ICYMI: CFPB Issues More Pandemic-Related Supervisory Guidance and FAQs
On May 13, the CFPB released a statement and FAQs on billing error resolution and change in terms notices. These documents are to inform credit unions and other financial institutions of existing flexibilities in the current rules and to provide supervisory expectations. These documents do not provide any additional requirements for credit unions.
Billing Error Resolution
In the supervisory and enforcement statement, the CFPB identifies some challenges the current environment poses for creditors and merchants when investigating billing errors under Regulation Z. The CFPB notes lack of staffing at merchant locations may impact a creditor’s ability to obtain sufficient information about a particular transaction. Not having access to sufficient information may mean a creditor is unable to properly assess whether a transaction is unauthorized within the required two billing cycle timeframe.
As a result, the CFPB states it does not intend to cite any timeframe violations if a creditor can demonstrate good faith efforts to obtain information and resolve the claim as soon as possible. The statement indicates good faith efforts may include getting a time estimate from the merchant as to when it can respond to the information request or making a reasonable determination the merchant cannot respond. As the CFPB has supervisory authority over credit unions with more than $10 billion in assets, it is unclear whether the NCUA will follow a similar approach for credit unions not subject to the CFPB’s supervisory authority. Credit unions experiencing difficulties in meeting the timeframe requirements may want to consider documenting their efforts to obtain information and resolve the claim.
While the CFPB provides flexibility around the two-billing cycle timeframe for resolving errors, it reminds creditors other provisions of Regulation Z’s billing error resolution procedures must still be followed. These include providing the written acknowledgement of the error notice, not providing adverse information to credit reporting agencies regarding the disputed amount and not accelerating the debt due to an error claim.
The CFPB also asks creditors to consider whether flexibility is appropriate when it comes to the cardholder’s responsibility to report errors within 60 days of the period statement reflecting the error. Creditors may enforce the 60-day period, but exceptions may be warranted in certain circumstances such as health or delay in receiving statements.
Change in Terms
In the deposit account FAQs and open-end (not home-secured) credit FAQs, the CFPB reminds credit unions of their ability to change terms on an account and that some changes do not require advance notice. Changes that are “clearly favorable” do not require advance notice, such as reducing a fee or finance charge. For open-end credit, extending a grace period and reducing the annual percentage rate (APR) under a temporary hardship arrangement also do not require advance notice.
The deposit account FAQs distinguish between waiving fees and changing account terms. If a credit union changes the account terms to reduce a fee, such as from $5 to $0, then the FAQs indicate advance notice will be required when the credit union wants to start imposing the $5 fee again. However, if fees are being waived on a case-by-case basis without actually changing account terms, then advance notice may not be required when imposing the fee. A credit union may need to review communications with members to determine whether account terms were changed or whether only case-by-case fee waivers have occurred to determine whether notice will be required when it starts imposing fees again.
The open-end (not home-secured) credit FAQs also address the notice requirements for temporary hardship arrangements. Arrangements that provide for relief, such as a lower APR or fees, may be implemented without advance notice in certain circumstances. The FAQ states the terms can be disclosed verbally and implemented immediately if the creditor then sends a written (or electronic) disclosure of the terms. As long as the terms of the arrangement and those that will apply after completion (or failure to complete) are disclosed up front, no change in terms notice is required when the arrangement ends. However, creditors may consider reminding members when the end of arrangement nears.