Effective July 1, 2015, a Kansas bank can reduce its liability for fraudulent electronic fund transfers on a consumer account by revising its Reg E disclosures. Kansas repealed K.S.A. 9-1111d which had long provided Kansas consumers with greater protection from fraudulent electronic fund transfers than was required by the federal Electronic Fund Transfer Act and Reg E.
While Reg E limits a consumer’s liability to $50 if the consumer notifies their bank of the fraudulent activity within two days, the old Kansas statute extended this two-day period to a four-day period. Furthermore, Reg E sets the maximum liability of consumers who fail to meet the prescribed deadline to $500, but the old Kansas statute reduced the consumer’s maximum liability to $300. The repeal of K.S.A. 9-1111d brings Kansas law into accord with Reg E, thereby eliminating the greater consumer protections that Kansas previously provided.
As a caveat, banks must revise their existing Reg E disclosures to take advantage of this recent Kansas law change. If the bank doesn’t revise its existing Reg E disclosures, the bank will be contractually binding itself to the old, more consumer protection provisions. In other words, if the bank’s disclosures still refer to the four-day period and the $300 maximum consumer liability, the bank has inadvertently established those terms by contract with its customer even though the Kansas law was repealed.
The revisions to the Reg E disclosures are simple: (1) change “four” days to “two” days, and (2) change “$300” to “$500.” With respect to new customers, the bank simply needs to change its Reg E disclosures in its new account documentation. With respect to existing customers, the bank needs to amend its existing account agreements by sending appropriate notice of the change to its existing customers.