Compliance Blog

Happy Wednesday! I hope everyone had a great holiday! Here is a picture of my cat, Quincy, all snuggled up and enjoying the holiday season.

Today’s blog is going to discuss members providing oral consent with respect to opting-in to receive overdraft coverage under Regulation E.

In order to set the stage for this blog, I need to mention this CFPB Press Release which details the CFPB ordering Atlantic Union Bank “to pay $6.2 million for illegal overdraft fee harvesting”. For purposes of this blog, here is a relevant part of the Press Release:

“At Atlantic Union Bank branches, employees gave oral descriptions of the bank’s overdraft coverage to new customers who opened checking accounts. Employees sought oral confirmation from customers to enroll in overdraft coverage before providing them with the required written disclosures describing the terms of service.” (Emphasis added).

After the press release, I received a couple questions as to whether or not credit unions could take oral/verbal opt-ins. So, what does Regulation E actually say? Section 1005.17(b) of Regulation E provides the following regarding the opt-in requirements:

“(b) Opt-in requirement —

(1) General. Except as provided under paragraph (c) of this section, a financial institution holding a consumer's account shall not assess a fee or charge on a consumer's account for paying an ATM or one-time debit card transaction pursuant to the institution's overdraft service, unless the institution:

(i) Provides the consumer with a notice in writing, or if the consumer agrees, electronically, segregated from all other information, describing the institution's overdraft service;

(ii) Provides a reasonable opportunity for the consumer to affirmatively consent, or opt in, to the service for ATM and one-time debit card transactions;

(iii) Obtains the consumer's affirmative consent, or opt-in, to the institution's payment of ATM or one-time debit card transactions; and

(iv) Provides the consumer with confirmation of the consumer's consent in writing, or if the consumer agrees, electronically, which includes a statement informing the consumer of the right to revoke such consent.” (Emphasis added).

Based on the above, credit unions need to provide consumers “with a notice in writing, or if the consumer agrees, electronically… describing the institution’s overdraft service.” After receiving the notice in writing, then consumers should be provided with “a reasonable opportunity to affirmatively consent, or opt in”. This is mentioned in the CFPB’s Consent Order, which states that “[a] financial institution must provide a consumer with the written (or, if the consumer agrees, electronic) notice required by 12 C.F.R. § 1005.17(b)(1)(i) before it can obtain that consumer’s affirmative consent as required by 12 C.F.R. § 1005.17(b)(1)(iii).” (Emphasis added).

Additionally, the Consent Order outlines that Atlantic Union Bank “requested that new customers orally specify their enrollment decision before providing them with adequate written notice describing the Opt-in ODP service.” (Emphasis added). Based on this, it appears that Atlantic Union Bank was having customers orally consent before they even received the notice in writing that describes the institution’s overdraft service.

However, there is no prohibition against obtaining consent orally so long as a credit union provides the notice in writing which describes the overdraft service first, and then gives the consumer a reasonable opportunity to opt in. Additionally, after receiving consent, credit unions should provide the consumer “with confirmation of the consumer’s consent in writing” (or electronically if the consumer agrees to it).

The commentary to section 1005.17(b) provides even more insight and mentions that credit unions can even provide “a readily-available telephone line that consumers may call to provide affirmative consent.”

That’s all for today! Looking forward to seeing everyone next year as America’s Credit Unions!