[Brent V]

The following response is from Reg DD expert Rebekah Leonard:

Yes. Notice is still required. Reg DD 1030.5(a) mandates 30 days ADVANCE NOTICE of “any change in a term required to be disclosed under Sec. 1030.4(b)… if the change may reduce the annual percentage yield or adversely affect the consumer.” This advanced notice requirement, therefore, is limited to changes to the disclosed items of 1030.4(b). See https://www.bankersonline.com/regulations/12-1030-004 for the full description of such items.

Now, if the changes to your Terms and Conditions (T&Cs) are not causing any rate increases or adverse effect to any of these items, then you are not required by Reg DD to send ADVANCE NOTICE of the change.

This does not mean “no notice” is permissible for other changes. That would be a misapplication of the regulatory context. The context of paragraph 1030.5(a) is clearly about “advance notice”. The next paragraph 1030.5(b) broadens this context, by describing “No notice required” at all, but that is a very short list limited to certain variable rate changes, check printing fees, or changes to time accounts with a maturity of 1 month of less.

Taken in totality, this means that any other change in terms still requires notification to the account holder. This fits with the spirit and intent of the Truth in Savings Act (the law behind Reg DD) which is all about truthfully describing deposit account terms to keep consumers informed.

Disclosing updated T&Cs also keeps you on the right side of any UDAP claims or legal challenges to your contract. The T&Cs are the legal deposit account contract with your customer, and undoubtedly your existing T&Cs include some sort of “Amendments” section that includes giving “reasonable notice”. That language contractually obligates to you do so.

[Brent V]

I reached out to Reg DD expert, Rebekah Leonard, and the following is her response:

This is not a Reg DD issue, as Reg DD does not speak to error resolution at all. (In fact, it doesn’t even require you to send a statement! It only prescribes certain account disclosures if you do send one, and error resolution is not part of it. That falls under Reg E, which only covers electronic transactions.)

Check matters fall under UCC rules (which are governed by state law) or contract law. UCC 4-406 actually grants a customer one year after the statement date to discover and report an unauthorized signature or alteration. https://www.law.cornell.edu/ucc/4/4-406 Whether or not your state has adopted this provision of the UCC without revision is a legal matter for bank counsel to guide you upon. The same is true for guidance on the necessary notice to give for altering a contractual agreement (your Terms and Conditions) in your state. In short, these are legal matters, not regulatory compliance matters. Contact bank counsel for assistance. Good luck!

[Brent V]

From MLA expert, Rebekah Leonard:

Good question! Residential mortgages are fully exempt from MLA coverage, which means any dwelling-secured loan would NOT be subject to MLA requirements. See Exception #2, here: eCFR :: 32 CFR 232.3 — Definitions. :

(2) Exceptions. Notwithstanding paragraph (f)(1) of this section, consumer credit does not mean:

(i) A residential mortgage, which is any credit transaction secured by an interest in a dwelling, including a transaction to finance the purchase or initial construction of the dwelling, any refinance transaction, home equity loan or line of credit, or reverse mortgage;

Also, the CFPB has a great info sheet and handy flow chart, here: cfpb_MLA_hybrid_chart (consumerfinance.gov)

In your situation, so long as your collateral does NOT include the residence, you are exempt from MLA. You can always voluntarily choose to extend MLA rights in such a situation, but you are not required to do so.

[Brent V]

I spoke with appraisal expert, Eric Collinsworth, and he said this is tricky and has several moving parts. I will contact you privately to put you in touch with Eric.

[Brent V]

Response from @jholzknecht:

In a situation involving joint applicants, the disclosure only needs to be delivered to one applicant, unless the transaction is subject to the right of rescission, in which case each applicant that has the right to rescind must receive a copy of the disclosure.

[Brent V]

@tressa, could you provide us with some of the additional information that @pparks mentioned?

[Brent V]

From Regulation CC expert Deb Crawford of Gettechnical, Inc: “If you have a belief that it is fraud due to markings on the check, you could hold it. And you have customer conversation.”

[Brent V]

From Regulation E expert Deb Crawford of Gettechnical, Inc: “Yes, no overdraft fees of any kind.”

