Compliance Blog

Paper gets a bad rap. No one wants to deal with it anymore. This truly disheartens me.

Personally, I enjoy collecting large piles of periodic statements from my credit union. While paper mills reek of a million frightened skunks, I still have hope of a Dunder Mifflin revival. I’m no economist, but seeing Dwight rise from office supply ashes would likely reignite our need for office supply stores. That would be great, because besides increased jobs for the American people, I could really use some printer ink right about now.

We’ve received questions that would utterly destroy the paper industry’s hope for a comeback. It appears that credit unions are looking to reduce paper usage and opting for alternatives to snail mail statements. One topic includes: Is it permissible to combine closed-end and open-end periodic statement? And like any responsible attorney, my answer is “it depends.”

This NAFCU blog, although dated, takes an honest look at whether the credit union may send a combined periodic statement. When written, this blog mentioned the preference of members to receive fewer statements from their credit union.

“Many credit unions currently provide combined statements at the beginning of each month. The combined statements contain a vast majority of the information that the proposed periodic statement contains. Borrowers are not only used to this format, but prefer it because they are not receiving multiple statements from their credit union throughout the month, but rather, a single combined statement that contains information about their loan, checking, share (savings) and other appropriate accounts. The proposed timing requirements would make this tried and true credit union practice virtually impossible to continue.”

Time restraints of sending open-end statements and closed-end statements at the same time appear to be real obstacles to reducing paper usage for credit unions.

Another obstacle mentioned was the competing format requirements of certain statements. The Consumer Financial Protection Bureau (CFPB), in a 2012 proposed rule, called to our attention that sometimes both open-end and closed-end statements require information to be written on the first page of the document:

“Based on industry outreach, the Bureau understands that some institutions provide a combined statement for mortgage loans and other financial products. For example if a consumer has both a checking account and a mortgage with a credit union, the consumer may receive a single combined statement. The Bureau seeks comment on how servicers would actually combine statements. In particular, the Bureau notes that difficulties may arise when different disclosures have different timing requirements, and when multiple disclosures have requirements that information be presented on the first page of the statement. For example, if both mortgage loan disclosures and credit card disclosures are required to be on the first page of a statement, how would these statements be combined?"

So, was this issue remedied? If you are in the paper business, look away now.

The official commentary for residential mortgage periodic statements attempts to answer whether different statements can be combined:

“2. Additional information; disclosures required by other laws. Nothing in § 1026.41 prohibits a servicer from including additional information or combining disclosures required by other laws with the disclosures required by this subpart, unless such prohibition is expressly set forth in this subpart, or other applicable law.”

In short, Regulation Z allows the credit union to include “combine disclosures” onto the mortgage periodic statement, as long as other laws allow it.

Still, there could be a timing or formatting conflict if a credit union attempted to combine a credit card disclosure with a mortgage disclosure. Some industry professionals reminiscent of Dwight Schrute believe that this situation calls for separate statements to avoid violating formatting requirements. While combining disclosures is mostly a business decision of the credit union, the credit union may want to consult with local counsel to determine if the credit union is sending the combined notices within their appropriate timelines.

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