August 18, 2022

NAFCU’s Berger voices CU opposition of Reg E liability expansion to CFPB

CFPBNAFCU President and CEO Dan Berger Wednesday wrote to the CFPB to highlight new requests regarding Regulation E and the prospect of future guidance on this topic from the bureau. Berger noted that recent reports, which suggest the CFPB may expand liability under Regulation E to further encompass fraudulently induced transfers initiated by a consumer, are “deeply concerning.”

“Credit unions are committed to providing safe, affordable, and fast payments to all their members, while also ensuring compliance with Regulation E. However, such a commitment depends on a fair and stable regulatory environment where the plain language of the EFTA does not expand beyond what was originally envisioned by Congress,” wrote Berger. “Further expansion of credit union liability under new guidance would magnify this risk beyond reasonable limits and have far reaching consequences.”

Berger noted that, in the long term, an expansive interpretation of Regulation E could magnify exposure to fraud and curtail investments designed to help reach underserved communities, such as investments in brick-and-mortar branches. “Credit unions have made strides improving underserved and rural branch access, growing branch presence by 2.4 percent between 2012 and 2021, but these gains could be reversed if budgetary resources are reallocated to cover new forms of fraud enabled by novel regulatory interpretations,” explained Berger.

Berger recommended that instead of issuing new interpretations of Regulation E or its commentary, the CFPB should redirect its focus to investigating technologies and solutions that can help prevent fraud before it occurs. “Technical and educational resources would also ensure that efforts to support real time payments, such as FedNow, are not abandoned out of fear that financial institution liability under Regulation E liability might exceed manageable limits,” added Berger.

Read the full letter. NAFCU will continue to advocate for a reasonable and fair interpretation of Regulation E to protect members and preserve credit unions’ ability to continue offering affordable and convenient payment systems. The association will keep members aware of any developing actions from the CFPB.