Long post.

We are rolling out a new version of online banking. I have been with this bank for 3 months so I am doing an initial review. The online banking service does not have E-SIGN. Customers can transfer funds internally and externally, set up recurring payments, pay bills, check balances and do remote deposits.

They rely on the initial Reg E disclosure provided at account opening or snail mail one to customers once they set up an online account. I read the existing Reg E disclosure and it is specific to ATM and Debit card use not online banking. As I read, Reg E, I think the addition of online banking is a new term or condition requiring re-disclosure. In addition, notices of errors are sent to a different location than the one in the original Reg E disclosure. So I am right on that understanding of the regulation?

This is what is further confusing me:

7(a) Timing of Disclosures
1. Early disclosures. Disclosures given by a financial institution earlier than the regulation requires (for example, when the consumer opens a checking account) need not be repeated when the consumer later enters into an agreement with a third party to initiate preauthorized transfers to or from the consumer's account, unless the terms and conditions differ from those that the institution previously disclosed. This interpretation also applies to any notice provided about one-time EFTs from a consumer's account initiated using information from the consumer's check. On the other hand, if an agreement for EFT services to be provided by an account- holding institution is directly between the consumer and the account-holding institution, disclosures must be given in close proximity to the event requiring disclosure, for example, when the consumer contracts for a new service.

They enter into a user agreement to start with the third party that owns the system. Is this where the Reg E exception comes in?

All of this then boils down to they need a new Reg E disclosure specific to the terms and conditions of this product and E-SIGN to deliver the new Reg E disclosure electronically or if they want to deliver by mail, they need to withhold access to the system until the new Reg E disclosures is delivered, right? Are there other disclosures required when you transfer funds or do remote deposit that required E-SIGN? What else am I missing?

TIA!

The bank contracts with a third party to offer online banking. Your customer contracts with the bank to use it so this is considered a new EFT service which will require disclosure. To provide the disclosure electronically, the customer would have to receive your ESIGN disclosure and agreement and provide demonstrable consent that they could read the Reg E disclosure in its electronic format prior to you providing it or they will need the paper disclosure.

Thank you. A few follow up questions, if you don't mind.

The User Agreement is between the customer and the third party (isn't that strange?). Does that change anything with Reg E?

Am I correct the Reg E disclosure will be a new one specific to the T&Cs of the online banking system? Could they add this to the original Reg E disclosure and have language like "only applicable if you use these products/services?

I can't shake the thought we need to provide some notifications or disclosures when customers transfer funds to third parties or set up recurring payments, but I am not seeing a requirement to do it. I know I get a message from my bank when I set up one time payments or recurring payments, so is it a NACHA rule perhaps?