Currently, we have a daily POS transaction limit of $1,000. This limit applies whether the debit card is present for the transaction or not. Management wants to reduce the 'card not present' limit to $500 and leave the 'card present' limit at $1,000. My initial thought was that we need to provide a change in terms notice to consumers 21 days before making this change since we are imposing "stricter limitations on the frequency or dollar amount of transfers." However, after reading through the commentary to 1005.7(b)(4) and 1005.8(a)(3), I am now wondering if this 'card not present' limit change could be considered essential to the security of the account or system and, therefore, be excluded from the notification requirement. Our initial Reg E disclosure does not currently disclose that the daily POS limit applies whether or not the card is present for the transaction. Thoughts?

In the case of consumer protection, I always go with maximum requirement, which is 21 days prior in this case of Reg E.

I generally hold the "security/fraud" protection you mention from the commentary to be a valuable tool when significant fraud starts occurring and the bank is truly actively mitigating risks and controlling loss by changing a fundamental term, such as reducing the amount limits, or blocking certain types of card uses...

I'm not saying you can't argue that the reduction is for security pruposes, I personally would not use it in the situation you described above. Especially where you and the others in management have had a conversation about making this change... in advance of making the change.

Just my thoughts though.

Cheers!

I'd reserve the use of the "security/fraud" exception to those cases in which it makes sense (for security purposes) not to share the information with your customer.

Thanks for the help. Management wants the change to take effect on July 1st and plans to notify customers via statement message. Should we go ahead and update our initial Reg E disclosure with the new limitations now (even though the change is not effective yet) so that anyone who opens an account between now and July 1 is informed of it? Or can we provide an addendum to our disclosure similar to the statement message at account opening and update our disclosure when the change takes effect?

Ohhhh tricky disclosures...

So my suggestion is to make the change in the disclosure, but also make the change with your service provider (or internally if you do it that way), to lower the limits for all NEW customers. Most card systems should let you manually change the limits, so it isn't a big deal to do this. That way you make the change, notifying new customers when they sign up... and then make the adjustment for exsiting customers on July 1.

I would caution you about making the disclosure without making the actual change for new customers, because should a card go lost or stolen and should a card not present transaction run through for more than $500... and should some other things happen which makes the customer want to sue your bank, you provided an inaccurate disclosure, which may or may not get you into trouble legally...

Cheers!

You've got a bit of a problem with your effective date unless all of your statement notices can be sent on or before Sunday, June 10 (21 days before July 1).