CFPB EFT FAQ Error Res Unauth EFTs 11 – A fraudster initiates an EFT through a non-bank P2P payment provider…. Is the depository institution considered a financial institution with full error resolution obligations under Regulation E?

Compliance > Regulation E - EFTA
Q:  A fraudster initiates an EFT through a non-bank P2P payment provider that the consumer does not have a relationship with from the consumer’s account with a depository institution.  Is the depository institution considered a financial institution with full error resolution obligations under Regulation E?
 
A:   Yes. As discussed in Electronic Fund Transfers Coverage: Financial Institutions Question 1, the definition of financial institution includes a bank, savings association, credit union, or any other person that directly or indirectly holds an account belonging to a consumer, or that issues an access device and agrees with a consumer to provide EFT services. 12 CFR 1005.2(i). Here, the account-holding financial institution holds the consumer’s account, and is thus considered a financial institution under Regulation E. Any entity defined as a financial institution under Regulation E has error resolution obligations in the event that a consumer notifies the financial institution of an error, with limited exceptions. 12 CFR 1005.11. As discussed in Electronic Fund Transfers Error Resolution: Unauthorized Transfers Question 4, since the transaction is an unauthorized EFT, the depository institution must comply with any applicable liability protections for unauthorized transfers in 12 CFR 1005.6.
 
 
This Q&A was contained in the CFPB’s Electronic Fund Transfers FAQs that were updated in December 2021 (which may be updated from time to time).  This may be found on the CFPB’s website here:  https://www.consumerfinance.gov/compliance/compliance-resources/deposit-accounts-resources/electronic-fund-transfers/electronic-fund-transfers-faqs/
 

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