NAFCU Compliance Blog

A Deep Dive into E-Signatures for Online Accounts

By Reginald Watson, Regulatory Compliance Counsel

Electronic documents and signatures are almost a mainstay in the financial industry, allowing credit unions to dramatically improve efficiency by reducing costs, saving paper, and expediting the application process. Additionally, consumers have come to enjoy the benefits of being able to easily edit and correct errors, or cut and paste pre-filled information. Before we take that dive, here's picture of a lovely dolphin that reminds me of my last boat trip in my hometown of sunny Tampa!

Now on to electronic signatures! Congress enacted the Electronic Signatures in Global and National Commerce Act (ESIGN) to accommodate the global transition to electronic transactions, records, and signatures, allowing electronic documents to carry the same legal weight as paper documents. The law went into effect on October 1, 2000 and states that the enforceability of a contract, electronic record, or signature for a transaction cannot be challenged solely because it is electronic. ESIGN also authorizes signatures to be retained in an electronic format so long as it is an accurate reflection of the information in the original document, remains accessible to all persons entitled to access, and is capable of being accurately reproduced.

This Blog will take a deep dive into the application process and discuss the ESIGN implications of electronically signed online account applications. As a threshold matter, ESIGN only applies to information that is legally required to be in writing. Thus, we should first ascertain which applications are legally required to have a signature.

Online Membership Applications

With regard to obtaining signatures on membership applications, the FCU model bylaws (Appendix A to Part 701, Art. II, Sec. 2) indicate that applications for membership must be signed by the applicant. The credit union's bylaws will likely have a similar requirement; however, there is no specific requirement for a wet signature. NCUA affirmed this position in NCUA Opinion Letter 2004-0543, explaining that "the credit union may rely on the electronic signature and need not require an applicant to print the form and sign it in handwriting," so long as the credit union ensures "that its audit and verification procedures are sufficient where the member's signature is captured electronically."

An “electronic signature” can be any type of notification that the member and the credit union both understand will formalize an agreement. While not required, using an electronic signature-verification service (e.g. DocuSign) provides that additional level of confirmation that both parties understand the e-signature is intended to bind the parties to the agreement. 

Online Credit Applications

Remember, ESIGN consent is only required for information that is legally required to be in writing. There is no federal regulatory requirement that a credit union obtain a signature on a mortgage loan application (but be on the lookout for state law requirements). However, some institutions require a signature as a means of further identifying the member to prevent identity theft. In the commentary to section 1002.4(c) of Regulation B, the bureau indicates that for credit decisions, the credit union "may complete an application on behalf of an applicant and need not require the applicant to sign the application."

With respect to pulling credit, the Fair Credit Reporting Act (FCRA) allows the credit union to pull credit if it has a permissible purpose – such as when a member requests a loan – but does not require that the credit union obtain a signature (except for employment purposes which require a signature). Nevertheless, some states and investors may have specific authorization requirements before a credit union can pull a credit report, in which case, some credit unions may use the applicant's signature for purposes of fulfilling these requirements.

There are a few specific issues related to credit card accounts which may require the credit union to obtain a signature. Regulation Z contains a requirement related to issuing credit cards to consumers under 21, where the credit union is required to have a signed agreement from a cosigner or joint applicant. See, §1026.51(b)). The credit union may also require a signature to maintain a consensual lien on the members’ shares in connection with a credit card account. Regulation Z specifically prohibits offsetting credit card debt with shares on deposit, unless the credit union has obtained a consensual security interest in the funds. See, §1026.12(d)(2). Some credit unions may obtain a signature in connection with establishing the consensual lien.

Other Purposes

The credit union may also choose to obtain a signature even when not required by federal regulation, for example, to substantiate an audit trail, or to fulfill investor or state requirements. Most applications also have a statement that the information provided in the application is true and correct, and having the signature can make a difference in the credit union’s legal recourse in the event of fraud. If a credit union decides as a matter of policy to obtain application signatures for these purposes, the use of an e-signature as opposed to wet signature would be a risk-based decision. When it comes to legality and enforceability, however, either will suffice!

