Statement on Supervisory and Enforcement Practices Regarding Electronic Credit Card Disclosures in Light of the COVID-19 Pandemic

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Treliant Takeaway:

The Consumer Financial Protection Bureau (CFPB or Bureau) recognizes that more consumers need expedited financial assistance in the current challenging environment. As a result, the Bureau authorized regulatory relief to help expedite the processing of credit card applications and service requests during the pandemic. Specifically, credit card issuers are excused from sending written disclosures to validate that E-SIGN consent requirements are met prior to sending Truth In Lending Act (TILA) or Regulation Z disclosures electronically. However, issuers must ensure E-SIGN disclosures are provided orally during the course of COVID-related credit transactions.

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Article Highlights:

The CFPB observed that many consumers, who are struggling financially as a result of the pandemic and subsequent economic downturn, are seeking help in the form of new credit card accounts or temporary reductions in APR and fees on existing accounts. Additionally, some institutions conveyed that the E-SIGN requirements are often a hindrance to the application or servicing process, causing longer time on the phone, multiple calls, and disruptions to the process. The CFPB concluded that the written E-SIGN requirements placed undue burden on the financial institutions and consumer’s in need of financial assistance.

As a result, the Bureau issued a “Statement on Supervisory and Enforcement Practices Regarding Electronic Credit Card Disclosures in Light of the COVID-19 Pandemic” on June 3, 2020. The Statement brings welcome relief to E-SIGN disclosure and consent requirements imposed under Regulation Z, since many credit card issuers are facing skyrocketing call volumes in light of constrained staffing and servicing capabilities. By providing this temporary relief from E-SIGN written disclosures, the Bureau “intends that this supervisory and enforcement flexibility will facilitate credit card issuers’ ability to quickly assist consumers during the pandemic.”

The following disclosure exceptions are temporarily permitted during the COVID-19 pandemic:

Before (Original E-SIGN Requirements)

In providing written disclosures under Regulation Z through electronic means, credit card issuers were required to deliver written E-SIGN disclosures and obtain the consumer’s affirmative consent to receive Regulation Z disclosures electronically. These E-SIGN provisions were required to occur electronically, including the consumer’s consent, in order to demonstrate that the consumer has appropriate technology to receive disclosures via electronic transmission. Oral exchanges were not permitted in the past.

After (CFPB Permissible Exceptions)

To ensure credit card lenders are providing timely responses to consumer requests for assistance, the CFPB is allowing lenders to deliver E-SIGN disclosures and obtain consumer consent orally prior to sending Regulation Z disclosures electronically.

These relaxed standards only apply to non-home secured, open-end credit defined in Regulation Z under four consumer relief scenarios:

  1. New account opening,
  2. Temporary reduction in APR,
  3. Temporary reduction in fees, and
  4. Low-rate balance transfer.

The CFPB notes in the Statement that it will not cite examination violations or bring enforcement actions in this regard as long as credit card issuers obtain (1) the consumer’s oral consent to receiving electronic disclosures and (2) oral affirmation of his/her ability to access and review the electronic written disclosures. The Bureau also outlines its expectations for issuers to verify consumer’s electronic contact information during phone calls.

To facilitate this regulatory change and minimize risk, credit card issuers should provide robust communications to front-line staff members who process changes to existing credit card accounts and new account openings. The revised process should include steps to document oral exchanges with consumers , which satisfy the current E-SIGN requirements under Regulation Z. Additionally, monitoring and testing should occur to ensure front-line staff understands the regulatory change and is providing appropriate oral disclosures.