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#1749024 - 10/12/12 06:53 PM E-statements
019lgoforth Offline
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Our bank is considering requiring e-statements on all accounts and if the customer chooses not to receive e-statements they will be charged for a paper statement. Our bank is also considering e-notices for loans (past due, etc), DDA (overdrafts)and annual privacy notices. We will have to obtain customer authorization for both e-statements and e-notices prior to them being sent. I am concerned that an examiner may have a problem with us requiring e-statements on all accounts and charging for paper statements by possibly citing a UDAAP violation unless we have an exception for the elderly. Could someone please discuss these issues and how our bank can address these and be in compliance?

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eBanking / Technology
#1749070 - 10/12/12 08:29 PM Re: E-statements [Re: 019lgoforth]
Andy_Z Offline
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You are not requiring them, you are offering two products and they are priced differently to allow for the additional costs in paper statement prep and delivery.

If you say you are requiring e-statements, you will have problems because you can't make e-disclosure (under E-SIGN) a requirement. There has to be an option to revert to paper.

You are providing options and they are cost based.
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#1749127 - 10/13/12 12:47 AM Re: E-statements [Re: 019lgoforth]
Richard Insley Offline
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Originally Posted By: 019lgoforth
all accounts
I hope you mean all new accounts. You cannot cram down e-delivery for existing accounts.
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#1749617 - 10/16/12 06:07 PM Re: E-statements [Re: Andy_Z]
banjo Offline
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Regulation E 1005.9 requires periodic statements for accounts with electronic fund transfers. 1005.5 requires the statements be in writing unless ESign is followed. If the customer refuses to sign up for estatements under ESign procedures, wouldn't we be required to mail paper statements to him at no charge?

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#1749854 - 10/17/12 02:59 PM Re: E-statements [Re: Richard Insley]
BetsyS Offline
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Originally Posted By: Richard Insley
Originally Posted By: 019lgoforth
all accounts
I hope you mean all new accounts. You cannot cram down e-delivery for existing accounts.


Could you institute a fee for paper statements on existing accounts? With the proper change interms notification, of course.
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#1750117 - 10/17/12 10:16 PM Re: E-statements [Re: 019lgoforth]
Andy_Z Offline
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Help me out, where does it say "written" or "in writing" for periodic statements? (1005.05 is about issuance of access devices.)

Certainly you can charge for paper statements where e-statements are at a lower cost or no cost. I've seen nothing against that and your costs are higher with paper.

Remember too that under E-SIGN a person has the ability to withdraw consent and you have disclosed this to them, along with the consequences. What else do you tell the person who says they lost their job, their PC was stolen and they have no means to review e-statements?
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#1750236 - 10/18/12 02:32 PM Re: E-statements [Re: Andy_Z]
Richard Insley Offline
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Originally Posted By: Andy Z
Help me out, where does it say "written" or "in writing" for periodic statements?
Huh? Is this a trick question?...OK, I'll bite.

Regulation E has always said:
"Disclosures required under this part shall be clear and readily understandable, in writing, and in a form the consumer may keep." (Section 1005.4, general disclosure requirements)

and

"For an account to or from which electronic fund transfers can be made, a financial institution shall send a periodic statement for each monthly cycle in which an electronic fund transfer has occurred; and shall send a periodic statement at least quarterly if no transfer has occurred. (Section 1005.9(b), receipts at electronic terminals; periodic statements)

Regulation DD has always said:
Depository institutions shall make the disclosures required by §§ 230.4 through 230.6 of this part, as applicable, clearly and conspicuously, in writing, and in a form the consumer may keep. (Section 1030.3(a), general disclosure requirements, form)

and

If a depository institution mails or delivers a periodic statement, the statement shall include the following disclosures: (APY, amount of interest, etc.) (Section 1030.6(a), periodic statement disclosures, general rule)

Although there's no direct connection, it's highly likely that accounts for which e-statements are offered will also feature debit cards and other types of EFT services that will trigger coverage of Regulation E. Once Reg. E requires a periodic statement, Reg. DD piles on and demands additional content.