"Friday Fun: Regulatory Requirements for Online Account Openings"

Written by: Andre' B. Cotten, Regulatory Compliance Counsel

Greetings, Compliance Friends! Opening accounts online is a major convenience for members. However, for compliance officers, the online account opening process is riddled with potential pitfalls. For example, when and how does the credit union provide the account opening disclosures. Today's blog is meant to be a high-level review of some of the relevant requirements credit unions may want to consider when establishing online account opening policies and procedures.

Bank Secrecy Act

From a BSA standpoint, opening accounts online can represent risks related to a credit union's Customer Identification Program (CIP) and Know Your Customer requirements. Generally, a credit union's CIP program is based on its own risk assessment and not prescriptive requirements. Although, from a CIP perspective, members opening accounts online is generally considered higher risk. From NAFCU's understanding, many financial institutions utilize complex vendor software in order to ensure the CIP requirements are met when individuals seek to open accounts online.

The FFIEC BSA/AML exam manual discusses "non documentary" methods of verifying identity that may also be helpful to the credit union. Note, the BSA requires that the credit union know the member's identity with reasonable certainty and have the member's name, address, date of birth and identification number so that guides what needs to be verified.

NCUA

However, a consumer must fall within the field of membership before they can be admitted as a member in the credit union. This determination will depend on the credit union's statement of its field of membership, the clause of the statement relied on by the potential member, and the credit union's policies and procedures.

Note, Article II, Section 2 of NCUA's FCU Bylaws requires a member to sign an application for membership. The credit union might verify this language in its own bylaws, and if it does appear, consider electronic signatures under the E-SIGN Act or whether it will require a member to come in and provide a wet signature for the signature card and to establish insurance under Part 745.

As an additional reference, NCUA Opinion Letter 2004-0543 discusses electronic signatures in the membership context.

E-SIGN

The E-Sign Act requires credit unions to receive the member's affirmative consent to receive electronic records. See, 15 U.S.C. § 7001(c). . As an industry standard, it seems many credit unions require members to comply with the E-SIGN consent and procedures when registered for online banking to give legal effect to the disclosures transmitted to the members  through the online banking platform.

For more information, NCUA issued a Risk Alert soon after the E-SIGN Act became effective in March 2001. Here is an additional link for your reference: Consumer Compliance Outlook 4Q Article on ESIGN .

Regulation E

The determination whether a credit union is required to provide additional disclosures when a member establishes an account online depends on what other types of products or services the member is requesting. For example, if the member requests a debit card to execute electronic fund transfers, then the credit union would need to comply with Regulation E.

Regulation E requires initial disclosures be provided "at the time a consumer contracts for an electronic fund transfer service or before the electronic fund transfer is made involving the consumer's account." Below are some Regulation E links of interest:

• Section 1005.4 contains general disclosure requirements and references providing disclosures electronically (E-SIGN)
• Section 1005.7 contains requirements for initial account disclosures
• Supplement I to Part 1005 contains commentary to both sections that clarify requirements
• Appendix A contains Model Forms for Regulation E – Model Form A-2 applies to initial account disclosures

Truth in Savings

NCUA's Truth in Savings Rule has a similar requirement that specifies that credit union must provide account opening disclosures before the account is opened or a service is provide din connection with the account. See, 12 C.F.R. § 707.4(a)(1)(ii).

Here are some Truth in Savings links of interest:

• Section 707.4 contains the requirements for delivery or initial account disclosures
• Section 707.3 describes how disclosures can be provided electronically (i.e., following E-SIGN) and the relationship to Regulation E
• Appendix C contains commentary to both sections that clarify requirements
• Appendix B contains Model Forms for TIS – Model Form B-1 applies to initial account disclosures

Privacy

Under the GLBA, Initial Privacy Notices and Opt-Out Notices can be provided electronically. The notieces can be delivered pursuant to the E-SIGN Act, or  in certain circumstances, the notices can be delivered when the consumer is conducting transactions electronically. Under section 1016.9(b)(1)(iii), it is considered valid delivery to post the privacy notice on a website and require the consumer to acknowledge receipt of the notice as a necessary step to obtaining a particular financial product or service.

