Pub. 4 2015 Issue 5

l e a d i n g a d v o c a t e f o r t h e b a n k i n g i n d u s t r y i n k a n s a s 30 K ANSAS BANKS HAVE LONG BEEN disadvantaged when it comes to liability for unauthorized electronic transactions. Regulation E (Reg E) is the federal regulation governing electronic transactions, including maximum liability for unauthorized transactions for consumers. States are allowed to establish their own laws, if the laws are more favorable to consumers than Reg E. Kansas was one of the few states with laws more favorable to consumers than federal regulations, consequently Kansas banks were governed by Kansas law, as well as Reg E. Reg E limits consumer customers’ liability to $50.00 when the customer notifies the bank of the unauthorized transaction within two business days. After the initial two days, Reg E increases consumer liability to $500.00. Kansas law allowed for consumer liability to be no more than $50.00 if the unauthorized transaction was reported within four days after finding discovering the transaction. After the initial four days, Kansas law would not allow the customer to be liable for more than $300.00. With the repeal of the Kansas unauthorized electronic transaction law (KSA 9-111d), Kansas banks are able to take advantage of the lower liability allowed by federal law starting July 1, 2015. In order to do so, banks must send a change-in- terms notice to consumer deposit customers 21 days before the change in terms is scheduled to take place. The change- in-terms notice is not required to be in any specific form or to have specific wording. For example, banks may include the notice on a periodic statement or can send an entirely new revised disclosure statement. For new customers, banks will be required to provide disclosures at opening which accurately reflect the changed terms. KBA recommends specifically stating in the change-in-terms notice the contents of the current disclosure and the change in the disclosures so consumers are able to clearly see the changes occurring. Keep in mind that banks are not required to change their existing agreements because of the repeal. Because KSA 9-111d provided more protection for consumers than Reg E, banks are still allowed to offer consumers a more favorable option. The repeal simply grants banks greater flexibility to limit their liability and to protect themselves by reducing the time consumers have to notify the bank while increasing the dollar limit for which consumers will be liable. Every bank should evaluate whether changing their agreements and disclosures is to their benefit. Also, banks are able to implement the change whenever they choose, as long as customers are provided with the change-in-terms notice 21 days in advance. As July 1, 2015 draws near, KBA Legal Department is ready to assist banks with answering any questions, reviewing change- in-terms disclosures, and providing banks with any assistance necessary to implement changes to current agreements and disclosures. REPEAL OF KSA 9-111D BENEFITS KANSAS BANKS By: Christopher Kuckelman, Legal Intern, J.D. Candidate 2016