CUNA Regulatory Comment Call

January 20, 2006

Interim Final Rule on Payroll Cards


Please feel free to fax your responses to CUNA at 202-638-7052; or e-mail them to Assistant General Counsel Lilly Thomas at; or mail them to Lilly c/o CUNA’s Regulatory Advocacy Department, 601 Pennsylvania Avenue, NW, South Building, Suite 600, Washington, D.C. 20004. Click here for a copy of this Interim Final Rule.


On September 17, 2004, the Federal Reserve Board (Board) published a notice of proposed rulemaking to provide that the term “account” under Regulation E includes payroll card accounts established by an employer for the purpose of providing an employee’s compensation on a recurring basis. The payroll card account would be subject to the regulation whether it is operated or managed by the employer, a third-party payroll processor, or a depository institution.

After receiving comments fro CUNA and other industry trade associations, credit unions, banks and thrifts, the Board modified the proposed rule and issued this interim final rule so that comments could be received on the modifications.


The Board has issued an interim final rule in which payroll card accounts are defined as “accounts” for purposes of coverage under Regulation E. This includes accounts that are directly or indirectly established by an employer to which electronic fund transfers of the consumer’s wages or other compensation are made on a recurring basis. Payroll card accounts are covered under this rule whether the funds are held in individual employee accounts or in a pooled account with some form of sub- accounting maintained by a depository institution or third party. This interim final rule is limited to payroll card accounts, so “gift” cards issued by a merchant would not be covered.

The definition of “account” would be revised to include a “payroll card account” directly or indirectly established by an employer on behalf of a consumer to which EFTs of the consumer’s wages, salary, or other employee compensation are made on a recurring basis.

If an employee remains in the employer’s hire for a short period of time, including for just one pay cycle, as long as the employer intended to make recurring payments, the payroll card account is still covered. However, if the employer only pays the employee by adding funds to an “account” accessible by a card in isolated or limited instances, such as in a final paycheck situation or in an emergency situation when the customary non-payroll card method of payment does not work, but otherwise intends to regularly pay the employee by another method, such as by paper check or direct deposit, such a card account would not fall within the definition of payroll card account.

Periodic Statements

Financial institutions will have flexibility in how to provide certain account transaction information to payroll card users. The periodic statement requirement is an important aspect of the Electronic Fund Transfer Act (EFTA) protections, but at this time, alternative methods of providing account transaction information is permissible with payroll card accounts. The interim final rule permits financial institutions to use alternative means to provide account information where an institution chooses not to provide periodic statements.

Instead of providing periodic statements, institutions may instead:

  1. Make available to the consumer the account balance through a readily available telephone line;
  2. Make available to the consumer an electronic history (such as through an Internet Web site) of the consumer’s account transactions that covers at least 60 days preceding the date the consumer electronically accesses the account; and
  3. Provide promptly upon the consumer’s oral or written request, a written history of the consumer’s account transactions that covers at least 60 days preceding the date of receipt of the consumer’s request.

The consumer “electronically accesses” an account once the consumer enters a user identification code or a password or otherwise complies with a security procedure used by an institution to verify the consumer’s identity. The 60 days worth of account transaction information is different than is currently required for EFTs. However, since financial institutions will not be required to send a regular statement of account transactions to payroll card account holders, the Board believes 60 days is appropriate for these accounts.

Initial Disclosures

In addition to the required initial Regulation E disclosures, financial institutions must provide in its initial disclosure the means by which a consumer can access information about his or her payroll card account, including the telephone number that the consumer may call to obtain his or her account balance, and information on how the consumer can electronically obtain a history of account transactions. This could include the address of an Internet Web site. Financial institutions must also include a summary of the consumer’s right to obtain a written history of account transactions upon request, including a telephone number to call to request a history. Instead of the current Regulation E initial and annual notice for error-resolution rights, financial institutions must provide an initial and annual notice explaining the error resolution rights associated with payroll card accounts. There are model forms which financial institutions may use to facilitate compliance with this interim final rule.

Liability Limitations and Error Reporting

If a financial institution opts not to provide a paper periodic statement, the interim final rule specifies two different triggers for beginning the 60-day period for limiting liability for unauthorized EFTs. The two triggers depend on when and how the consumer has obtained a history of his or her account transactions.

If the consumer obtained transaction history, the 60-day period begins on the date the account is electronically accessed. The 60-day period for liability limits and error resolution does not begin running if the member merely visits an Internet Web site where his or her account information and other information can be retrieved. Rather, the period would begin once the member enters a user identification code or a password or otherwise complies with a security procedure used by the institution to verify the member’s identity.

If the member has requested a written history of his or her account transactions, the 60-day period begins on the date the institution sends the written history. If the member reviews his or her account transactions for errors using both an electronic and written history, the 60-day period begins on the earlier of these two dates.

The interim final rule establishes a similar rule for the 60-day period for reporting an error. A financial institution must comply with the Regulation E error resolution requirements if it receives a consumer’s oral or written notice of error no later than 60 days after the earlier of:

  1. the date the member electronically accesses his or her account; or
  2. the date the institution sends a written history of the member’s account transactions that has been requested.

If the member accesses his or her account electronically, the financial institution must make available to the member information about the EFT for which the member asserts an error.


  1. Do you believe the option to obtain a written history of account transactions is necessary or appropriate? Please explain.

  2. Do you believe additional transaction information should be provided to payroll card users, or whether certain information should be excluded from the history of account transactions? Please explain.

  3. What is the feasibility of providing consumers with a rolling history of 60 days’ worth of transactions? Please explain.

  4. What is the feasibility of determining when a member has electronically accessed his or her account? Please explain.

  5. Are there other methods of triggering the 60-day time periods for establishing liability for unauthorized EFTs or for error resolution? Please explain.

  6. Please provide any other comments.

  7. Other comments?

Eric Richard • General Counsel • (202) 508-6742 •
Mary Mitchell Dunn • SVP & Deputy General Counsel • (202) 508-6736 •
Jeffrey Bloch • Assistant General Counsel • (202) 508-6732 •
Lilly Thomas • Assistant General Counsel • (202) 508-6733 •
Catherine Orr • Senior Regulatory Counsel • (202) 508-6743 •