A check contains specific information that authorizes a bank to withdraw a certain amount of money from a person’s account and pay that amount to another person. Electronic funds transfer systems allow for payment between parties to occur electronically.

Sample Electronic Funds Transfer (EFT) Systems

Automated Teller Machines (ATMs). Consumers can get cash, make deposits, pay bills, or transfer funds from one account to another electronically with the use of a debit card and a PIN number.

Point-of-Sale (POS) Transactions. Some debit or check cards can be used when shopping. To pay for a purchase, the consumer presents a debit card instead of cash. Money is taken out of the consumer’s account and put into the merchant’s account electronically.

Preauthorized Transfers. This is a method of automatically withdrawing funds from a consumer's account when the consumer authorizes the bank or a third party to do so. For example, consumers can authorize financial institutions to automatically withdraw payments for insurance, mortgage, utility, or other bills.

Telephone Transfers. Consumers can transfer funds from one account to another— from savings to checking, for example—or can order payment of specific bills by phone.

Unauthorized Electronic Transfers

The Electronic Funds Transfer Act (EFTA) covers various unauthorized electronic transfers processed through a person's  checking account.  Use of a stolen debit card by a thief is an example of an unauthorized electronic transfer.

How Do I Correct Unauthorized Electronic Transfers?

The way to report errors is somewhat different with unauthorized banking transactions than it is with credit cards. But as with credit cards, banks must investigate and promptly correct any unauthorized transactions that you report.  If you believe there has been an unauthorized transaction relating to your bank account:

1.  Write or call your bank immediately but no later than 60 days from the date of the first statement that contains the error was mailed to you. Give your name, account number, dollar amount and date in question.  Explain why you believe there is an error. If you call, you may be asked to send this information in writing within 10 days.  Click here for a sample bank account dispute letter.

2.  The bank must promptly investigate an error and resolve it within 45 days. However, if the bank takes longer than 10 business days to complete its investigation, generally it must put back into your account the amount in question while it finishes the investigation.

3.  The bank must notify you of the results of its investigation. If there was an error, the bank must correct it promptly. If it finds no error, the bank must explain in writing why it believes no error occurred and let you know that it has deducted any amount re-credited during the investigation. The bank must also inform you that you may ask for copies of documents relied on by the bank during in the investigation.

What about Loss or Theft?

It’s important to be aware of the potential risk in using a debit or check card, which differs from the risk on a credit card.  On lost or stolen credit cards, your loss is limited to $50 per card. On a debit or check card, your liability for an unauthorized withdrawal can vary:

• Your loss is limited to $50 if you notify the bank within two business days after learning of the loss or theft of your card or code.
• You can lose as much as $500 if you do not tell your bank within two business days after learning of loss or theft.
• If you do not report an unauthorized transfer that appears on your statement within 60 days after the statement is mailed to you, you risk unlimited loss on transfers made after the 60-day period.  

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