Electronic Fund Transfer Act (EFTA)

What the EFTA is

The Electronic Fund Transfer Act (EFTA) is a federal law that protects consumers who transfer funds electronically. It covers transactions made with debit cards, ATMs, point-of-sale (POS) systems, telephone and online banking, direct deposits, automated clearing house (ACH) transfers, and preauthorized withdrawals. The EFTA establishes consumer rights for disputing errors, limits consumer liability for unauthorized transfers, and requires financial institutions to provide specific disclosures.

How it works — types of electronic fund transfers

Electronic fund transfers under the EFTA include:
* ATM transactions
* Debit card purchases (in-store and online)
* Direct deposits (payroll, benefits)
* POS transactions
* Phone-initiated transfers and pay-by-phone services
* Online account access and bill payments
* ACH transfers and automatic/preauthorized withdrawals
* Electronic check conversion (scanning a paper check into an electronic payment)

Key consumer protections

• Error resolution: Consumers can dispute errors and have them investigated and corrected by the institution. You must generally report errors within 60 days of the institution sending the periodic statement showing the error.
• Liability for lost/stolen cards:
• Report within 2 business days: maximum liability of $50.
• Report within 3–59 days: liability may be up to $500.
• Report after 60 days: you may be liable for all losses and overdraft charges.
• Right to stop preauthorized transfers: You can stop preauthorized transfers at any time, regardless of contrary contract terms.

Requirements for financial institutions and service providers

Financial institutions and any third parties providing EFT services must disclose:
* Liability rules for unauthorized transactions
* Contact information and procedures for reporting unauthorized transactions and filing claims
* Types of transfers available, fees, and any limits
* A summary of consumer rights (including rights to periodic statements and POS receipts)
* The institution’s obligations if it fails to make or stop certain transactions
* Circumstances under which account information will be shared with third parties
* How to report errors, request additional information, and the time limits to do so

Who the EFTA applies to

The EFTA applies to any person or entity offering EFT services to U.S. residents, including U.S. offices of foreign financial institutions. It covers accounts located in the United States, regardless of where a particular transfer takes place.

Withdrawal limits

While the EFTA permits institutions to set limits, many banks impose daily electronic cash withdrawal limits (commonly around $200–$300). These limits vary by institution and account type and must be disclosed to consumers.

History and regulation

• Enacted in 1978 in response to growing use of ATMs and electronic banking.
• Implemented as Regulation E.
• Rulemaking authority moved from the Federal Reserve to the Consumer Financial Protection Bureau (CFPB) in 2011 under the Dodd‑Frank Act.

Practical tips for consumers

• Report a lost or stolen debit card immediately to minimize liability.
• Review periodic statements promptly and report errors within 60 days.
• Keep records of authorized preauthorized payments and cancel instructions if you stop a recurring transfer.
• For online purchases or disputes over delivery, consider using a credit card when possible, since credit cards offer different dispute protections.

Bottom line

The EFTA gives consumers important protections and procedures for electronic fund transfers, requiring clear disclosures from financial institutions and providing timeframes and limits for disputing errors and limiting liability for unauthorized transfers. Knowing these rights helps you monitor and protect your accounts when using electronic payment methods.