On May 13, 2020, the Consumer Financial Protection Bureau (CFPB) issued three guidance documents highlighting existing regulatory flexibility and responsibilities for financial institutions when interacting with consumers in the context of the COVID-19 pandemic:
- A statement notifying credit card issuers and other open-end creditors that the CFPB will provide supervision and enforcement flexibility during the pandemic with respect to the timeframe for creditor completion of billing error investigations under Regulation Z;
- FAQs on existing flexibility in Regulation E and Regulation DD for providers of checking, savings, or prepaid accounts; and
- FAQs on existing flexibility for open-end credit in Regulation Z.
This client alert provides an overview of the CFPB guidance.
1. Statement on Billing Error Resolution
The Statement on Supervisory and Enforcement Practices Regarding Regulation Z Billing Error Resolution Timeframes in Light of the COVID-19 Pandemic provides temporary relief to ensure that creditors are able to accurately resolve consumer billing error claims during the crisis. The Statement also highlights creditors' existing billing error resolution responsibilities.
The CFPB acknowledges that some creditors, along with merchants and other entities that provide information to aid creditor billing error investigations, may be experiencing operational disruptions due to the pandemic, and that these disruptions could adversely affect the ability of creditors to accurately investigate consumer billing error claims in a timely manner. As a result, during the pandemic, the CFPB has indicated that it will provide supervisory and enforcement flexibility as to the timeframe within which creditor investigations must be completed (see 12 C.F.R. § 1026.13(c)). Specifically, the CFPB says it intends to consider the creditor's circumstances and does not intend to cite a violation or bring an enforcement action against a creditor that takes longer than the maximum timeframe permitted by Regulation Z to investigate and resolve a billing error, as long as the creditor can demonstrate that it has made a good faith effort to obtain the necessary information and make a determination as quickly as possible, and the creditor complies with all other statutory and regulatory obligations pending error resolution. According to the Statement, good faith efforts include the creditor obtaining a reasonable estimate from the merchant of when it will be able to respond to a request for information, or determining reasonably that the merchant is unable to respond at the time.
The CFPB also emphasizes that it expects creditors to continue to comply with 12 C.F.R. § 1026.13(d), under which, pending error resolution: (1) the consumer does not need to pay any portion of any required payment that the consumer believes is related to the disputed amount (including related finance or other charges); (2) neither the creditor nor its agent may, directly or indirectly, make or threaten to make an adverse report about the consumer's credit standing, or report that an amount or account is delinquent because the consumer did not pay the disputed amount or related charges; and (3) a creditor may not accelerate any part of the consumer's indebtedness or restrict or close a consumer's account solely because the consumer has exercised, in good faith, billing error resolution rights provided by Regulation Z.
In light of circumstances surrounding the pandemic, the CFPB encourages creditors to be flexible in deciding whether to apply Regulation Z's 60-day timeframe for a consumer to provide a billing error notice to the creditor after an error appears on the first periodic statement.
The statement does not address error resolution under Regulation E.
2. Regulation E and Regulation DD FAQs
The Payments and Deposits Rules FAQs Related to the COVID-19 Pandemic provide three FAQs that are intended to remind providers of checking accounts, savings accounts, or prepaid accounts that, under both Regulation E and Regulation DD, providers can change account terms without advance notice to consumers where the change in terms is clearly favorable to the consumer. Further, such changes in terms, including reductions in ATM fees or account maintenance fees, may be implemented immediately.
For example, following the Federal Reserve Board's April 28, 2020 interim final rule eliminating the six-per-month limit on transfers from savings accounts, the CFPB says an institution may discontinue transfer fees on savings accounts without providing advance notice.
The CFPB also states that, while many financial institutions already waive or reduce certain fees upon consumer request, institutions may choose to implement fee waivers without request during the pandemic.
3. Regulation Z FAQs
The Open-End (not Home-Secured) Rules FAQs Related to the COVID-19 Pandemic provide three FAQs regarding existing flexibilities for open-end credit in Regulation Z.
Under the first FAQ, the CFPB reminds creditors of the limitations on the requirement for advance notice of a change in terms under Regulation Z, and that the advance notice requirements do not apply in specific circumstances, which may help consumers in need. For example, the CFPB notes that there is no advance notice requirement if a creditor chooses to extend the grace period of a credit card account. Similarly, advance notice is not required if a creditor chooses to reduce any component of a finance or other charge, including a reduction at the outset of a hardship arrangement.
Under the second FAQ, the CFPB reminds creditors that where a temporary hardship arrangement is in place, no advance notice to the consumer is required to increase charges or payments at the end of the arrangement, provided that notice was provided at the beginning of the arrangement that the increase would occur. The FAQ clarifies that this is only the case where the terms that apply at the end of the arrangement are as favorable as the terms that applied prior to the arrangement. However, there are limitations on the existing flexibility that is provided by Regulation Z in this respect. Specifically, the exception only applies to a workout or temporary hardship arrangement, and does not apply to other accommodations that may be offered by card issuers during this difficult time.
Finally, in the third FAQ, the CFPB encourages creditors to communicate proactively with consumers during the pandemic, for example by including additional information with periodic statements to help educate consumers about common problems and potential resources to assist with resolution. The CFPB adds that creditors may speed communication with consumers by using electronic means to deliver required disclosures, subject to the provisions of the E-SIGN Act. While the CFPB provides one example of how card issuers can meet the E-SIGN consent requirements for delivering consumer disclosures electronically, the CFPB does not address directly the challenges that confront card issuers when obtaining E-SIGN consent, particularly in this physically distant environment.
Originally published 29 May, 2020
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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