As promised, this is the next installment of a three-part series examining Regulation E, and how it applies to those in the ARM industry. The first articlewent over the legal consequence of Regulation E. Scott E. Wortman, partner at Blank Rome LLP, and Mike Etmund, attorney at Moss & Barnett, P.A., sat down with PDCflowand provided some clarity on an often murky subject.
Does the procedure for being compliant with Regulation E differ for Third Party payments compared to First Party payments, such as payments made directly to hospitals or doctor offices?
Some of Regulation E’s rules apply only to financial institutions. “Just to be clear, the EFTA defines “financial institution” as “a State or National bank, a State or Federal savings and loan association, a mutual savings bank, a State or Federal credit union, or any other person who, directly or indirectly, holds an account belonging to a consumer,” says Wortman.
While these may not apply to a collection agency, Etmund points out there is a provision that applies Regulation E to other service providers. “If electronic funds transfer services are made available to consumers by a person other than a financial institution holding a consumer’s account, the disclosures, protections, responsibilities and remedies shall be applicable,” says Etmund. “See 15 U.S.C. 1693b(d). In short, this may include collection agencies and other third parties that set up electronic fund transfers.”
Does compliance with Regulation E, fulfill compliance for EFTA and NACHA?
All the different rules and regulations can get confusing. Many people may not realize that Regulation E is actually part of the Electronic Funds Transfer Act (EFTA). Wortman points out that the nuance (and confusion) often comes from amendments placed on the regulation by the Federal Reserve Board, and even new rules for the EFTA as a whole, via Dodd-Frank.
In addition, Wortman points out that NACHA is not a statute. The not-for-profit, self-governing body has created uniform rules for all those that participate in the ACH system. By doing so, “NACHA plays an integral role serving as the trustee of the ACH system.” Although this association lists safety and security as priorities, its regulations do not replace or necessarily fulfill those stated within the EFTA and Regulation E. It is always important to speak to your agency’s attorney in order to ensure you are fully complying with all rules and regulations that apply.
For more on Regulation E, look for our third and final article in the series where we will discuss the disclosures the regulation requires.
Written by: Hannah Huerta, Marketing Specialist, PDCflow