Interactive Teller Machines and Regulatory Requirements
Written by Stephanie Lyon, Senior Regulatory Compliance Counsel, NAFCU
Credit unions are known for serving their communities and operating in a lean way to ensure members receive cost-saving benefits in the forms of lower loan rates, higher dividends and additional services. This is why many credit unions are now turning to interactive or video teller machines. These machines allow credit unions to provide members with a face-to-face experience via the interactive teller machine while reducing the costs of maintaining a branch.
While innovation has always moved fast, regulations are sometimes slower to catch up. This may leave credit unions wondering how to provide these services while complying with our current regulatory landscape. Depending on the service interactive teller machines provide, different regulatory requirements may come into play. Let’s review a few different requirements.
Regulation E Consumer Protections
Regulation E provides certain protections to members who conduct electronic funds transfers (EFT) at electronic terminals. An electronic terminal is considered to be “any electronic device, other than a telephone operated by a [member], through which a [member] may initiate an [EFT].” 12 C.F.R. § 1005.2(h). This includes point-of-sale terminals, ATMs and cash dispensing machines. The question becomes, is an interactive teller machine or similar technology considered to be an electronic terminal?
The definition of an electronic terminal is not helpful in making this determination. However, the official interpretation does have a discussion on how the regulation views teller-operated terminals:
“3. Teller-operated terminals. A terminal or other computer equipment operated by an employee of a financial institution is not an electronic terminal for purposes of the regulation. However, transfers initiated at such terminals by means of a consumer's access device (using the consumer's PIN, for example) are EFTs and are subject to other requirements of the regulation. If an access device is used only for identification purposes or for determining the account balance, the transfers are not EFTs for purposes of the regulation.” 12 C.F.R. § 1005, Supp. I, 1005.2(h)—3.
The interpretation of an electronic terminal seems to exclude teller-operated terminals in which the credit union's employee assists the member in conducting EFTs as long as the member's debit card or other access device is not used to conduct the transaction. To determine whether a credit union’s interactive teller machine is considered an electronic terminal, a credit union may need to determine if the member is using their access device (e.g., debit card, pin) to conduct a transaction or if the member’s access device is used by the machine solely for identification purposes or for account balance information.
Many credit unions are also only staffing these interactive teller machines during certain business hours. In cases when the teller is not available to assist the member and the member utilizes an access device to conduct the transaction, the interactive teller machine most closely resembles an ATM. As mentioned previously, ATMs are considered to be electronic terminals and when used by a member, the member receives Regulation E protections. See, 12 C.F.R. § 1005.2(h).
Other obligations the credit union may face when installing or using an interactive teller machine may be the requirement to have certain notices on the machine. For example, section 740.4 of NCUA rules and regulations sets the requirement to display the NCUA official sign at each station or window where insured account funds or deposits are normally received such as all branches. The rule states this requirement excludes ATMs or point-of-sale terminals. See, 12 C.F.R. § 740.4(e). The rule is silent on whether an interactive teller machine is considered an ATM or a teller station/branch. If the credit union is allowing members to deposit insured account funds through the interactive teller machine, this may be an area where NCUA’s official sign may need to be displayed if this machine is considered a teller station. For those reasons, credit unions using these interactive machines may need to seek legal advice with regards to the requirement to place this notice.
Regulation CC has two separate but related notice requirements – one is to place a notice of the credit union’s availability policy in each location where employees accept member deposits and the other is to place a notice at each ATM in which funds can be deposited and may not be available for immediate withdrawal. See, 12 C.F.R. § 229.18(b)-(c). Again, if the interactive teller machine is capable of accepting member deposits, the credit union may need to determine if these deposits are treated like deposits made at a branch/teller station or as deposits made at ATMs in which funds made not be made available as quickly and need a special notice.
There may be other considerations for ITMs that a credit union may want to discuss with the seller/lessor of these machines. For example, the Americans with Disabilities Act (ADA) has been a hot topic recently for website accessibility (see this NAFCU page for more details). It is possible that ADA standards could apply to ITMs as either ATMs or as a physical location similar to accessibility expectations for teller stations and branches. For those reasons, it is important to understand general accessibility requirements and the software/operational limitations of these machines to meet ADA standards.
I have yet to experience this type of machine, but I am looking forward to a future where transactions continue to become easier to make and a member can conduct sophisticated transactions without visiting a branch.