On May 13 the Consumer Financial Protection Bureau (CFPB) published three Frequently Asked Questions (FAQs) regarding open-end (not home-secured) rules related to the COVID-19 pandemic. The FAQs are “compliance aids,” which do not have the weight of the law or the regulations.
The first FAQ addresses changes to account terms. The answer indicates that a creditor may change terms on an open-end account, although most significant changes in terms require advance notice. It clarifies that the advance notice requirement does not apply to specific circumstances that may help consumers in need. For example:
- While a creditor generally must provide the consumer with written notice at least 45 days prior to a significant change in terms, there is no advance notice requirement should a creditor choose to extend an account’s grace period.
- Likewise, there is no advance notice requirement should a creditor choose to reduce any component of a finance or other charge, which might provide immediate relief for consumers.3 Further, if a creditor indicates at the outset of a temporary hardship arrangement that it is temporarily reducing a consumer’s APR for the duration of the hardship arrangement, the creditor would not need to notify the consumer prior to making this reduction.
The second question explores advance notice when hardship relief results in an increase in charges or payments that will follow completion of, or failure to complete, the arrangement.
- The CFPB explains that a creditor that enters into a temporary hardship arrangement with a consumer by telephone can put the relief in place after providing the consumer with an oral disclosure of the terms of the arrangement including those that will apply at the end of the arrangement, so long as the creditor mails or delivers a written disclosure of those terms to the consumer as soon as reasonably practicable after the oral disclosure is provided.
- In order for a creditor to take advantage of this flexibility to avoid advance written notice, the terms that begin to apply at the end of the hardship arrangement must be as favorable to the consumer as the terms that applied prior to the beginning of the hardship arrangement.
- While not required, creditors may remind consumers as the forbearance period nears its end, so consumers may prepare for the resumption of prior terms, or if necessary, contact the creditor. Such reminders may help reduce consumer confusion and complaints.
The final FAQ offers suggestions on other ways open-end creditors can assist consumers during the pandemic. The CFPB explains that as in-person interaction continues to pose challenges, telephone and consumer response resources may be strained for some creditors.
- Communicating in advance with consumers, before they may encounter unexpected problems, may help educate them with respect to common problems and potential resources to help solve such problems.
- These communications might also highlight how consumers may use online resources or email to communicate with the creditor.
- Creditors might consider adding additional communications or materials when sending existing periodic statements.
Creditors may also be able to expedite communication with consumers by using electronic means to deliver required disclosures. Disclosures may be provided in electronic form, subject to compliance with consumer consent and other applicable provisions of the E-SIGN Act. The E-Sign Act does not permit a consumer to consent orally to electronic provision of written disclosures. However, creditors could obtain a consumer’s email address over the phone and contact the consumer through the provided email address to obtain consent by, for example, providing a hyperlink through which a consumer might agree to electronic disclosure.