All of the periodic disclosures required by these two regulations must be provided "in writing." Before 2000, that meant paper statements. Post-ESIGN, "in writing" also means electronic documents (periodic statements) provided to consumers who have received the various pre-consent disclosures mandated by Section 101(c)(1) of ESIGN, and have given consent "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" (i.e., the periodic statement disclosures required by Regs E and DD.)
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#1750239 - 10/18/12 02:37 PM Re: E-statements [Re: Andy_Z]
banjo Offline
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My mistake, wrong section. I meant 1005.4:

"Form of disclosures. Disclosures required by this part shall be clear and readily understandable, in writing, and in a form the consumer may keep, except as provided for in this part. The disclosures required by this part may be provided to the consumer in electronic form, subject to compliance with the consumer-consent and other applicable provisions of the Electronic Signatures in Global and National Commerce Act (E-Sign Act)."

I understand that to mean that if a periodic statement is required under Reg E, it must be provided in writing (paper form) unless electronic statements have been consented to by the customer according to E-Sign rules.

Is it advisable to charge for something we are required by regulation to provide? Also, many low income customers may not have home computer access to estatements.

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#1750300 - 10/18/12 03:50 PM Re: E-statements [Re: 019lgoforth]
rlcarey Online
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Is it advisable to charge for something we are required by regulation to provide?

I think you answered your own question. There is no guidance and banks do have reduced service fees for e-statement accounts, but if a bank is going to have a specific charge for paper statements (IMHO - really just another way to slice the apple) I can see an over zealous regulator looking at this charge very closely.
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#1750390 - 10/18/12 05:59 PM Re: E-statements [Re: 019lgoforth]
Andy_Z Offline
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Not a trick question, but my error. I should have said in the EFTA.

There was a case, Collins v. Missouri Electric Cooperatives Employee Credit Union, 2006 U.S. Dist. LEXIS 57116 (July 26, 2006) where the judge ruled partially in favor of the CU because the Act itself doesn't say "in writing."

Collins was incarcerated, he was put on e-statements but contended he hadn't agreed to E-SIGN. The judge said E-SIGN didn't apply because the Act didn't require written statements.

"Written is in the Act several times, but not under statements. http://www.fdic.gov/regulations/laws/rules/6500-1350.html

Would I recommend ignoring Reg E - absolutely not. That is not what I'm saying. But is it an interesting case and a defense I'd reach for if I was being sued - because it may be the only defense available.
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#1750595 - 10/19/12 12:35 PM Re: E-statements [Re: 019lgoforth]
Richard Insley Offline
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Originally Posted By: banjo
If the customer refuses to sign up for estatements under ESign procedures, wouldn't we be required to mail paper statements to him at no charge?

Originally Posted By: BetsyS
Could you institute a fee for paper statements on existing accounts?

Originally Posted By: banjo
Is it advisable to charge for something we are required by regulation to provide?

Originally Posted By: rlcarey
There is no guidance...I can see an over zealous regulator looking at this charge very closely.
As far as I know, RESPA is the only consumer protection law that clearly prohibits fees for providing disclosures. Congress could have written the same prohibition into any of the other consumer protection laws (EFTA and TISA, for example), but it didn't. Can we assume that silence on this issue is equivalent to permission? I don't think so, but that's just my opinion. As Randy says, there isn't even as much as guidance. The EFTA and TISA were enacted and regulations issued before e-delivery was possible. At the time, it was standard practice to provide account statements without charge and therefore this question didn't arise.

You can price services differently, including the delivery method for documents containing required disclosures. In the case of new account offerings, consumers who can't or won't accept e-documents have the choice of paying a delivery fee or taking their business to a competitor. Until they open an account, they do not have a right to periodic statements. Existing accountholders DO have a right to periodic statements and the question becomes--can you impose a charge for the exercise of that right?