Another privacy consideration for online banking is the Children’s Online Privacy Protection Act (COPPA). COPPA imposes certain requirements on operators of websites or online services directed to children. Credit unions are subject to COPPA if they operate a website or online service directed to children, or have actual knowledge that they are collecting or maintaining personal information from a child online. Making COPPA determinations generally requires an analysis of the specific facts and circumstances surrounding a credit union’s online activities against the requirements of COPPA. Thus, a credit union may want to work with local counsel to see if COPPA applies. The FTC’s website has an excellent overview of COPPA.

State Law

Lastly, there may be state law considerations. An online banking agreement establishes contractual obligations between the credit union and the member. The credit union may consider consulting with local counsel to develop a comprehensive agreement that includes, but is not limited to: balance and transaction information; password creation and maintenance; access authorization; and technical assistance.

Additional Resources

Below are a few resources on authentication, cybersecurity, and other issues related to online banking:

• NCUA Official Sign is required on a webpage where a credit union accepts deposits or opens accounts under section 740.4(a). Downloadable graphics of the sign are available here.
• Regulation CC requires the credit union to provide disclosures relating to funds availability “before opening a new account,” under section 229.17.
• NCUA Letter to Credit Unions 2011-CU-09 discusses Online Member Authentication Guidance
• FFIEC IT Booklets provides guidance on cybersecurity considerations.

Wet vs. E-SIGN(atures): Balancing Efficiency & Enforceability

Written by Stephanie Lyon, Regulatory Compliance Counsel

Credit Unions are increasingly going paperless and implementing fully electronic membership and loan origination processes. While going digital can expedite the application process, reduce staffing costs and eliminate the need to maintain voluminous paper archives, there may be legal and compliance concerns with the enforceability of electronic signatures (e-signatures).

Both federal and state laws affect the validity and enforceability of e-signatures; the two governing bodies of law are the Electronic Signatures in Global and National Commerce Act (ESIGN) and the various state enactments of the Uniform Electronic Transactions Act (UETA). As of today, 47 states and the District of Columbia have enacted some version of UETA — notably missing are New York, Illinois and Washington.

Both ESIGN and the model UETA define an e-signature as “an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record.” 15 U.S.C. § 7001. An important provision of the federal and state law is that an e-signature “may not be denied legal effect, validity, or enforceability solely because it is in electronic form.” See, 15 U.S.C. § 7001 (a)(1)-(2). Keep in mind that ESIGN does not apply to all documents. The law contains an explicit exception for certain documents that states have historically required in paper format and to have wet signatures. Some examples may include:

• Foreclosures and Evictions
• Wills and Trusts
• Domestic Relations matters
• Court Orders

See, 15 U.S.C. § 7003. Additionally, some land recording offices continue to require wet signatures for deeds of trust and other security agreements pertaining to real property. With all of these state variations, credit unions may want to consult with local counsel regarding the enforceability of e-signatures and e-documents in the states it transacts business.

Apart from the exceptions noted, federal regulations that require a signature or a written document generally also state that an electronic version can meet the requirements as long as it is ESIGN compliant. For example, the Credit Card Act and its implementing regulations require young members to submit a written application and a signed agreement of a consigner, guarantor, or joint applicant who is at least 21 years old. See, 12 C.F.R. § 1026.51(b)-(ii)(A). The official interpretation explains that an electronic application and consent would meet the requirements of Regulation Z. See, 12 C.F.R. Pt. 1026, Supp. I, comment 1026.51(b) – 4. Hence the main concern is not whether you can use e-signatures, but rather what makes the e-signature enforceable.

The manner of evidencing the member’s intent to be bound to the terms and conditions of the contract is essential in the enforceability of both wet and e-signatures. See, NCUA Examiner’s Guide, Chapter 19. Neither ESIGN nor UETA recommend a specific technological standard for electronic signatures, hence the method of obtaining a signature or executing a contract may vary from credit union to credit union. Some legal enforceability and admissibility questions that a credit union may want to consider are — “Was the intent of the member to sign the document and be bound by the terms and conditions of the contract?” “Is the document an accurate representation of the original?” “Was the identity of the signatory established?” The process the credit union uses to obtain e-signatures should be able to answer these important legal questions. The credit union may also want to review applicable state law to ensure the digital process mirrors the enforceability requirements of wet signatures, as well as investor requirements, which may have their own provisions for the acceptability of e-signatures.

