CUNA Comment Letter

Advance Notice of Proposed Rulemaking on Regulation E

May 15, 1998

Mr. William W. Wiles, Secretary
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, NW
Washington, DC 20551

RE: Docket No. R-1002

Dear Secretary Wiles:

The Credit Union National Association (CUNA) appreciates the opportunity to comment on the interim rule amending Regulation E, which implements the Electronic Fund Transfer Act (EFTA). This interim rule, which went into effect on March 25, 1998, permits financial institutions to begin implementing systems that allow for the electronic delivery of EFTA disclosures. This interim rule was published in the March 25, 1998 Federal Register. For background purposes, CUNA represents over 11,000 state and federally chartered credit unions through fifty state offices throughout the country.

CUNA supports allowing financial institutions to provide Regulation E disclosures electronically and commends the agency for clarifying, in this interim rule, several issues raised in the 1996 Regulation E proposal. In response to the agency's request for input on specific provisions of the interim rule, CUNA offers the following comments:

Request of Paper Copy of Electronic Disclosures

The 1996 proposed rule would have required a credit union to provide, upon request, a paper copy of any disclosures sent by electronic communication. The consumer could request this paper disclosure for up to one year after receiving the electronic disclosure. CUNA is pleased that this provision has been deleted from the interim rule.

As we stated in our September 6, 1996 comment letter, a one-year time period would be too long and could deter credit unions' ability to establish electronic accounts thus eliminating the potential cost savings of electronic communication.

Paper Confirmation of Electronic Communications

CUNA is pleased that the interim rule permits financial institutions to request paper confirmation of an electronic communication where they are currently permitted to require written confirmation, such as stop-payment notices and notices of error. We raised this concern in our September 6, 1996 comment letter and believe that it is important for financial institutions to have the ability to require paper confirmations under certain circumstances for the protection of both the financial institution and the consumer.

Definition of "Electronic Communication"

The 1996 proposal defined electronic communication as "an electronically transmitted text message between a consumer and a financial institution; in the case of a communication to the consumer the message shall allow text to be displayed on equipment in the consumer's possession such as a modem-equipped personal computer or screen telephone." The interim rule includes a similar definition but eliminates the phrase "in the consumer's possession".

CUNA agrees with the clarification in this definition finding that the reference to the equipment being "in the consumer's possession" caused confusion where consumers use public terminals such as at a library or in a credit union facility.

Consumer Ability to Retain Disclosures

Under Regulation E, most disclosures must be provided in a form that the consumer may keep. The interim rule applies the same requirement to disclosures provided by electronic communication. CUNA supports the agency's clarification included in this provision that financial institutions are not obligated to monitor a consumer's ability to retain the electronically delivered information, or to ascertain whether the consumer actually did retain it.

Timing Requirements

In the Supplementary Information included with the interim rule, the Board states that "[f]inancial institutions have flexibility in how they may deliver electronic disclosures to consumers.." and provides examples that include posting disclosures on a designated website. CUNA urges the Board to provide additional guidance on how to comply with the timing requirement when a notice is posted on an Internet website.

Thank you for the opportunity to comment on this interim rule.


Colleen Kelly
Regulatory Staff Attorney