Kansas electronic transactions no longer have different customer liability limits than those available to consumers under the Federal Electronic Funds Transfer Act as implemented by Regulation E. Effective July 1, 2015, the Kansas Legislature repealed the long-standing (and confusing in implementation) Kansas law, K.S.A. 9-1111d, which established different liability limitations for Kansas compared to other states. Out of state banks that engage in electronic transactions with Kansas customers likewise are effected and need to address Kansas’s change in law.
The former law. Under the former law, depositor liability for unauthorized transaction was limited to $50 dollars unless the customer failed to notify the institution within 4 business days after learning of the loss or theft of the machine readable instrument of which liability was then limited to $300.
Regulation E. Depositor liability for unauthorized transaction is limited to $50 unless the customer fails to notify the institution within 2 business days after learning of the loss or theft of the access device of which liability is then limited to $500.
How repeal of K.S.A. 9-1111d affects banks:
- Kansas banks should amend agreement disclosures for electronic transactions. Kansas banks should amend their electronic transaction agreement disclosures to provide for the more bank-friendly Regulation E liability limitations and timing. Specifically, Kansas banks should amend their electronic transfer agreement disclosures by decreasing the permissible period for customer notification from 4 to 2 days and increasing a customer’s maximum liability after the 2 days from $300 to $500. To amend, banks must provide a change-in-terms notice to consumer deposit customers at least 21 days prior to implementing the change. The change-in-terms notice has no form requirements.
- Kansas banks should amend the agreement disclosures addressing limitation of liability for electronic transactions prior to any system update. Processors may be making changes to their systems to accommodate the repealed K.S.A. 9-1111d, and banks should ensure customers have proper notice of the changes prior to the Processor system update. Banks may be exposed to risk if the Processor system change operates in a manner which is inconsistent with the bank’s agreement disclosures.
- Kansas banks using standard forms should ensure the actual form is consistent with operations. Form providers may not be updating form disclosures at the same time that third-party Processors update the system to accommodate the repealed K.S.A. 9-1111d. Kansas banks should ensure that their form agreements and disclosures are updated in a manner that any changes will coincide with system updates.