Compliance Blog

Posted by Sarah Loats

It's been a busy day here so I'm going to cheat a little and use a Q&A from NAFCU's Book of Answers for today's blog. The topic - E-statements and the E-Sign Act. A recurring question that we receive is whether the credit union can convert all members over to E-Statements, requiring them to opt-out if they want paper statements. The short answer is no, if you want to be compliant with the E-Sign Act. See below for the long answer.

Question: A senior manager wants to reduce costs by reducing the number of statements that we print and mail. She proposes that we approach new members about receiving statements electronically and supply an opt-out notice for members who would not be interested. Are there any regulatory issues we would run into by doing it this way?

Answer: Yes. Credit unions may satisfy the requirement to send periodic statements electronically, but the credit union must obtain the member’s consent before doing so. In 2000, the Electronic Signatures in Global and National Commerce Act (E-Sign Act) became law.

The E-Sign Act, among other things, empowered financial institutions to use electronic records to provide required disclosures electronically, rather than in written form. In 2001, NCUA issued Regulatory Alert 01-RA-03 regarding the E-Sign Act. NCUA indicated that before a credit union could send required disclosures electronically, two things had to happen. First, the credit union must provide members with certain, mandatory information. Second, after the member receives this information, he or she must consent to receive electronic disclosures. In short, the E-Sign Act creates an “opt-in” system for consumers. Your credit union’s proposal appears to run contrary to this requirement.
January 2007