfers) governing services that offer consumers electronic access to funds through stored-value cards.

Comment is requested by August 1, 1996.

The proposed amendments would require card issuers to give consumers initial disclosures for stored-value accounts that track transactions but do not require online authorization for each card use. These accounts would be exempt from other Regulation E requirements.

For stored-value accounts in which the cards operate more like traditional debit cards, with online authorization, the amendments would modify some rules that would otherwise apply. For example, issuers could give a written account history on request, in place of sending monthly statements.

The amendments would also provide a complete exemption for stored-value cards, of either type, that can store a maximum value of $100.

Additionally, the proposal contains general amendments to the regulation. These revisions would allow electronic disclosures and notices between financial institutions and consumers, in place of paper copies, such as in home-banking programs. They also would set longer error resolution periods for new accounts.

The text of the proposal, as printed in the Federal Register of May. Comments thereon should be submitted by August 1, 1996 to the Board, as specified in the notice, or to our Compliance Examinations Department.

Revisions to Regulation and Official Staff Commentary

The following statement was also issued by the Board of Governors of the Federal Reserve System:

The Federal Reserve Board has announced a final rule to simplify and update its Regulation E, which implements the Electronic Fund Transfer Act.

In keeping with the Board's Regulatory Planning and Review Program, the revisions primarily focus on ways of easing the compliance burdens imposed on financial institutions without diminishing the consumer protections established by the act. The revised rule contains some substantive amendments, including changes to the existing exemptions for securities and commodities transfers and for preauthorized transfers to or from accounts at small financial institutions. In conjunction with the amendments to the regulation, the Board also has amended the staff commentary to Regulation E.

The revised rule and commentary are effective May 2, 1996, with mandatory compliance January 1, 1997.

For depository institutions and others who maintain sets of the Board's regulations, is a copy of the amendments to Regulation E and its Official Staff Commentary from the Federal Register of May 2. Additional, single copies may be obtained from the Circulars Division.

Questions on this matter may be directed to Janice A. Oser, Supervising Examiner, Compliance Examinations Department.