CUNA Comment Letter
CUNA's Letter to NCUA regarding Interim Final Rule Regarding the Electronic Delivery of the Disclosures Required Under the Truth in Savings Act
Sent Via E-mail to firstname.lastname@example.org
August 14, 2001
Ms. Becky Baker
Secretary of the Board
National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314-3428
Re: Interim Final Rule Regarding the Electronic Delivery of the Disclosures Required Under the Truth in Savings Act (12 CFR Part 707)
Dear Ms. Baker:
The Credit Union National Association (CUNA) appreciates the opportunity to comment on the interim final rule amending the regulations that implement the Truth in Savings Act (TISA). The rule, which appeared in the Federal Register on June 21, 2001, would provide guidance to credit unions that use electronic communications to provide the disclosures required by TISA if the consumer agrees to such delivery. CUNA represents more than 90 percent of our nations 10,500 state and federal credit unions. This letter reflects the opinions of those credit unions and the opinions of CUNA's Consumer Protection Subcommittee, chaired by Kris Mecham, CEO of Deseret First Credit Union, Salt Lake City, Utah.
On April 4, 2001, the Federal Reserve Board (Fed) published an interim final rule amending Regulation DD to provide guidance to creditors that use electronic communications to provide the disclosures that are required under TISA if the consumer agrees to such delivery. The TISA requires the National Credit Union Administration (NCUA) Board to adopt regulations that are substantially similar to those of the Fed, taking into account the unique nature of credit unions and the limitations under which they may pay dividends on member accounts.
Summary of CUNAs Position
- The definition of electronic address-- should be more flexible in order to accommodate the use of home banking programs and other Intranet websites.
- The Electronic Signatures in Global and National Commerce Act (E-Sign Act) requires that a consumer must provide consent, or confirmation of consent, electronically and in a manner that reasonably demonstrates-- that he or she can access the disclosure information. More guidance is needed regarding the term reasonably demonstrates.-- Providing consent on the Internet should be sufficient in most cases because accessing the Internet itself reasonably demonstrates-- the ability to access the information.
- Currently, credit unions may delay the delivery of account-opening disclosures if the member is not present when the account is opened. Examples include accounts that are opened by mail or by telephone. NCUA should also include accounts that are opened by electronic communications, such as the Internet.
In September 1999, the Fed issued an interim final rule to permit financial institutions to use electronic communications to provide the disclosures that are required under Regulation DD. Shortly after the Fed issued the rule, the NCUA Board issued an interim final rule that was substantially similar. In our comment letter to NCUA, CUNA supported the rule that would allow financial institutions to provide the required disclosures electronically. Because credit unions are owned and operated by their members, they want to provide the most efficient services for their members and providing disclosures electronically would help credit unions reach this goal.
After the publication of the 1999 interim final rule, the E-Sign Act was signed by President Clinton and became effective as of October 1, 2000. Under the E-Sign Act, electronic documents and signatures generally have the same validity as paper documents and handwritten signatures, as long as the consumer consents after receiving certain information.
The E-Sign Act also contains requirements for the use of electronic disclosures in consumer transactions. Implementing regulations are not required and financial institutions are currently permitted to use electronic disclosures. Government agencies are permitted, within limits, to interpret the E-Sign Act consumer consent provisions but are restricted from imposing additional requirements.
As a result of the E-Sign Act, the Fed withdrew the September 1999 interim final rule and issued a new rule on April 4, 2001 regarding the electronic delivery of the disclosures required under TISA and Regulation DD. The new rule is intended to implement the E-Sign Act by providing uniform standards on the timing and delivery of these electronic disclosures. The NCUA Board has now issued a substantially similar rule that is also intended to implement the requirements of the E-Sign Act.
The Definition of Electronic Address-- Should be More Flexible
Section 707.4 of the interim final rule requires that the electronic disclosures must be sent to the members electronic address or made available at another location, such as an Internet website. If the disclosures are made available at another location, the credit union must send a notice to the members electronic address to alert him or her that the disclosures are available and to indicate how they may be accessed.
Section 707.10 of the rule defines an electronic address-- as an e-mail address that is not limited to receiving communications transmitted solely by the credit union.-- This would appear to prohibit communications through mechanisms such as home banking programs.
We believe the interim final rule and the current narrow definition of electronic address-- will be burdensome for credit unions that had intended to or would consider using home banking programs or other Intranet systems to communicate with members and would prevent members from receiving the benefits of these technologies. This definition would also contradict both the language and intent of the E-Sign Act. Section 104 of the E-Sign Act generally prohibits a regulatory agency from issuing a rule unless it concludes that the rule would not impose unreasonable costs on the acceptance and use of electronic records. Section 104 also prohibits rules that accord greater legal status to a specific technology or technical specification to the detriment of others, such as home banking programs or other Intranet systems.
