Financial Planning: The Three Banking Regulations / Laws That You Should Know


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Ah, the convoluted rules by which banks require us to live. This is the stuff that truly inspires excitement — about as much excitement as watching another re-run of Everybody Loves Raymond.

Taking the fun factor aside, here are three common banking regulations that you will come across every day, which you should know just a little bit more about. Why? Because if you accidentally run afoul one of them, it will cost you in fees and headaches. Staying on top of them is simply good financial planning.

Federal Regulation D – a.k.a. Federal Limit on Electronic Transfer

This little bugger limits the number of electronic transactions on savings and money market accounts to six outgoing transfers per month, per account.

What qualifies as an electronic transfer?

  • Online, overdraft, telephone and preauthorized transfers
  • Checks clearing each month from any savings or any money market account.
  • Faxes, ACH Debits, money market checks.

Basically, these include most type of transactions where you’re not present. While that might limit you, you can still make an unlimited number of transfers through these methods:

  • Mail, ATM, and good old-fashioned in-person visit sto the branch

The bottom line is to keep Federal Regulation D in mind when you move money from your savings account to other accounts — especially those utilizing high-yield online savings accounts. In many instances, it’s not a physical limit; thus, you may actually exceed the six outgoing transfer limit unintentionally and have your account suspended, closed, or tackled with fees. Ack!

Check 21 – a.k.a. Check Clearing for the 21st Century Act

Enacted in Oct 28 of 2003 and thrown into effect on Oct 28 of 2004, this psuedo-complicated regulation allows paper check recipients (i.e., banks) to create digital versions, eliminating the need for the recipient to keep the actual paper check. The whole point is to create a more efficient check truncation.

How does it affect you?

  • You probably already know from experience that this means you won’t be able to get your original paper checks back, because your banks aren’t keeping them any more.
  • Contrary to what some banks claim, checks you write will generally clear faster than before. The funny part is that banks aren’t required to speed up the time they make your check funds available to you from the time you deposit. The lesson here is: don’t write checks unless the funds are already in your account.
  • If you need to have checks back, you can request substitute checks from your bank for a fee. You should shop around to find a reasonable fee on substitute checks.
  • In the case of an error where a check was paid twice or with an incorrect amount, you can request a “re-credit” to your account within 10 days and receive a refund of up to $2,500.

If you don’t write a lot of checks, Check 21 probably hasn’t affected you much. If you still write a lot of checks for various amounts to numerous payees, you really should examine your bank’s Check 21 process, and request substitute checks for the added protection in the case of a banking error. The last thing anyone would want is to find a non-sufficient fund fee on their account statement!

Want to read more about Check 21? Oh we know you do. Find out more at Consumer Union: How New Electronic Check Law Affects Consumer

EFT Act – a.k.a. the Electronic Funds Transfer Act

Implemented way back in 1978 (and probably in need of some amendment), this law establishes the rights and liabilities of the consumer, as well as the responsibilities of all participants in EFT activities (including financial institutions).

What falls under electronic fund transfers?

  • ATM and POS (point of sale) transactions, like using your debit or check card at the grocery store.
  • Telephone transfers and preauthorized transfers — in other words, whenever you tell your bank to make some type of automatic transfers for you. Monthly direct deposits and monthly mortgage payments all count.

What happens when there’s an error? (New: Does all that financial planning go to waste? Not necessarily…)

  • Report the error no later than 60 days from the date of the statement containing the error (write or call).
  • The financial institution must promptly investigate the error and resolve it in 45 days. Errors involving new accounts, POS and foreign transactions may take up to 90 days.
  • If it takes longer than 10 days for the investigation to resolve, the financial institution must re-credit the amount in question while it finishes its investigation.
  • The financial institution must report the result of the investigation to you and correct the error (make the re-credit final) or in the case when there is no error, explain to you in writing and inform you of any amount deducted from the re-credit.

Lost or Theft of ATM/Debit Card?

  • Your loss is limited to $50 if you notify the financial institution within 2 business days.
  • Loss may be up to $500 if you don’t notify the institution within 2 business days.
  • If loss is not reported within 60 business days, the liability could be unlimited.

Your liability under federal law for the use of your ATM or debit card depends on how quickly you report the loss — an often-mention difference between debit and credit cards.

For credit cards, under the Fair Credit Billing Act, your maximum liability for unauthorized charges is $50. If you report the card lost before it’s used, you cannot be held responsible for any unauthorized charges. If the loss involves your credit card number but not the actual card itself, you have no liability for unauthorized use.

On the flip side, debit/check cards generally have additional protections with them from the bank that issued them (e.g. Bank of America’s Zero Liability Protection), or the zero liability that comes with a VISA and MasterCard check card. Of course, credit cards usually have these additional protections too (even if they don’t need them).

To read more about EFT, check out the Electronic Fund Transfer FAQ at You’ll be able to better differentiate the types of transactions that fall under electronic transfer, and see more example of how the act may affect consumers.

Banking Regulations Check-List

  1. Check if you ever got dinged for any type of fees that may involve one of these regulations, such as an insufficient fund fee or an over-transfer-limit fee.
  2. If you’ve received such a fee, read up on the regulations above so you can be better informed on why they hit you with it.
  3. If this was your first time hit with these fees, call your financial institution and explain to them that you were unaware of such regulations, and ask them politely to waive the fee out of courtesy for you, their important customer.
  4. If you use debit cards frequently, make sure you understand the EFT Act — because if your card was lost, stolen, or used without authorization, you have a limited set time frame to report these problems. If you neglect to report the lost or theft of your card, after 60 business days, your liability could be unlimited!

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