Finally, it is worth noting that the CFPB has been working on an “eClosing” project since 2015 that seeks to streamline the use of electronic documents. Here is the CFPB’s Press Release and the CFPB’s Report. NAFCU’s Regulatory Affairs team will alert our members if there are any new developments in this area.

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Tuesday, Aug.16 from 2:00pm to 3:30pm ET.

As the degree of balance sheet complexity increases, so should the amount of training provided to ALCO members. Attend this webcast to get enhanced training, gain a better understanding of the link between strategy and Asset Liability Management (ALM), and learn how ALM can be used to help you stay on top of the competition.

CFPB Issues Compliance Bulletin on Preauthorized Debit Transactions Under the Electronic Fund Transfer Act and Regulation E

Written by Shereefat Balogun, Regulatory Compliance Counsel

On November 23, the CFPB issued a compliance bulletin (Bulletin 2015-06) concerning the Electronic Fund Transfer Act (EFTA) and Regulation E requirements for obtaining a consumer’s authorization for preauthorized electronic fund transfers. In the bulletin, the CFPB observed that some entities are not fully complying with the requirements imposed by the EFTA and Regulation E. The bulletin primarily focuses on two areas: (i) obtaining the member’s authorization for preauthorized EFTs over the telephone; and (ii) providing a copy of the authorization to the member.

As you may know, Regulation E requires that preauthorized EFTs from a member’s account be authorized “only by a writing signed or similarly authenticated by the consumer.” Moreover, a copy of the authorization but be provided to the member. In the bulletin, the CFPB explains that a credit union may obtain a member’s authorization over the phone, provided that the requirements of the E-Sign Act are met. Specifically, the bulletin states that Regulation E may be satisfied if a member signs or similarly authenticates the authorization orally. For example, a member can authorize preauthorized EFTs by entering a code into their telephone keypad; or the credit union may record and retain the member’s oral authorization. In both instances, Regulation E is satisfied, provided the member intends to sign the record as required by the E-Sign Act. Note that the E-Sign Act prohibits the use of oral recordings as electronic records, where a law or regulation requires that information be provided to a consumer in writing. However, in the bulletin, the CFPB makes clear that the E-Sign Act’s restriction does not apply to Regulation E’s preauthorized EFT requirements because Regulation E does not specify that entities provide a writing to consumers when obtaining the authorization.

The bulletin also discusses Regulation E’s requirement for a credit union to provide a copy of an authorization for a preauthorized EFT to the member, noting that two of the most significant terms of an authorization are timing and the amount of the recurring transfers from the member’s account. The CFPB also provides an alternative to providing a copy of the authorization after its execution- a credit union can provide a confirmation form. For example, a credit union may provide a member with two copies of the authorization form, and ask the member to sign and return one and to retain the second copy.

Lastly, the CFPB makes clear that credit unions must obtain member authorizations before initiating preauthorized EFTs and provide a copy of that authorization to members. The CFPB encourages credit unions to provide a copy of the authorization to the member before the first preauthorized EFT is initiated.

 

FHA Makes Positive E-Signatures Change; Free Kick; ERM Webcast

Written by Ricardo Piñeres, Regulatory Compliance Counsel

With all of the new compliance requirements that have accompanied the start of 2014, it is easy to get trapped in a vortex of negativity.  Credit unions are struggling to keep up with the growing regulatory burdens, and many in our industry have suggested that instead of just adding new regulations, regulators should be looking to modernize some of their more outdated requirements.  Well, for those that have been clamoring for a step in the direction of modernity, I bring good news.  At the end of last month, the FHA announced that it would finally expand the list of documents for which it will accept electronic signatures!

Prior to this announcement, FHA only accepted e-signatures on third-party documents (i.e. sales contracts and other documents not under the lender’s control).  In addition to third-party documents, the new policy states that e-signatures are valid on the following documents:

• Origination;
• Servicing;
• Loss mitigation;
• FHA insurance claims;
• REO sales contracts; and
• Related addenda.

Lenders that choose to accept e-signatures may begin taking advantage of the FHA’s new policy immediately on both single family forward mortgages and reverse mortgages.  For the time being, the FHA will not be accepting e-signatures on the mortgage note, itself.  It is expected that they will begin accepting e-signatures on forward mortgage notes by the end of the year.