Clearly, you can't force consumers to accept e-delivery of deposit account statements. Unless "the consumer has affirmatively consented to (e-delivery) and has not withdrawn such consent", you cannot count electronic documents as "written." If they are not "in writing", your statements do not comply with the general delivery requirements of Regulations E and DD. That's enough to trigger enforcement action by your regulator, but Andy's reference to the Collins case keeps the light burning at the other end of the civil liability tunnel.

If I returned to my once-upon-a-time role of bank compliance officer, I would advise management to characterize the fees as the price for optional premium delivery service. They are imposed, not for providing a statement (to which the customer has a legal right), but rather for the method of its delivery. As long as we offered a no-cost delivery option for new accounts, I could still make a good-faith argument that we were not forcing or coercing customers to pay for their rights. I would also recommend that we grandfather all existing accountholders and continue providing them paper statements at no cost. We could, of course, try very hard to sell existing customers the idea of e-delivery, but initiating a charge for their statements would be like charging for any other legal right--free speech, for example.
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#1750743 - 10/19/12 03:47 PM Re: E-statements [Re: 019lgoforth]
Andy_Z Offline
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A rose by any other name...

The price of postage is going up, the cost of delivering statements is going up. I see charging for accounts with paper statement delivery a higher fee than those with e-statements as good business. Is it "charging for a statement?" Yes, indirectly. But it is a cost increase which is reasonable, IMHO.
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#1751177 - 10/22/12 07:28 PM Re: E-statements [Re: 019lgoforth]
banjo Offline
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The following is in the October edition of ABA's Banking Journal, "Compliance Center Inbox" (of course this is just their compliance analysts' opinions, which they state is not professional legal advice):

Q. We are considering switching from paper statements to online statements. At that time we would begin charging a fee for paper statements. If we do, can we still call this a "free" product?

A. Maybe. There is no regulatory requirement of a paper statement. It just has to be made available. The customer still has a free account - as long as they choose an electronic statement. The choice is the consumer's.
However: A recent issue we have heard from banks is that some regulators believe this is a possible UDAAP issue. Another concern is that the customers who may be most negatively impacted by this policy will likely be the poor, minorities, and the elderly, as they are least likely to have online access. A better practice might be: "Sign up for online statements and your account is free," rather than advertising the account as free and then charging for paper statements.

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#1751422 - 10/23/12 03:21 PM Re: E-statements [Re: 019lgoforth]
Andy_Z Offline
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If you review product costs, some costs go up. If the paper statement account cost increases, the product costs more. E-statements costs didn't go up, unless your IT costs went up. So paper statement accounts go up $.50 or $1.00 and e-statements remain the same, as examples. While I hear the argument, any fee increase on a product used by the groups you mentioned will have a negative impact on them. They want the low- or no-minimum balance accounts. If the cost goes up, they are impacted. There is no way around it. Was the increase unfair, is it an attempt to eliminate these accounts? There has to be a business reason for this, but there isn't a fair deposit account law that requires free accounts for certain groups.
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#1754874 - 11/04/12 12:54 PM Re: E-statements [Re: 019lgoforth]
anabanana Offline
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We have always required that the esign disclosures be provided first followed by the customer accepting and demonstrating capability to receive tham. We are now having a debate as to whether these need to be separate, and also we are having a debate with our processor.  For on-line banking, do you think it is acceptable to have the EFT and eSign disclosures open as one document (both displayed on the screen in full) and then assent to both at one click?
 
Thanks,

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#1754990 - 11/05/12 03:30 PM Re: E-statements [Re: 019lgoforth]
Andy_Z Offline
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What happens if they fail to consent - your EFT disclosure is not made as you have no evidence of disclosure. If the EFT section is pertinent only to the new services, that isn't a big deal.

Ideally I'd like to see consent before any other disclosures are made. (That would be the natural order. But if the disclosures are moot without the E-SIGN consent it may not be a big deal. To make a new disclosures contemporaneously with the consent might be OK, I think a lawyer might have to opine. I've seen no cases on it and it isn't addressed in the law. The law does say you must do the consent. I don't recall specific language that says "before" or "prior" and in the same transaction is as close as I'd want to go.
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