[Brent V]

We received the following response from one of our experts, Deb Crawford:

My opinion is that it is excluded from Reg CC like a Canadian check. It is its own government.

[Brent V]

I can offer a few references from the Commentary to Reg E that partially address this issue. However, I STRONGLY encourage you to consult with an OCC Compliance Examiner for their insights and concerns. In additional to being compliant with Reg E and the opt-in provisions for overdraft protection programs, there is also the potential for UDAPP citations if the consumer can’t make an informed decision based on the information provided at account opening. There are several sections of 1005.17 that apply to the opt-in process that you’ve outlined. Here is one basic requirement in 1005.17(b)(5):

5. Implementing opt-in at account-opening. A financial institution may provide notice regarding the institution’s overdraft service prior to or at account-opening. A financial institution may require a consumer, as a necessary step to opening an account, to choose whether or not to opt into the payment of ATM or one-time debit card transactions pursuant to the institution’s overdraft service. For example, the institution could require the consumer, at account opening, to sign a signature line or check a box on a form (consistent with comment 17(b)-6) indicating whether or not the consumer affirmatively consents at account opening. If the consumer does not check any box or provide a signature, the institution must assume that the consumer does not opt in. Or, the institution could require the consumer to choose between an account that does not permit the payment of ATM or one-time debit card transactions pursuant to the institution’s overdraft service and an account that permits the payment of such overdrafts, provided that the accounts comply with § 1005.17(b)(2) and § 1005.17(b)(3).

Section 6 of the commentary explains that
6. Affirmative consent required. A consumer’s affirmative consent, or opt-in, to a financial institution’s overdraft service must be obtained separately from other consents or acknowledgements obtained by the institution, including a consent to receive disclosures electronically. An institution may obtain a consumer’s affirmative consent by providing a blank signature line or check box that the consumer could sign or select to affirmatively consent, provided that the signature line or check box is used solely for purposes of evidencing the consumer’s choice whether or not to opt into the overdraft service and not for other purposes. An institution does not obtain a consumer’s affirmative consent by including preprinted language about the overdraft service in an account disclosure provided with a signature card or contract that the consumer must sign to open the account and that acknowledges the consumer’s acceptance of the account terms. Nor does an institution obtain a consumer’s affirmative consent by providing a signature card that contains a pre-selected check box indicating that the consumer is requesting the service.

There are MANY examples in 1005.17(b)(9) that outline fees that may be charged or NOT charged. However, I didn’t see an example that addressed the “effective date” or “waiting period” example.

The most conservative approach may be to refrain from charging a fee during the waiting period. However, this is just a personal opinion.

Susan Costonis, CRCM

[Brent V]

Response from Rebekah Leonard:

1.Are there any compliance issues with doing “small business spotlight” for businesses in our community on our Facebook page? Basically a Facebook post highlighting a business in our community each month with their consent.

For any business that does not provide mortgage settlement services, there are no concerns, as since you are obtaining the business owner’s consent.
However, for mortgage settlement service providers (think title companies, realtors, brokers, attorneys, appraisers, inspectors, insurers, etc.), things are murkier. RESPA Section 8 issues to consider:
– The “spotlight” exposure is free advertising for the business. As such, it is a thing of value, and it cannot be given in exchange for any referral. To steer clear of this, ask if all three of these things are present:
o A thing of value: Yes
o An agreement or understanding: Yes (the business is consenting to the FB spotlight)
o A referral. Here’s the tricky one. You must make sure there is no explicit or implied expectation that the company will refer business to your bank because you featured them in the spotlight.

– Applicability of MSA rules. Marketing Services Agreements (MSAs) are agreements that involve an arrangement where one entity agrees to market or promote the services of another and receives compensation in return. (See the RESPA FAQ starting on page 176 of my manual.) If you are not receiving any compensation (think about “compensation” broadly here) for the spotlight, then you do not have an MSA and do not need to consider the rules for it.
In short, you have a risk decision to make. The most conservative approach is to simply not spotlight a business that provides settlement services. That avoids the RESPA landmine altogether. However, if you wish to do so, I suggest you broadly spotlight many different companies for free (to reinforce that there is no favoritism shown for any particular settlement service provider), and for those providing settlement services, make sure everyone is very well aware that there are no referral strings attached.

