Unauthorized or not: A look into Regulations E and Z

Next week, NAFCU kicks off its first ever virtual Regulatory Compliance School. In honor of School, let’s go back to basics and review what it means for a transaction to be unauthorized under Regulations E and Z. Understanding which transactions are or are not considered unauthorized is important because it informs a credit union whether it is required to investigate and resolve the issue as well as limit the member’s liability for the transactions, potentially saving a credit union both time and resources.

Under Regulation E, an unauthorized electronic fund transfer (EFT) is defined as any EFT from an account initiated by someone without authority to initiate the transfer and from which the member receives no benefit. Unauthorized EFTs include transfers using an access device, such as a debit card, that was obtained by robbery or fraud and transfers a member was forced to initiate. It does not include transfers where the member acted fraudulently or when the member gave someone else permission to use her access device. Let’s take a look at some common scenarios to help illustrate which transfers are or are not covered:

  • Sally gives her debit card to her son, Jake, to buy groceries but Jake buys a new television instead. The television purchase is not necessarily an unauthorized transaction. When a third party is given authority to make transactions, the member is liable for all transactions, even those that exceed the scope of authority, unless she notifies the credit union that the third party no longer has the authority to make transactions.


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