In order to take advantage of the FHA’s new policy, all lenders that submit electronically-signed documents must have specific technology and operational capabilities and controls, documented quality control processes, and the ability to adapt the electronic signature to FHA’s existing record retention processes.  Furthermore, any lender that chooses to take advantage of the FHA’s new policy must still comply with all of the requirements of the E-SIGN Act.  For more information on the requirements, credit unions should view FHA’s Mortgagee Letter 2014-03.

While this may not do much to ease the ever-growing regulatory burden on credit unions, it is heartening to see a government entity seeking to improve its processes.  I applaud the FHA for making it easier for lenders to work with them, and hope that they continue to streamline their processes.  Not only will this help lenders, but ultimately, it will help consumers seeking to take advantage of the FHA’s products.

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Free Kick. I am in the middle of a tense two weeks.  As a die-hard supporter of Arsenal, the schedule has put together a string of fixtures that will either make or break the Gunners’ season.  If Arsene Wegner and Company can survive these two weeks, then maybe I can dream of an end to the trophy drought.

Sadly, things did not get off to a good start over the weekend.  The drubbing at Anfield saw Arsenal play its worst game of the season (excluding the league opener to West Ham).  While Liverpool has been firing on all cylinders, I’m hoping that the embarrassment of this past weekend will fuel Arsenal to seek some revenge and move into the FA Cup Quarterfinals when they host Liverpool on Sunday.

Turning to the Premier League, thankfully, Chelsea dropped two points to West Bromwich in the waning minutes of yesterday’s match.  Therefore, Arsenal can go back to the top of the Premier League with a win later today against Manchester United.  ManU, frankly, has been mediocre to start 2014, so Arsenal need all three points if they are to truly contend down the stretch.

Lastly, the knockout stages of the UEFA Champions League get underway next week.  Arsenal was unable to win their group in the fall, so they have drawn Bayern Munich.  This is a repeat of last year’s Round of 16 matchup.  While Arsenal is a much improved squad this season, I see a similar result in our future with Bayern Munich coming away with a close win over the two-legged contest.

Hopefully, the loss to Liverpool at Anfield was just an aberration, and I can continue to dream of a trophy or two!  Go Gunners!

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Mortgage Periodic Statements & The E-SIGN Act; Key Takeaways from NAFCU's Webcast

Written by Steve Van Beek

One of the issues discussed last week at School and again on yesterday's webcast was the ability of credit unions to send mortgage periodic statements electronically without going through the full E-SIGN Act consent process.

Here is the language from new 12 CFR 1026.41(c):

"(c) Form of the periodic statement. The servicer must make the disclosures required by this section clearly and conspicuously in writing, or electronically if the consumer agrees, and in a form that the consumer may keep. Sample forms for periodic statements are provided in appendix H-30. Proper use of these forms complies with the requirements of this paragraph (c) and the layout requirements in paragraph (d) of this section." (Emphasis added).

The official staff commentary to 12 CFR 1026.41(c) has additional information:

"41(c) Form of the periodic statement.

1. Clear and conspicuous standard. The “clear and conspicuous” standard generally requires that disclosures be in a reasonably understandable form. Except where otherwise provided, the standard does not prohibit adding to the required disclosures, as long as the additional information does not overwhelm or obscure the required disclosures. For example, while certain information about the escrow account (such as the account balance) is not required on the periodic statement, this information may be included.

2. Additional information; disclosures required by other laws. Nothing in § 1026.41 prohibits a servicer from including additional information or combining disclosures required by other laws with the disclosures required by this subpart, unless such prohibition is expressly set forth in this subpart, or other applicable law.

3. Electronic distribution. The periodic statement may be provided electronically if the consumer agrees. The consumer must give affirmative consent to receive statements electronically. If statements are provided electronically, the creditor, assignee, or servicer may send a notification that a consumer's statement is available, with a link to where the statement can be accessed, in place of the statement itself.

4. Presumed consent. Any consumer who is currently receiving disclosures for any account (for example, a mortgage or checking account) electronically from their servicer shall be deemed to have consented to receiving e-statements in place of paper statements."  (Emphasis added).

