Who is Responsible for an Electronic Check Conversion?

Today, Mar/Apr 2006

Federal Reserve Clarifies Reg E

The Federal Reserve Board (www.federalreserve.gov) has made final amendments to Regulation E (Electronic Fund Transfer Act) clarifying the responsibilities of parties involved in electronic check conversion transactions and require that consumers receive written notification in advance of these transactions.

The final rule provides that merchants that convert payments by check into electronic fund transfers must provide a notice to consumers to obtain consumer authorization for the electronic fund transfer. Merchants and other payees must also notify consumers that if a check is converted, funds may be debited from consumers' accounts as soon as the same day that payment is received, and the check will not be returned by their financial institution.

The final rule addressing electronic check conversion and other matters will take effect thirty days after the date of publication in the Federal Register. The mandatory compliance date is January 1, 2007.