The proposed provision would go far beyond the

present law and makes no distinction between ACH and other transactions. Such a provision should not be adopted absent a showing, on the basis of experience rather than conjecture, that it is necessary for the protection of the consumer in connection with ACH transactions.

Section 811(a)(1). This provision would make

a financial institution liable for damages suffered by a consumer arising out of the institution's failure to make an electronic funds transfer in the correct amount or manner when properly instructed to do so by the consumer, except where the consumer's account has insufficient funds. That exception is too narrowly stated. It should be made clear that the financial institution has no liability, for example, where the authorization of the consumer has been revoked, or the agreement of the financial institution to accept items has been terminated by that institution or by operation of law (e.g., upon death of the consumer), or the consumer has stopped payment with respect to the transaction involved, or proper account information enabling it to effect the transfer is not received by that institution.

Section 816. This section would impose a general fiduciary duty upon a financial institution to a consumer with respect to electronic funds transfers "to ensure the security, integrity, accuracy and confidentiality of each account of the consumer accessable by such means of transfers", and lists several particular applications of that general duty. Those provisions purporting to particularize that duty have not been well considered.

Subdivision (1) of Section 816 provides that the fiduciary "duty includes notifying the consumer as soon as possible of any action against the consumer's account." Subdivision (2) provides that the duty includes "designing all mechanisms, means, and systems employed in effectuating electronic fund transfers to prevent unauthorized electronic funds transfers and to detect and correct such transfers." If a duty is to be imposed upon a financial institution, the institution should at least be able to determine with certainty what action is required of it. The language quoted above, however, is so vague and uncertain as to preclude a financial institution from making that determination with any assurance that particular action taken in a good faith effort to comply would be found adequate.

We appreciate this opportunity to express our views on the proposed legislation, and would be most happy to answer any questions you may have or provide any additional information desired.

Very truly yours,

J. M. Disse

V. M. Dissmeyer

Citicorp is pleased to submit a statement for the record
pertaining to S.2065, a bill to provide consumer protec-
tions and rights in electronic funds transfers. Citicorp's
interest and experience in providing improved financial
services to consumers via electronic technology is well
known. Therefore, we believe our views may be helpful
to the deliberations of the Congress as it prepares to
enact EFT legislation.

Our experience in New York indicates that electronic
banking services are currently providing improved
financial services for consumers with corresponding
safeguards to protect customer security and privacy.
Commercial banks and thrift institutions have expanded
their locations to serve the public more conveniently
and at less cost than through "brick and mortar" branches.
If permitted to develop freely, EFTS can provide additional
opportunities to satisfy consumer demands for better, more
efficient financial services. EFT systems also provide
additional choices of payment method for consumers, and
provide lower-income consumers with the opportunity to
participate in the payment system since they do not have to
meet credit standards. There is increasing evidence that
consumers like using automated tellers, point-of-sale

terminals and similar electronic facilities.

As a matter of general principle, we believe that state
and federal laws and regulations should provide a pro-
competitive environment for the development and imple-
mentation of electronic systems for the delivery of
improved financial services to consumers. EFTS is
still at an early stage of its development; therefore,
experimentation and innovation should be encouraged
with a minimum amount of regulation and few, if any,
legal constraints on the installation and operation
of such systems. If and when new legislation or amend-
ments to existing regulations are deemed necessary to
protect consumers' rights in an EFT environment, the
social and economic impact of such proposed measures
should be thoroughly analyzed prior to enactment to
ensure that the public interest will best be served.

In light of the above comments, we endorse efforts to provide adequate consumer safeguards in electronic funds transfer. However, we oppose legislation that would mandate unreasonable standards and restrict financial institutions from competing to offer consumers the best financial services, with necessary consumer protections and at the lowest cost. With some changes, we can fully support S.2065 as a positive legislative effort which provides consumers with important rights and yet does not interfere with the competitive environment.

We believe that any EFT legislation designed to protect consumers should be based on a factual need for specific safeguards. Therefore, we have analyzed a number of attitudinal surveys and consumer research studies and summarized them in Part II of this statement. These studies indicate that there is no grassroots demand for additional restrictive legislation. The facts are that users of electronic banking services seem to be very satisfied, and not overly concerned with potential disadvantages. Non-users have generally not been deterred by fears of potential reductions in privacy or security or other alleged concerns. Instead, unfamiliarity, and a lack of availability of these services, have been the major constraints to usage.

Part III of our statement is a section-by-section analysis of S.2065. In general, we support the following provisions of the bill:

Limited government access to and use of

customer information

Limited disclosure of information to third parties

Voluntary participation in EFT, providing

additional choices of payment methods

Clear and complete disclosure of terms and

conditions to consumers.

A high standard of care by financial institutions

in dealing with consumers' privacy and security.