2.Can we offer a rebate to a customer for signing up for e-statements? Example, $10 if a customer signs up to get electronic statements instead of getting a mailed copy.

Yes! Paying a $10 (or more!) bonus as an incentive for e-statement enrollment is not a Reg DD “bonus” in any way. 1030.2(f) defines a bonus as a “premium, gift, award, or other consideration worth more than $10 (whether in the form of cash, credit, merchandise, or any equivalent) given or offered to a consumer during a year in exchange for opening, maintaining, renewing, or increasing an account balance.” E-statement enrollment does not involve any of these things. Neither Reg DD’s bonus rules nor IRS interest reporting rules apply.

• This reply was modified 2 years, 5 months ago by Brent V.

[Brent V]

I reached out to Deb Crawford, a very experienced Reg CC expert, and she responded with the following:

“You cannot place a case by case, but you may place an exception hold.”

[Brent V]

From Reg E Expert Terri Sands: Yes. You can set a lower limit for minors and just like the limits you have in place today, you do not need to state those in your account disclosures. Since you don’t provide limits in your account disclosures, you would not need to address limits in an advance notice.

[Brent V]

As you noted, Section 1024.17(I)(1) includes the “at a minimum” comment. Section 1024.17(I)(3) specifically allows the statement to be delivered to the borrower with additional material. One comment seems to allow additional content on the statement, the other seems to allow additional information with the statement. I believe extra caution is needed when the additional content appears on the statement. Make sure the additional information doesn’t obscure the required content of the annual statement.

[Brent V]

Answer provided by Susan Costonis:

Thanks for posting your questions regarding a new overdraft protection product. It’s difficult to address these issues without some additional information about the existing product. If your current program is an ad hoc program AND IF your regulator is the FDIC they provided detailed information about overdraft guidance; here’s a link to the 2014 Exam procedures; see comments about the “ad hoc” programs are on page V-14.5 : https://www.fdic.gov/resources/supervision-and-examinations/consumer-compliance-examination-manual/documents/5/v-14-1.pdf
I strongly recommend that you compare the proposed “new product” to these requirements if the FDIC is your regulator.

This is a link to the interagency Guidance on Overdraft Protection Programs that was released by all regulators: https://www.occ.gov/news-issuances/federal-register/2005/70fr9127.pdf
This is link to an overview: https://www.occ.gov/news-issuances/bulletins/2005/bulletin-2005-9.html

It’s critical that you contact YOUR primary regulator for guidance on the requirements to transition from the current ODP product to a new program. In response to the first question, sending a new disclosure is absolutely required. Have these customers ALL signed the A-9 Model consent form for Overdraft Services? Here is a link to the form: https://www.consumerfinance.gov/rules-policy/regulations/1005/a/#ImageA9

It’s difficult to comment on the 2nd question regarding the 30-day notice without knowing the terms of the EXISTING product and disclosure. Please review this with your regulator.

The qualifications for the new product weren’t included in your question. Please discuss this with your regulator. Here are a few thoughts about the situation. While Regulation B defines credit and consumer credit broadly enough to include credit union bounce protection and overdraft programs within its scope, the rule also contains a number of exceptions from various provisions for incidental credit including the requirement to provide adverse action notices. See, 12 C.F.R. 1002.3(c)(2)(vi). The term incidental credit is defined as an extension of credit that is not made pursuant to a credit card agreement, that is not subject to a finance charge, and that is not payable by agreement in more than four installments. See, 12 C.F.R. 1002.3(c)(1). Since most overdraft charges are not considered finance charges, it may not be necessary to provide an adverse action notice under Regulation B. See, 12 C.F.R. 1026.4(c)(3). That being said, if the financial institution denies an overdraft as part of an overdraft line of credit program, there may be an obligation to provide an adverse action notice if one would otherwise be required since fees related to overdraft lines of credit are typically considered finance charges.

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