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Which payment is covered?
Regulation E covers the consumer accounts discussed here: accounts established primarily for personal, family or household purposes. A preauthorised transfer is authorised in advance to recur at substantially regular intervals. If the customer must initiate each payment afresh, that is a different arrangement.
This matters when a studio or other service business moves from invoices to automatic monthly debits. The payment-authorisation question is separate from whether the membership offer and cancellation terms comply with subscription law.
The customer must authorise the debit
The authorisation must be readily identifiable, with clear and understandable terms. Electronic signatures or other permitted authentication can work when the process establishes the customer’s identity and assent under the applicable electronic-record requirements. The person obtaining it must provide a copy of the authorisation, including its terms, to the customer in paper or electronic form.
Fictional example: a receptionist receives an oral yes, types the member’s name into an authorisation and starts monthly debits. The official interpretation says the payee cannot satisfy the writing requirement by signing on the consumer’s behalf with only oral authorisation. Use an actual consumer-authentication process.
Variable charges need attention too
For a covered debit varying from the previous or preauthorised amount, the designated payee or financial institution generally must send written notice of the amount and date at least 10 days before the transfer. The rule permits specified range or agreed-difference options only after the consumer is informed of the right to notice of all varying transfers.
Consumers also have separate bank-side stop-payment rights. Those rules do not turn your debit authorisation into a complete answer about the service contract, cancellation fees or any alleged unpaid debt.
Scope
- Covered consumer accounts only; no business-account, card-network or bank stop-payment processing determination. Subscription contracts, financing, error resolution and state law remain separate.
Next step
Check the customer’s actual authorisation, their copy and any variable-amount notice before activating the recurring debit.
Sources & review notes
Consumer Financial Protection Bureau
Passage, dates and research notes
primary · §1005.10(b)–(d) and official interpretations; scoped(e)
signed or similarly authenticated
Read complete(b)–(d), including actual consent/copy, clear terms, electronic authentication, bona-fide error, bank stop-payment and variable-amount/range conditions. Compulsory-credit provisions read for scope, not expanded into a lending guide.
Consumer Financial Protection Bureau
Passage, dates and research notes
primary · §1005.2(b)(1)–(2),(k) and corresponding official interpretations
authorized in advance to recur
Read consumer-purpose account scope and recurring-transfer definition/interpretation. Not a statement about every business bank account, credit card, prepaid product or one-off payment.
Detailed rule records (1)
Obtain writing signed or similarly authenticated by the consumer, provide a copy of the authorisation, and use clear readily identifiable terms. For varying transfers, the designated payee or institution must provide amount/date notice at least 10 days before the transfer unless the consumer chooses the specified supported range/difference option after being told of the right to all varying-transfer notices.
12 CFR 1005.10 and official interpretations: preauthorised transfers 12 CFR 1005.2: consumer account and recurring transferKeep this reading in your learning library.
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