As you can see, the commentary is extremely important. It clarifies that simple consent to electronic statements is sufficient (as opposed to the electronic consent required by the E-SIGN Act). It also clarifies that members who have consented to receive other disclosures electronically "shall be deemed to have consented" to receiving their mortgage periodic statement electronically.

Of course, the new periodic statement requirement only applies to credit unions that service 5000 or more mortgage loans (NAFCU log-in required). However, credit unions below the threshold - and, thus, not required to the new periodic statement - can still use the commentary as a guide to the delivery of any mortgage servicing information they currently send to members.

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Two Important Notes.  

1. Limited Scope. This does not open the flood gates with regard to the E-SIGN Act. This flexibility applies solely to closed-end loans secured by a dwelling. It does not extend to HELOC statements which must follow 12 CFR 1026.7. The flexibility also does not extend to other products (checking accounts, credit cards, etc.). 
2. Training Staff. The E-SIGN Act has already caused numerous headaches for compliance officers. This flexibility for mortgage periodic statements (simple consent versus full E-SIGN Act consent) has the potential to amplify this confusion.

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Yesterday's webcast included a detailed discussion of this issue as well as many of the other "under the radar" issues in the new mortgage regulations. Below you can find the Key Takeaways from the webcast (click on the photo of the slides):

Of course, the webcast is available for on-demand purchase. If you are following the Key Takeaways from School and putting together a mortgage implementation team at your credit union, this would be a good webcast to watch together to ensure everyone is on the same page.

Research Tips for the New Mortgage Rules; NAFCU Webcast on New Rules

Written by Steve Van Beek

Over the past two months, we've written numerous blog posts on the new mortgage regulations. Included a few posts which contain research tips on how to track and find the new requirements. Below is a consolidated listing of those blog posts so that you have them in one central location:

• February 5th - CFPB Rules in the Federal Register; NAFCU Rule Summaries

• February 11th - Finding the New Requirements in the Electronic Code of Federal Regulations

• February 13th - NAFCU's Scope & Applicability Charts for the New Mortgage Rules

• February 22nd - Finding the New Reg Z & Reg X Requirements in the Electronic Code of Federal Regulations

• March 4th - Research Tip: Tracking Rulemakings in the Federal Register

Hopefully you find the above useful. We're always looking for blog ideas - so just let us know if there is something you'd like to see us cover in a future blog post.  

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NAFCU Webcast on Mortgage Rules. NAFCU's compliance team will be conducting a webcast tomorrow on a few of the "under the radar" issues from the CFPB's new mortgage rules. We'll discuss:

• Details on homeownership counseling requirements;

• Mortgage loan originator qualifications, certifications and training requirements;

• New appraisal disclosure and delivery requirements;

• The small creditor exemption for the escrow requirement for higher-priced mortgage loans; and

• Other frequently-asked-questions regarding the new rules.

We'll also provide a "look ahead" at what other issues the CFPB is targeting in 2013.  

Registration is still open - Sign Up Today!  Remember, NAFCU's webcasts are available to anyone and everyone.  

NAFCU's Regulatory Compliance School Just Got Better - Regulatory Update Day

Written by Steve Van Beek

We've heard you!  For the past couple of years, we've received the following feedback about NAFCU's Regulatory Compliance School (paraphrased, of course):

"School is great and provided a solid foundation for understanding the regulatory requirements credit unions face on a daily basis.  BUT, the rules are changing so fast that it would be great to receive updates on what has just changed and what is changing next."

With this in mind, we've created Regulatory Update Day at NAFCU's 2013 Regulatory Compliance School (March 18-23 in National Harbor, Maryland).  

Regulatory Update Day (Thursday, March 21st) will provide:

• A clear understanding of what changes NCUA has in store for 2013 – including their Exam Focus

• An overview of the scope and applicability of the CFPB’s seven new mortgage regulations*

• A detailed look at the CFPB’s Qualified Mortgage/Ability-to-Repay requirements*

• Answers to Frequently Asked Questions on the mortgage rules from NAFCU’s compliance team*

• Insight from credit union attorneys and practitioners on how best to set up your implementation strategy

You can find more information on Regulatory Update Day here.  The three sessions with the "*" are sessions that are also part of NAFCU's Mortgage Reform Webcast Series.

