Covered accounts and transfers
Regulation E generally applies when funds move electronically to or from a consumer account established primarily for personal, family, or household purposes. Coverage focuses on the transfer and the account, not on whether the underlying student debt is federal, private, or institutional.
Recurring payments and authorization
Preauthorized recurring transfers from a consumer account must be authorized in a writing signed or similarly authenticated by the consumer, and a copy of the authorization must be provided. E-SIGN can determine when an electronic record and signature satisfy that form requirement.
A creditor generally may not condition an extension of credit on repayment by preauthorized recurring electronic fund transfer. A borrower can choose autopay, and a creditor can offer an incentive, but the regulation limits compulsory use.
Official examples & tools
- Regulation E Appendix A model clausesOptional clauses illustrate recurring-transfer authorization and other transfer disclosures.
Stopping transfers and resolving errors
Consumers have stop-payment rights for qualifying preauthorized transfers and protections for unauthorized transfers and covered errors. Variable recurring amounts can require advance notice unless an agreed range applies.
Stopping an electronic transfer does not necessarily eliminate the underlying debt. The payment method and the obligation being paid are separate legal questions.
Institutions, servicers, and account-holding banks
A school, lender, or servicer can request or initiate repayment, while the consumer’s account-holding financial institution performs its own Regulation E duties. Responsibility for a particular issue depends on the transfer, the actor, and the rule involved.
Recurring authorization and voluntary autopay
A preauthorized recurring electronic transfer from a covered consumer account requires a writing signed or similarly authenticated by the consumer, clear terms, and a copy of the authorization. E-SIGN can supply the electronic form of signature, but the authorization must still evidence identity and assent.
A creditor generally may not condition consumer credit on repayment by recurring preauthorized electronic transfers. A voluntary autopay discount can be offered when an alternative program without that feature is also available for the type of credit.
Stopping payments and resolving transfer errors
A consumer may stop a preauthorized transfer by notifying the account-holding financial institution at least three business days before the scheduled payment. Variable recurring debits generally require advance notice of amount and date unless the consumer agreed to a permitted range-based notice.
Unauthorized-transfer limits and error-resolution duties generally attach to the institution holding the consumer’s asset account, which may differ from the student loan servicer or creditor receiving payment. A consumer generally must report a qualifying statement error within 60 days; the financial institution ordinarily investigates within 10 business days, subject to specified extensions and provisional-credit rules.