Compliance Blog

The Consumer Financial Protection Bureau (CFPB) announced a stipulated final judgment and order (judgment) with Citizens Bank, N.A. (Citizens Bank) for violating Regulation Z’s credit card error resolution provisions following a January 2020 compliant (complaint) filed by the CFPB. While Regulation E’s error resolution provisions typically dominate error resolution conversations, it is worth remembering Regulation Z has its own provisions for moments like when the CFPB come knocking.

Section 1026.13 outlines the billing error resolution process under Regulation Z. This process involves a written notice from a member alerting a credit union of an alleged billing error. This error notice allows a credit union to identify the consumer’s name and account number while allowing the member to outline his or her claim and reasons for the belief that an error exists. This notice will also capture the type, date, and the amount of the error. A credit union is also required to resolve the resolution in a timely manner following the timing requirements under section 1026.13(c).

In addition, Regulation Z outlines procedures if the billing error occurred as asserted or if a different billing error or no billing error occurred along with the timing requirements and the written notice requirements. Lastly, section 1026.13(g) outlines the rights and duties of a creditor after resolution. If you want to read more on this subject, NAFCU's compliance blog, Disputed Territory: Billing Error Notices, provides a more in-depth discussion on section 1026.13.

Now that we offered a brief overview of the provision at the heart of regulatory action, let’s move to what happened and what is stipulated in the final judgement

According to the complaint, Citizens Banks failed to meet its regulatory obligations surrounding billing error notices. For example, Citizens Banks denied billing error notices and claims because “consumers refused to or were unable to…complete [a required] affidavit. Citizens Bank also refused to refund charges in addition to denying consumers due to the failure of the customer to sign an affidavit. These charges occurred either through “mistakenly calculating the amount of finance charges and fees based on the date the dispute was placed in its system of record, as opposed to when the dispute arose, or manually miscalculating finance charges and fees related to transactions that should have been refunded to consumers.” Citizen Banks also failed to meet the notification requirements under section 1026.13. Generally, Citizen Banks is required to alert a consumer of receiving the claim within 30 days of receipt. In the same vein, Citizens Banks allegedly did not notify consumers of the written denial within the required two complete billing cycle period. Lastly, Citizens Bank had no policies and procedures in place to provide credit counseling information when contacted by consumers. When a customer did call, these customers were organized based on account status and good standing.

The complaint raises eight Regulation Z violations. These violations include Citizen Banks’s automatic denial of consumer claims when the consumers did not sign the affidavits Citizen Banks provided as a step in its error resolution violated Regulation Z. Another violation is Citizen Bank’s failure to refund finance charges when the bank “…resolved billing error notices or claims of unauthorized use in consumers’ favor.” Citizens also did not refund finance charges and fees in connection when resolving error notices or when unauthorized use claims were resolved in the consumer’s favor. Several other counts are linked to Citizen Banks failure to notify its consumers of its acknowledgement of the billing error and the subsequent denial to the consumer who filed the notice. The final two counts are connected to the failure of providing credit counseling referrals to its members.

Citizens Bank and the CFPB entered this stipulated final judgment on May 23, 2023. The financial institution must take steps to avoid repeated violations. The CFPB asks the financial institution to take affirmative actions to maintain policies and procedures designed to handle billing error notices and claims, including procedures to refund any calculated charges and to provide credit counseling to consumers. The judgement also requires Citizens Bank to provide a compliance plan and reports to the CFPB showing the financial institution is implementing the compliance requirements outlined in the judgement. The judgement also places obligations on the Citizens Bank’s board of directors. Lastly, the financial institution is required to pay a civil money penalty of $9 million dollars.

This recent CFPB stipulated final judgment and order is a reminder of what can go wrong and highlights operational pitfalls. If there are any additional questions, please do not hesitate to contact NAFCU’s compliance team at compliance@NAFCU.com.

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