have created an "information overload" problem for consumers. a. Why won't all the disclosures required by S. 2065 also create

consumer information overload?

As presently drafted, § 805(a) requires disclosure of "all [EFT] terms and conditions," including 10 enumerated items of information. Governor Jackson mentioned in his testimony before this Subcommittee on July 11, 1977, that disclosure of excessive information to the consumer may result in his refusing to read any of the material.

I would suggest that Congress carefully consider each proposed disclosure requirement and enact only those critical disclosures. As you know, I recommended the elimination of a number of disclosures in my, testimony. It is also important that disclosures be as clear and understandable as possible.

b. To provide certainty for financial institutions about what they have to disclose, shouldn't this legislation require

the Board to issue model disclosure language?

I do not believe that it is necessary for Congress to require the Board to issue model disclosure language. There appears to be sufficient flexibility within the proposed rulewriting authority to permit the board to provide model language if necessary. For example, the Board promulgated model forms for Equal Credit Opportunity compliance without a specific directive from Congress to do so. Use of the model forms remains completely optional; however, their use does constitute automatic compliance with certain provisions of Regulation B. These models have met an enthusiastic reception. The Board would not be reluctant to provide model language if there is uncertainty about compliance.

Senator RIEGLE. Our next witness is Mr. Lewis Goldfarb, the Acting Assistant Director for Special Statutes for the Federal Trade Commission. We welcome you before our subcommittee today. We are delighted that you are here and we would be pleased to hear from you.

[The statement of Mr. Goldfarb follows:]

*THESE REMARKS REPRESENT THE VIEWS OF THE FEDERAL TRADE COMMISSION STAFF. THEY ARE NOT INTENDED TO BE, AND SHOULD NOT BE CONSTRUED AS, REPRESENTATIVE OF OFFICIAL FEDERAL TRADE COMMISSION POLICY.

MR. CHAIRMAN AND MEMBERS OF THE COMMITTEE,

MY NAME IS LEWIS H. GOLDFARB, ACTING ASSISTANT DIRECTOR FOR THE

DIVISION OF SPECIAL STATUTES IN THE BUREAU OF CONSUMER PROTECTION

OF THE FEDERAL TRADE COMMISSION.

I AM PLEASED TO APPEAR HERE TODAY

TO COMMENT ON S. 2065, A BILL WHICH WOULD CREATE CONSUMER RIGHTS AND REMEDIES IN ELECTRONIC FUNDS TRANSFER TRANSACTIONS. THE VIEWS I EXPRESS

TODAY ARE MY OWN AND DO NOT NECESSARILY REPRESENT THOSE OF THE

FEDERAL TRADE COMMISSION OR ANY OF ITS MEMBERS.

ELECTRONIC FUNDS TRANSFER SYSTEMS HAVE, ON A LIMITED SCALE, BEEN

A PART OF OUR BANKING SYSTEM FOR SEVERAL DECADES. IT IS JUST WITHIN

THE LAST FEW YEARS, HOWEVER, THAT THE APPLICATION OF COMPUTERS AND
ELECTRONIC DATA PROCESSING EQUIPMENT HAS REACHED THE STAGE OF

TECHNOLOGICAL SOPHISTICATION AS TO MAKE PRACTICAL ITS INTRODUCTION INTO

THE WORLD OF CONSUMER FINANCIAL TRANSACTIONS.

THE FEDERAL TRADE COMMISSION AS AN ENFORCEMENT AGENCY HAS NOT HAD

OCCASION TO CONSIDER ANY ENFORCEMENT ACTIVITIES INVOLVING THE USE OR

MISUSE OF THE EFT SYSTEMS. THE COMMISSION'S EXPERIENCE IN THIS AREA

HAS FOCUSED PRIMARILY ON ITS RESPONSIBILITY AS A GOVERNMENT REPRESENTA

TIVE ON THE NATIONAL COMMISSION ON ELECTRONIC FUNDS TRANSFER.

THE

MAJOR PART OF THE COMMISSION'S ROLE ON THE EFT COMMISSION HAS BEEN TO

DEVELOP A THOROUGH UNDERSTANDING OF THE ESOTERIC AND HIGHLY COMPLICATED

WORLD OF ELECTRONIC FUNDS TRANSFER--ITS JARGON, ITS COMPUTER TECHNOLOGY

AND ITS IMPACT ON TRADITIONAL METHODS OF TRANSFERRING VALUE AND TO

ADVOCATE ITS POSITION AS AN ENFORCER OF THIS NATION'S ANTITRUST AND

CONSUMER PROTECTION LAWS.

