On June 3, 2020 the Consumer Financial Protection Bureau (CFPB) issued a Statement on Supervisory and Enforcement Practices Regarding Electronic Credit Card Disclosures in Light of the COVID-19 Pandemic.
The Issue
Where underlying law, such as Regulation Z, requires a written disclosure to a consumer, the Electronic Signatures in Global and National Commerce Act (E-Sign Act) allows the disclosure to be provided electronically subject to certain conditions, including consumers’ consent–commonly known as “E-Sign consent.”
- Some firms have observed that obtaining E-Sign consent can result in longer telephone transactions, dropped or transferred calls, and additional calls.
- For example, an issuer’s normal practice for obtaining E-Sign consent during a phone call might be to have a consumer, on the consumer’s computer, click a link in an email sent from the issuer so that the consumer may provide consent. That may take time or cause disruption as the consumer shifts to another communications channel (the computer) without dropping the phone call. And if the consumer cannot access email during the phone call, the consumer would need to access the issuer’s email later, potentially requiring the consumer to call the issuer a second time to finish the transaction, thereby reentering a phone queue. Obtaining E-Sign consent may thus delay assistance to consumers seeking relief.
The Requirement
Regulation Z generally requires that credit card issuers provide disclosures to consumers in writing. Where underlying law, such as Regulation Z, requires a written disclosure to a consumer, the consumer consent provisions of the E-Sign Act allow the disclosure to be
provided electronically subject to several requirements, such as:
- First, the issuer must obtain a consumer’s affirmative consent to the electronic provision.
- Second, the issuer must provide certain disclosures to the consumer prior to obtaining the consumer’s consent.
- Third, the consumer must “consent electronically, or confirm his or her consent electronically, in a manner that reasonably demonstrates that the consumer can access information in the electronic form that will be used to provide the information that is the subject of the consent.” This third requirement, combined with another provision that states that oral communications are not electronic records for purposes of the E-Sign Act’s consumer disclosure provisions, precludes entities such as card issuers from obtaining a consumer’s consent orally to electronic delivery of written electronic disclosures.
CFPB’s Response
The CFPB’s statement provides temporary and targeted flexibility for credit card issuers regarding electronic provision of certain disclosures required to be in writing during this pandemic.
- The Statement pertains to oral telephone interactions where a card issuer may seek to open a new credit card account for a consumer, to provide certain temporary reductions in APRs or fees applicable to an existing account, or to offer a low-rate balance transfer.
- In these instances, the CFPB does not intend to cite a violation in an examination or bring an enforcement action against an issuer that during a phone call:
- Does not obtain a consumer’s E-Sign consent to electronic provision of the written disclosures required by Regulation Z, so long as the issuer during the phone call obtains both the consumer’s oral consent to electronic delivery of the written disclosures and oral affirmation of his or her ability to access and review the electronic written disclosures.
- Takes reasonable steps during the phone call to verify consumers’ electronic contact information. For example:
- If during a phone call a consumer provides an issuer with the consumer’s email address, the Bureau expects that the issuer will confirm the correctness of the consumer’s email address, such as by clearly and understandably reading the email address back to the consumer so that the consumer can verify its correctness.
- If an issuer already haves an email address for the consumer on file the issuer, during the phone call, clearly and understandably states that on-file email address to the consumer so that the consumer can verify its accuracy.
Note: The CFPB does not intend to apply this flexibility to other requirements of Regulation Z.
Author’s Concerns
- The CFPB states this guidance is temporary, but does not provide an ending date for the temporary guidance.
- The statement does not indicate the position of other agencies, such as the FDIC, OCC and the Federal Reserve on this issue. Will the other agencies provide the same flexibility or cite the violations?
- The statement does not provide any protection against civil liability. Consumers can sue.
We suggest all banks follow existing procedures and to comply fully with all requirements of Regulation Z and the E-Sign Act.