Financial Update (Fourth Quarter 2006)

Vol. 19, No. 4,
Fourth Quarter 2006


Point of Purchase
Fuels E-Check Growth

Atlanta Fed Publishes
Online Payments Guide

Agencies Propose Rules
to Prevent ID Theft

Fed Vice Chair: Payment
System Still Evolving

Bank Profitability Strong
in '05, Report Says

Comments Requested
on Basel II Rules

New Governor Joins
Federal Reserve Board

Study Explores Credit
Notice Attitudes

Payroll Cards to Receive
Added Protection

FHLBs' Risk Taking
Behaviors Examined

Nontraditional Mortgage
Guidance Issued

Atlanta Fed Welcomes
SBAL Council Members


Did You Know?

Data Bank

Circular Letters


Subscribe Online

Payroll Cards Receive Added Protection

payroll card
The Federal Reserve Board's consumer protection rules governing electronic fund transfers will also apply to payroll card accounts next year. Among other changes, card providers will not have to send periodic printed account statements to customers if they make that information available electronically, by phone, or upon request. The measure becomes effective July 1, 2007.

The amendments to address payroll card accounts are being made to Regulation E, which implements the Electronic Fund Transfer Act, and to the official staff commentary, which interprets the requirements of Regulation E.

Cards' use grows rapidly
Payroll cards have become increasingly popular with some employers, financial institutions, and payroll service providers as a means of paying wages or other compensation. A worker paid via a payroll card can use it to withdraw money at an automated teller machine and to make purchases at a point-of-sale terminal, as debit card users can.

Information about EFTs
Electronic Fund Transfer Act legislation

Typically, an employer will arrange with a bank or a third-party service provider to issue employees a magnetic stripe–backed card that accesses an account. Each payday, the employer credits the account for the amount of the employee's compensation instead of paying the employee with a paper check or making a direct deposit. Some payroll cards also offer features such as convenience checks and electronic bill payment.

Amendments affect transaction information
Under the new rule, if institutions make account transaction information available by telephone, electronically, or in writing upon the consumer's request, then they are not required to provide periodic paper statements to consumers, as they do for checking account customers, for instance.

The Electronic Fund Transfer Act of 1978 establishes the rights, liabilities, and responsibilities of participants in electronic fund transfer (EFT) systems. The act covers transfers and includes those initiated through an automated teller machine, point-of-sale terminal, automated clearinghouse, telephone bill-payment plan, or remote banking service.

The act and regulation provide for disclosure of terms and conditions of an EFT service, documentation of EFTs by terminal receipts and periodic account activity statements, limitations on consumer liability for unauthorized transfers, procedures for error resolution, and certain rights related to preauthorized EFTs. The act and regulation also restrict the unsolicited issuance of ATM cards and other access devices.