The Federal Reserve Board is expected to propose regulations for stored-value cards next week.
The central bank would not release details in advance of its board meeting Wednesday. The proposal, which will be open for public comment, has been eagerly awaited by developers of smart cards and similar systems that serve as alternatives to cash or conventional card payments.
"This may well be the most important thing the Fed does in the regulatory area for the future of financial services," said Robert Ballen, a partner in the Washington law firm Schwartz & Ballen. "This will put in place rules that will govern electronic banking."
Sources familiar with the Fed's document said it would subject stored- value cards to Regulation E, which governs electronic funds transfers. It would require banks to disclose the risks associated with these cards and explain a consumer's liability if a card is lost or stolen.
These sources said, however, that the proposal includes several exemptions that banks have advocated, which would differentiate so-called electronic purses from conventional credit and debit cards.
They said the Fed would not require banks to deliver periodic statements summarizing smart card purchases, nor would it require vendors that accept smart cards to provide receipts.
It also would exempt most smart cards from the rules limiting consumer liability for lost or stolen debit and credit cards. The limit is $50 in most instances.
But the sources said the Fed governors may ask for further comment on whether loss limits and other consumer protections should apply to smart cards with high dollar values.
The proposal also is to address whether providers of home banking services can fulfill their disclosure requirements through on-line messages rather than on paper. Fed officials would give no details on how the central bank would address this subject, but a Fed observer said he expects on-line disclosures to be permitted.
Also next week, the Fed is expected to approve a February 1994 proposal updating Regulation E. The changes will let consumers electronically debit their accounts without written preauthorization, and it will expand an exemption for securities and commodities transactions.
