Item (b) of this section states: "Written authorization for preauthorized transfers from consumer's account. Preauthorized electronic fun transfers from a consumer's account may be authorized only by a writing signed or similarly authenticated by the consumer. The person that obtains the authorization shall provide a copy to the consumer."

1) Does this rule (specifically providing a copy of the authorization to the consumer) apply to transfers set up between two accounts at the bank (such as from a savings account to a checking account) or from a checking account to make a loan payment? On the loan side we purchase a lot of dealer paper from car dealers and many times aren't involved with the auto pay process. Would we still be required to provide a copy of an authorization to the consumer?

2) Does this rule require that the authorization (such as a signed copy of the auto transfer or auto pay agreement) be provided when this is initially set up or prior to each transfer/payment?

Need some help clarifying what is required by this part. Thanks.

Your answer is in 1005.3 where an electronic funds transfer is defined.

(c) Exclusions from coverage. The term “electronic fund transfer” does not include:...

(5) Automatic transfers by account-holding institution. Any transfer of funds under an agreement between a consumer and a financial institution which provides that the institution will initiate individual transfers without a specific request from the consumer:

(i) Between a consumer's accounts within the financial institution;

(ii) From a consumer's account to an account of a member of the consumer's family held in the same financial institution; or

(iii) Between a consumer's account and an account of the financial institution, except that these transfers remain subject to § 1005.10(e) regarding compulsory use and sections 916 and 917 of the Act regarding civil and criminal liability.
If you set up an ACH transfer between a customer's checking account at another bank and their loan with you, then you must provide a copy of the written authorizatino to the customer. Transfers between accounts at your bank are not covered.

So the authorization would be required in a dealer loan situation? We purchase the paper from the dealer, but don't actually execute any of our own documents as far as the loan is concerned. So would we be responsible for providing an authorization or would the dealer?

If the deposit account and the loan account are housed in the same financial institution, the exception that Brian showed you covers the matter, regardless of where the loan was signed. That includes dealer paper.

Of course, if the authorization is given at the dealership, you may need some paperwork to know about it, no?

In regard to dealer loans...not sure I made myself as clear with my last question as I should have....If the bank purchases the dealer paper, and borrower sets up an auto pay from their checking account at another FI to make their loan payment at our bank (since we purchased the dealer paper) would we be required to provide them with a copy of an auto pay authorization or would this requirement be the dealer's? Are we only required to provide authorization if we actually set up the auto pay ourselves?

The key seems to be the 'at another FI'. The authorization is between the (mutual) customer and the other FI since the other FI will originate the entry to your FI to make the payment. You would not have that authorization.

The responsibility of obtaining the pre-auth falls to the entity that will be originating the payments (the Originator). You were a little ambiguous as to whether you fall into the role of Originator, ODFI, RDFI, or Receiver. Refer to the NACHA rule book & you should be able to figure out your role and your question will be answered.

OK. Bank A holds the consumer's loan account. Bank B holds the same consumer's checking account. The consumer gives Bank A the OK to transfer funds from his Bank B account. In that case, it's an EFT, and Bank A must obtain a written authorization and provide the consumer a copy. It does not need to provide a copy to Bank B (which will be the RDFI for the debits) unless Bank B requests a copy. This would be the case if Bank A and Bank B are not related or if they are affiliates.