IN THE NEARLY TWO YEARS OF ITS EXISTENCE, THE NATIONAL COMMISSION

ON ELECTRONIC FUNDS TRANSFER (NCEFT) HAS PERFORMED A COMMENDABLE TASK

IN COMPILING THE MASSIVE BODY OF INFORMATION IN THE AREA AND RECONCILING THE DIVERSE VIEWS OF ITS 26 MEMBERS TO PRODUCE A REPORT TO CONGRESS WHICH

I BELIEVE WILL BE VIEWED AS A MAJOR CONTRIBUTION IN GUIDING NATIONAL

POLICY ON ELECTRONIC FUNDS TRANSFER. WHILE SOME OF THE VIEWS WHICH I

EXPRESS TODAY WILL NOT BE CONSISTENT WITH ALL OF THE CONSUMER RECOMMEN

DATIONS CONTAINED IN THE REPORT, I BELIEVE THE COMMITTEE SHOULD GIVE

CAREFUL CONSIDERATION TO EACH OF THE PROPOSALS RELATING TO CONSUMER

PROTECTION AS WELL AS THE SEPARATE STATEMENT WHICH THE FTC REPRESENTATIVE

WILL BE SUBMITTING ALONG WITH THE REPORT.

WE AGREE WITH THE FINDING OF THE NCEFT IN ITS INTERIM REPORT THAT

ELECTRONIC FUNDS TRANSFERS OFFER THE POTENTIAL FOR SUBSTANTIAL BENEFITS

TO CONSUMERS IN THE HANDLING OF THEIR FINANCIAL AFFAIRS. THE AVAILABILITY

OF NEW METHODS OF MAKING PAYMENTS FOR GOODS AND SERVICES, THE USE OF

NEW TYPES OF BANKING SERVICES WHICH WILL SAVE TIME AND OFFER GREATER

CONVENIENCE TO THE CONSUMER AND THE POSSIBILITY THAT THE CONSUMER MAY

PAY LESS FOR ALL HIS FINANCIAL SERVICES AS A RESULT OF INCREASED COMPETI

TION AMONG PROVIDERS OF EFT SERVICES ARE SOME OF THE ADVANTAGES OF EFT

SYSTEMS WHICH ARE LIKELY TO INSURE THEIR ACCEPTABILITY AMONG CONSUMERS, PROVIDED, HOWEVER, THAT THE OTHER SIDE OF THE EQUATION, THE CONSUMER DETRIMENTS, ARE KEPT AT A MINIMUM. I BELIEVE THAT S. 2065 IS AN

EXCELLENT PROPOSAL WHICH WOULD MINIMIZE THE POTENTIAL SHORTCOMINGS OF

EFTS AND INSURE ITS WIDESPREAD ACCEPTANCE BY CONSUMERS.

MY COMMENTS TODAY WILL FOCUS ON THREE CATEGORIES OF CONCERN

WHICH ARE RAISED BY THE INTRODUCTION OF THE EFT SERVICES INTO THE

CONSUMER MARKETPLACE:

THE IMPAIRMENT BY EFT OF EXISTING SAFEGUARDS

UNDER THE CONSUMER CREDIT PROTECTION ACT, THE EFFECT OF EFT ON

LOW INCOME AND UNSOPHISTICATED CONSUMERS AND THE IMPACT OF EFT ON

CONSUMERS' PRIVACY. THE PROPOSED LEGISLATION WOULD PROVIDE IMPORTANT

PROTECTIONS FOR CONSUMERS IN ALL THREE AREAS.

S. 2065 INCORPORATES THE BASIC PHILOSOPHY OF TRUTH IN LENDING

BY REQUIRING TIMELY AND MEANINGFUL DISCLOSURE OF THE IMPORTANT TERMS OF AN EFT AGREEMENT. AS IN TRUTH IN LENDING, SECTION 805 REQUIRES COMPLETE DISCLOSURE OF ALL THE RIGHTS AND RESPONSIBILITIES OF THE PARTIES TO AN EFT AGREEMENT AND SECTION 806 REQUIRES

A DESCRIPTIVE STATEMENT FOR EACH EFT TRANSACTION EITHER

AT POINT OF SALE OR WITHIN FIVE DAYS THEREAFTER.

ANOTHER NECESSARY EXTENSION OF EXISTING LAW IS THE ERROR

RESOLUTION PROCEDURE SET FORTH IN SECTION 809. THIS PROVISION

REQUIRES AN INSTITUTION TO RESPOND TO A CONSUMER NOTIFICATION
OF ERROR WITH AN EXPLANATION WITHIN THREE DAYS AND TO CORRECT
ANY ERRORS ON THE INSTITUTION'S PART WITHIN 24 HOURS AFTER SUCH
THIS PROMPT RECREDITING OF A CONSUMER'S ACCOUNT

DETERMINATION.

IS NEEDED IN AN EFT DEBIT TRANSACTION BECAUSE OF THE SEVERE FINANCIAL

HARDSHIP WHICH A CONSUMER WOULD SUFFER FROM NOT HAVING ACCESS

TO FUNDS WHICH HAVE BEEN ERRONEOUSLY DEBITED.