Section 1005.3(a) of Regulation E lays out what’s covered by the Rule. It specifies that Subpart A applies to any electronic fund transfer that authorizes a financial institution to debit or credit a consumer's account. While there are a few sections listed that apply to any person (meaning an individual, entity, etc.), it’s clear that the liability for unauthorized transfers (§1005.6), the initial disclosure (§1005.7) and the procedures for resolving errors (§1005.11) apply only to consumer accounts. Surprisingly, we see quite a few banks that give an initial EFT disclosure when they open a business account. While there isn’t necessarily anything wrong with doing this, we recommend you don’t. By giving the initial disclosure to business customers you are, in a sense, implying everything in the disclosure applies to them. If they come in later to dispute an unauthorized transaction and you tell them “Oh, sorry those rules don’t apply to you”, it could lead to a disgruntled customer.
Jerod explains more in the video.
Published
2024/02/15
