ABA Family Legal Guide

Computer Law

Online Purchases

Online Banking

How safe are online money transfers?

The federal government has taken steps in recent years to make online banking quite safe. The Electronic Funds Transfer Act (EFTA) and related federal regulations are designed to protect consumers when making banking transactions from their computer, such as transferring money between accounts or transferring money from their account to pay bills.

Under the law, banks that permit online transfers must inform consumers of the institutions' and customers' liability for unauthorized transfers and provide the telephone number and address of the bank employee to be told if you think an unauthorized transfer has been made. The bank must also tell the customer the fees it charges for transfers and any limits on the frequency and dollar amounts of the transfers. Customers must also be told of their right to receive documentation of all transfers, and their right to stop payment on transfers. In addition, the bank must tell the customer under what circumstances it will tell third parties, such as governmental agencies, about the account.

Under the law, customers have sixty days from the time they receive a bank statement containing a potential error to alert the financial institution. The Federal Trade Commission advises customers to alert the bank by a certified letter, return receipt requested, so the customer can prove that the institution received the letter within the sixty days. Customers should keep a copy of the letter for their records.

Failure to notify the bank within sixty days lets the institution off the hook for prompt investigation of a claim. Under the law, the bank is under no obligation to investigate the alleged error within specific time limits if the deadline is missed, although it must still make any required refunds to a consumer for an unauthorized transfer.