Reg E 1005.10b Preauth Transfers

I have read Reg E 1005.10(b), 1005.10(d) and section 1005.3(c)(5) and the official staff commentary several times... Am I correct to say that the written authorization for preauthorized transfers from a consumer's account, and the notice of varying amounts, if applicable, is only required if one part of the transfer is external to the bank, or within the bank for unrelated parties?

1005.3(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.

I am trying to determine what scenarios require compliance with 1005.10(b) and 1005.10(d).

Am I correct with this line of thinking...

Scenario 1 - customer sets up automatic recurring ACH payment of their loan with ABC Bank to be debited from their ABC Bank checking account - 1005.10(b) and (d) do NOT apply.

Scenario 2 - customer sets up automatic recurring ACH payment of their loan at ABC Bank to be debited from their XYZ Bank debit account. This is set up through ABC Bank. 1005.10(b) and 1005.10(d) apply. ABC Bank must get authorization from the customer, provide a copy of such to the customer, and if the amounts will vary each month, must send the notice at least 10 days prior to the debit.

Thanks in advance for your help.

That is substantially correct, except scenario 1 should not be characterized as an ACH payment. It's an internal transfer, and never visits ACH territory.

As for the notice of varying amounts, it can be avoided if the authorization covers varying amounts as described in paragraph 1005.10(d)(2).

Thank you John, much appreciated.

Did you see the second paragraph of my response, which I may have added as you were responding?

Yes, I did see that. Would you consider the authorization as covering varying amounts if the loan payment authorization agreement says "amount due", rather than a dollar amount in the payment amount field? In reading the Official Staff Commentary for 1005.10(d) I am not sure it satisfies the requirement. Below is the staff commentary...

10(d)(2) Range
1. Range. A financial institution or designated payee that elects to offer the consumer a specified range of amounts for debiting (in lieu of providing the notice of transfers varying in amount) must provide an acceptable range that could be anticipated by the consumer. For example, if the transfer is for payment of a gas bill, an appropriate range might be based on the highest bill in winter and the lowest bill in summer.
2. Transfers to an account of the consumer held at another institution. A financial institution need not provide a consumer the option of receiving notice with each varying transfer, and may instead provide notice only when a debit to an account of the consumer falls outside a specified range or differs by more than a specified amount from the most recent transfer, if the funds are transferred and credited to an account of the consumer held at another financial institution. The specified range or amount, however, must be one that reasonably could be anticipated by the consumer, and the institution must notify the consumer of the range or amount at the time the consumer provides authorization for the preauthorized transfers. For example, if the transfer is for payment of interest for a fixed-rate certificate of deposit account, an appropriate range might be based on a month containing 28 days and a month containing 31 days.

No. You need the authorization to recite the range of the dollar amounts.

Thank you, that is what I thought as well.