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My bank’s core processor told us that consumer online bill payments are not subject to Regulation E on the basis that bill payment funds are transferred from the consumer’s account into the "holding" account, and the actual payments are made from that account. They contend that the bill pay transaction is an internal transfer, that is, an electronic fund transfer (EFT) between a consumer’s account and an account of the financial institution, and therefore, it is exempt from Regulation E. Do you agree?

No. The exemptions for EFTs between a consumer’s account and an account of the financial institution does not apply. Consumers are not in fact agreeing to transfer funds into the bank’s holding account. They are agreeing to transfer money to the person or entity they want to pay. The fact that the bank processes the bill payment by using an internal account does not change this basic intent and agreement. Moreover, banks could easily circumvent the entire regulation by creating an artificial process that eliminates important consumer protections without consumer knowledge, contrary to the spirit and intention of the law. (May 2017)

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