CUNA Comment Letter

Regulation E Interim Final Rule


September 29, 2006

Ms. Jennifer J. Johnson
Board of Governors of the
Federal Reserve System
20th Street and Constitution Avenue, NW
Washington, DC 20551

Re: Docket No. R-1265 - Regulation E Interim Final Rule

Dear Ms. Johnson:

The Credit Union National Association (CUNA) appreciates the opportunity to respond to the interim final rule that will clarify certain provisions of Regulation E, the Electronic Fund Transfer Act. This includes a number of clarifications as they pertain to the requirement to provide notice and obtain a consumer's authorization to collect a fee for insufficient funds or uncollected funds through an electronic debit to the consumer's account. CUNA represents approximately 90 percent of our nation's 8,800 state and federal credit unions, which serve nearly 87 million members.

Summary of CUNA’s Comments

Discussion of CUNA's Comments

CUNA supports the clarifications in the interim final rule as they pertain to the disclosure of the fee assessed for insufficient or uncollected funds. Specifically, we appreciate that the Federal Reserve Board (Fed) clarified that the consumer's financial institution is not required to provide notice or obtain authorization from the consumer, unless the financial institution is the payee. This clarification should help reduce questions from financial institutions about the rule's applicability and assist electronic fund transfer system participants in complying with the rule.

We also support the interim final rule's clarification on the disclosure of the dollar amount of the insufficient funds fees. The rule will permit payees to either disclose these fees as dollar amounts or describe how the fees will be calculated if the amount of the fee varies due to the amount of the underlying transaction or other factors. This clarification will allow payees to comply with certain state laws that require these fees to be determined based on individual transactions or other factors and will provide the appropriate flexibility to payees without adversely affecting consumers.

In the interim final rule, the Fed requested information as to whether fees for insufficient funds can be collected electronically by payees in circumstances other than in connection with a POS transaction or with an accounts receivable conversion (ARC) transaction when a consumer sends in a payment for a recurring bill. Although we believe these fees can be collected electronically by payees in other circumstances, credit unions generally do not track this information, as the transactions to collect the insufficient funds fees are separate from the original transaction that was returned.

Finally, we support the interim final rule's provisions clarifying that payees intending to collect the fees for insufficient or uncollected funds at POS electronically need not provide consumers with an exact copy of the posted notice stating the payees' intent to collect these fees electronically, as long as the notice provided to the consumers is "substantially similar." Because the posted notices tend to be somewhat general, we believe this flexibility will allow payees to provide notices to consumers that better reflect the specific transaction, which should result in more meaningful disclosures.

Thank you for the opportunity to comment on the interim final rule that will clarify certain provisions of Regulation E, the Electronic Fund Transfer Act. If you have questions about our comments, please contact Senior Vice President and Deputy General Counsel Mary Dunn or me at (202) 638-5777.


Jeffrey Bloch
Senior Assistant General Counsel