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[June 25, 2014]
MONEY & THE LAW: Master the ins and outs of mobile banking [Gazette, The (CO)]
(Gazette, The (CO) Via Acquire Media NewsEdge) By JIM FLYNN - As you probably know, the hot new thing in financial services these days is mobile banking, where you can use your smartphone or tablet to make deposits, pay bills, send money to your children in college, buy pizzas, determine the balance in your checking account, etc.
In thinking about the mobile banking phenomenon, two questions come to mind. First, how exactly does this all work? And second, what protections do consumers have against mobile banking fraud? As to the first question, there are two ways money moves in and out of your bank account.
The first way involves checks. If you write a check, your check is presented (physically or as a scanned image) to the payee's bank for deposit into the payee's account.
The payee's bank then sends the check (as a scanned image) to your bank for payment and, upon receipt of the check image, your bank takes the money out of your account. This virtual presenting of the check from the payee's bank to the payor's bank is usually handled by a computer system run by the Federal Reserve.
The second way money moves in and out of your bank account involves an electronic system known as ACH, which stands for "automated clearing house." The Federal Reserve again gets in the act with an ACH system it calls FedACH. Another privately owned ACH system operates under the name The Electronic Payments Network.
By way of example on the money-into-your-account side, this includes automated payroll deposits, Social Security payments, and tax refunds.
By way of example on the money-out-of-your-account side, the ACH system handles purchases made with a debit card, withdrawals from an automated teller machine, and preauthorized payments, such as your Netflix bill.
To complicate things a bit, the payee of a check will sometimes convert the check to an ACH transaction.
In any event, it's the ACH network that handles mobile device transactions.
As for consumer protection, in 1978 Congress passed a law called the Electronic Fund Transfer Act. Under the EFTA, a consumer's liability for an unauthorized electronic transaction taking money out of a bank account is limited to $50.
To benefit from this protection, the loss or theft of a smartphone or tablet (or a debit card or ATM card) must be reported to the consumer's bank within two business days following discovery of the loss or theft. If that deadline is missed, the limit increases to $500.
- Jim Flynn is a private attorney with Flynn Wright & Fredman LLC in Colorado Springs. Email him at firstname.lastname@example.org.
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