The other 4 days of Compliance School will remain the same as will the opportunity to take the NAFCU Certified Compliance Officer (NCCO) exams.  Good luck!  

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And, all attendees at NAFCU's 2013 Regulatory Compliance School will receive NAFCU's 2013 GPS (coming soon!) as well as NAFCU's Scope & Applicability Charts.

Remember:  You do not need to be a NAFCU member credit union to attend NAFCU's conferences or webcasts.  In fact, you don't even need to work at a credit union.  Each School usually features a handful of consultants, vendors and other credit union "peeps" who support credit unions - in one way or another - on a daily basis.      

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Mortgage Periodic Statements & The E-SIGN Act: Part 3

Written by Steve Van Beek

Yesterday we blogged further on mortgage periodic statements and the E-SIGN Act.  We noted that the CFPB's mortgage servicing proposal could change when it is finalized.  In fact, the CFPB specifically asked for comments on the delivery of mortgage statements electronically.  As we noted yesterday, NAFCU supported electronic delivery in our comment letter.

Well, this section of the CFPB's proposed rule is actually a very interesting read - including this portion:

"The Bureau seeks comment as to whether additional requirements should be placed on when a consumer consents to receiving electronic statements. For example, must consent be obtained or confirmed electronically in a manner that demonstrates that the consumer is able to access information electronically? The Bureau also seeks comment on whether consumers who already receive electronic statements should be deemed as having consented to receive statements electronically. Additionally, the Bureau seeks comment on whether consumers who have auto-debit set up to deduct payments from their bank account should be deemed as having consented to receive statements electronically."  (Emphasis added).

As this paragraph indicates, the CFPB is looking at a wide range of options and solicited comments from interested parties.  The CFPB is looking for comments on whether the full E-SIGN Act consent process should apply regardless of the plain language of Dodd-Frank and TILA.  They are also seeking comments on whether a member's past consent to electronic statements - such as for their credit card or checking account statements - should be sufficient evidence to allow credit unions to send the mortgage periodic statement to existing members.  Additionally, that last option of electronic payments equaling consent for electronic statements is certainly an interesting approach.   

Again - it will be very interesting to see how the CFPB analyzes the comment letters from all interested parties and what the final rule will look like.  We'll know by January 21, 2013.  

Mortgage Periodic Statements & The E-SIGN Act: Part 2

Written by Steve Van Beek

A couple of weeks ago we blogged on the CFPB's mortgage servicing proposal and the ability to send mortgage periodic statements electronically - if the proposal is adopted as proposed - without following the full E-SIGN Act consent process.  Here was a snippet from that post:

"Thus, if the CFPB's proposal is adopted as is - credit unions would have flexibility to send mortgage periodic statements electronically without following the full E-SIGN Act consent process.  A member's authorization - properly documented by the CU - would be sufficient."

NAFCU's comment letter showed strong support for this ability to have member's sign up for mortgage statements without following the full E-SIGN Act process:

"NAFCU does support allowing credit unions to be able to send notices electronically without following the E-SIGN Act. Under the proposal, the periodic statement may be transmitted in writing or electronically; thus, a credit union would not need to obtain a person’s signature as required by the E-SIGN Act. NAFCU strongly supports this proposal and urges the CFPB to pursue legislation that would amend the E-SIGN Act to remove the outdated and onerous requirement of obtaining the borrower’s signature in order to transmit communications electronically."

The next question is - what about members with existing mortgages?  How does the credit union obtain a member's authorization or opt-in for electronic periodic statements?  

Here is from NAFCU's comment letter:

"NAFCU requests that the CFPB develop a model opt-in form that credit union can send to their members to facilitate member acceptance of electronic statements. This is especially important considering the new periodic statement requirement would apply to existing mortgages as well as new mortgages."

A model opt-in form that credit unions could send to existing members would help both credit unions and their members.  Members would be able to simply agree to "go paperless" in response to the monthly statement they are sent.  They could also opt-in for electronic periodic statements by providing the indication inside the CU's online banking platform.  

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Of course, this is still a proposal and the final rule could differ.  Additionally, keep in mind that this flexibility for member agreement for electronic delivery of statements without the full E-SIGN Act consent process does not necessarily extend to other proposed notices that are being added to Reg Z and RESPA.