Payments and Electronic Funds Transfer Compliance Attorneys
Regulation E error resolution and liability limits, money services business registration, and the unfair, deceptive, or abusive acts standard for payment products.
A company that moves consumer money electronically is governed by three bodies of federal law at once. The Electronic Fund Transfer Act and Regulation E set the consumer’s liability for unauthorized transfers and the timelines for investigating errors. The Bank Secrecy Act regulations define money services businesses and require them to register with FinCEN. The Consumer Financial Protection Act prohibits unfair, deceptive, or abusive acts or practices in connection with consumer financial products. State money transmitter licensing sits on top of all three.
Industria Business Lawyers advises payment companies, fintech platforms, and their partners nationwide on which of these rules apply and how to comply. Every provision cited on this page was read from the United States Code or the Code of Federal Regulations. A consultation is free.
The Rules That Govern Payment Products
Regulation E, the money services business rules, and the federal consumer protection standard, quoted from the text in force.
Consumer Liability for Unauthorized Transfers
Regulation E, 12 CFR 1005.6(b), limits a consumer’s liability for an unauthorized electronic fund transfer. Where the consumer notifies the financial institution within two business days after learning of the loss or theft of the access device, liability does not exceed the lesser of $50 or the amount of unauthorized transfers that occur before notice. Where the consumer fails to give timely notice, the higher tiers the rule sets apply.
Error Resolution Timelines
12 CFR 1005.11(c) requires a financial institution to investigate promptly and, subject to the exceptions in the paragraph, to determine whether an error occurred within 10 business days of receiving a notice of error, to report the results within three business days after completing the investigation, and to correct the error within one business day after determining that one occurred. Where the investigation cannot be completed in 10 business days, the institution may take up to 45 days on the conditions the rule sets, including provisional credit.
Money Services Business Definition
31 CFR 1010.100(ff) defines money services business to include a money transmitter, which under paragraph (ff)(5)(i) is a person that provides money transmission services, meaning the acceptance of currency, funds, or other value that substitutes for currency from one person and the transmission to another location or person by any means, subject to the exclusions in paragraph (ff)(5)(ii), including the payment processor and integral-to-the-sale exclusions.
FinCEN Registration
31 CFR 1022.380(a)(1) requires each money services business, whether or not licensed as such by any state, to register with FinCEN, with the exceptions the section states, and to maintain the list of agents the section requires. Registration is renewed on the schedule the regulation prescribes.
Unfair, Deceptive, or Abusive Acts or Practices
12 U.S.C. 5536(a)(1) makes it unlawful for any covered person or service provider to offer or provide a consumer financial product or service not in conformity with federal consumer financial law, or to engage in any unfair, deceptive, or abusive act or practice. 12 U.S.C. 5531(c) provides that an act or practice is unfair where it causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers and is not outweighed by countervailing benefits to consumers or to competition.
The FTC Act Standard
Section 5(a)(1) of the Federal Trade Commission Act, 15 U.S.C. 45(a)(1), declares unlawful unfair methods of competition in or affecting commerce and unfair or deceptive acts or practices in or affecting commerce. Section 5(n), 15 U.S.C. 45(n), sets the same three-part unfairness test: substantial injury, not reasonably avoidable, not outweighed by countervailing benefits.
Where Payment Companies Get It Wrong
The rules are specific about timing and about who bears a loss.
Treating a dispute as a courtesy. Under 12 CFR 1005.11(c), an error notice starts a 10-business-day investigation clock with defined reporting and correction deadlines. A platform that handles disputes on an informal basis, or that shifts the obligation to a partner bank without a written allocation, is exposed on every dispute.
Charging the consumer for a theft. 12 CFR 1005.6(b) caps the consumer’s liability for unauthorized transfers according to when notice was given. Terms of service that impose greater liability do not override the regulation.
Assuming the payment processor exclusion applies. As FinCEN interprets the exclusion in 31 CFR 1010.100(ff)(5)(ii)(B) (for example in FIN-2019-G001), it has conditions, including a formal agreement with the creditor or seller and operation through a clearance and settlement system that admits only BSA-regulated financial institutions. A flow of funds that fits neither that exclusion nor another limitation in paragraph (ff)(5)(ii) is likely to be money transmission, which the regulation treats as a matter of facts and circumstances, with FinCEN registration under 31 CFR 1022.380 and state licensing to follow.
Marketing that outruns the product. Statements about speed, availability of funds, fees, and protections are measured against 12 U.S.C. 5536(a)(1) and 15 U.S.C. 45(a)(1). A claim that is literally true can still be deceptive under those standards if its overall impression is likely to mislead a reasonable consumer about something material.
Bank partnership allocation. Where a fintech offers a product through a bank, Regulation E can apply to the fintech as well as the bank, because 12 CFR 1005.2(i) treats a person that directly or indirectly holds a consumer’s account, or that issues an access device and agrees with the consumer to provide electronic fund transfer services, as a financial institution; the contract between them decides who performs each step. The firm reviews those agreements against the regulation’s timelines.
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How We Handle a Payments Compliance Matter
Every step money takes from payer to payee, with each party’s role described in the terms the regulations use.
Which party is the financial institution for each account, and how the 1005.6 and 1005.11 obligations are performed.
Whether the company is a money transmitter under 31 CFR 1010.100(ff)(5) or fits an exclusion, with the conclusion documented.
FinCEN registration under 31 CFR 1022.380 and the state money transmitter licenses the flow requires.
Terms, fee disclosures, and marketing tested against 12 U.S.C. 5536 and 15 U.S.C. 45.
Bank and processor agreements reviewed so that every regulatory obligation is assigned and performed.
Dispute handling, complaint tracking, and periodic review procedures put in writing and calendared.
FAQ
01 • Payment Companies How fast do we have to resolve a disputed transfer?
Under 12 CFR 1005.11(c), the institution must determine whether an error occurred within 10 business days of the notice, report results within three business days after completing the investigation, and correct the error within one business day after determining it occurred, with a 45-day extension available on the conditions the rule sets.
02 • Payment Companies How much can a consumer be charged for an unauthorized transfer?
12 CFR 1005.6(b) caps liability at the lesser of $50 or the pre-notice unauthorized transfers where notice is given within two business days of learning of the loss or theft, with higher tiers where notice is late.
03 • Payment Companies Are we a money transmitter?
Under 31 CFR 1010.100(ff)(5), a person that accepts currency, funds, or value from one person and transmits it to another location or person is a money transmitter unless an exclusion in paragraph (ff)(5)(ii) applies. The analysis is fact-specific.
04 • Payment Companies Do we register with FinCEN even if we are state licensed?
31 CFR 1022.380(a)(1) requires each money services business to register with FinCEN whether or not it is licensed by a state, subject to the exceptions the section states.
05 • Payment Companies What makes a practice unfair under federal law?
12 U.S.C. 5531(c) and 15 U.S.C. 45(n) both require substantial injury to consumers that is not reasonably avoidable and not outweighed by countervailing benefits to consumers or competition.
Payment companies and fintech platforms nationwide. Call (202) 860-1210 or describe the product and the flow of funds through the form. Free consultation. Every analysis is documented against the rule text in force.
This page provides general information about payments and electronic funds transfer compliance under federal law and does not constitute legal advice. Reading it does not create an attorney-client relationship with Industria Business Lawyers. Whether a claim, defense, or obligation exists depends on the facts and the law in force. Provisions cited were read on September 23, 2026 from the United States Code and the Code of Federal Regulations.