[Angie Cowell]

If a payment for a loan at our bank is auto-drafted from an account at our bank or from another financial institution, do we have to send a separate notification that the payment was auto-drafted or is the fact that the notification appears on their DDA/SAV account statement on the account from which it was debited suffice as such notification?

[donblaine]

Good question. Reg E’s 1005.9(b) requires a bank to send a monthly statement when an EFT has occurred and the statement should include transaction information such as date, amount and name of any third party from which the funds were transferred.

Your question mentioned that the electronic payment might be from your bank or another bank. If the payment was intra-bank (within your bank) there would not be a third party to name for an incoming EFT on your monthly statement and the regulation is very forgiving as to how you can identity this transaction on your DDA periodic statement such as Intra-bank car loan payment of $.

Reg E’s requirements pertaining to 1005.10 will not apply as that portion of Reg E only applied to a preauthorized EFT TO a consumer’s ACCOUNT. I emphasize the words TO and ACCOUNT to point out that the transaction you mention would be an incoming credit to a loan account versus an outgoing debit from a DDA account. For Reg E purposes, “account” is defined as a DDA, Savings Account or other consumer asset account and would not include a loan account. Therefore, the receipt of a third party EFT in order to satisfy a loan payment would not trigger any Reg E 1005.9 or 1005.10 notification requirements other than the reflection of the EFT transaction if it were indeed debited from the customer’s DDA or savings account at your bank.

If you drafted the loan payment from another financial institution the burden would be upon the other financial institution to either provide positive or negative notice of the EFT or to disclose a phone number, in the initial disclosures and on their periodic statements, which would allow their customer to call and determine if the draft took place. As mentioned above, the disclosure burden, such as whether an EFT was made, is on the entity that holds the account (DDA, Savings, etc) from which the funds were drawn.

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