The interim final rule and the definition of electronic address-- will pose impediments for potentially effective means of communications between credit unions and their members. Credit unions are organized to serve members within distinct fields of membership (FOMs). These FOMs include members who are employed by specific employers, belong to specific organizations, or who live in defined communities. Under this structure, the use of home banking programs or other Intranet websites can be a very effective means of communication between credit unions and their members.
For example, a home banking system with electronic message capability would be a very effective means for credit unions that serve military men and women who are away from home on long-term assignments. Although computers are often provided on ships and other military installations, or at public libraries nearby, these members may not have access to the personal-- e-mail address that is contemplated under the rule and that is often used at home. Also, for security reasons, these members may be prohibited from using non-secured personal e-mail addresses as a means to access account data. Many members may not even have personal e-mail addresses but may still want to take the advantage of the convenience of electronic disclosures through their home banking programs.
Members who work for a non-military employer may also find it more convenient to access account information from their employers Intranet website, assuming that the employer permits such access. Many members may actually prefer not to disclose or use their personal e- mail address in connection with their financial transactions and may want to use home banking programs or Intranet websites in which they do not have to disclose this information. Other members may actually use their home banking programs more frequently than they access their personal e-mail. This may be especially true for members with multiple e-mail accounts. Home banking systems also provide credit unions with the opportunity to determine if and when the member has opened the message containing the disclosure information.
The current definition of electronic address-- will create a substantial burden by requiring credit unions to compile and maintain separate e-mail lists. The ability to send notices through a home banking or other Intranet system will not only relieve credit unions of this burden, but it will also help ensure accurate delivery of the disclosures.
Members often change their personal e-mail addresses, increasing the likelihood of disclosures being delivered to an inaccurate address. This will make it more difficult for credit unions to monitor and update e-mail address lists. Unlike postal mail, there is no widely used mechanism to forward e-mail that is delivered to an old or inaccurate address. This problem would be minimized if communications could be delivered through these alternative means.
The Feds current rules provide similar flexibility. For example, 12 CFR § 226.5 of the Truth in Lending Act regulations permits periodic statements to be mailed or delivered.-- The term mail or deliver-- is also referred to in 12 CFR § 230.6 of the Feds Truth in Savings Act regulations.
Credit unions have appreciated and members have benefited from this ability to allow for delivery through means other than the postal system. For example, credit unions that serve airline employees have designated certain locations in airports where employees may pick-up-- their statements. These members appreciate this convenient and efficient means for receiving their statements and, if provided the opportunity, may also choose to pick-up-- their statements online.
However, under the current rules that permit the pick-up-- of statements, credit unions are not required to provide a separate notice informing members that the statement is available, unlike the requirement in the interim final rule that would require a separate e-mail notice. Also, airline employees that would elect to receive disclosures electronically would also likely prefer not to use personal e-mail addresses that may be inaccessible when they are traveling.
Credit unions that serve other types of employer groups also currently have the latitude to provide statements at certain locations at the place of business. This flexibility should continue with the use of electronic disclosures by offering other means for communications besides personal e-mail addresses that are used primarily in the home.
We are also concerned because the 1999 interim final rule did not define electronic address.-- Certain credit unions have since developed home banking systems with internal electronic message capabilities believing that this would be acceptable in the absence of a specific definition of electronic address.-- It would be a tremendous burden if these credit unions had to overhaul or abandon their current systems.
Based on these concerns raised by credit unions, CUNA urges NCUA to clarify that it would be permissible to use both Intranet and Internet websites as a means for making disclosures available to members and to define electronic address-- in a more flexible manner to include communications through alternative means, such as home banking programs. This would be especially helpful for credit unions and their unique fields of membership.
Although TISA requires the NCUA Board to issue regulations that are substantially similar to those of the Fed, the NCUA Board is permitted to incorporate variations that take into account the unique nature of credit unions. We believe the compatibility of communications through home banking systems with credit unions unique fields of membership, as described above, justifies the NCUA Board to incorporate a variation to the Feds definition of electronic address-- that would permit electronic messages through home banking programs or other Intranet systems. We also believe credit union members may find such alternative systems more convenient and efficient and should not be a problem for any member, provided that he or she understands and provides the required consent.
During discussions with the Fed and NCUA on this issue, we learned that both agencies are concerned that members may have less control over the receipt of the electronic disclosures if electronic messages are delivered through home banking programs. To address this concern, NCUA could require credit unions to use other means to deliver information that is not accessed within a certain period of time after it is made available. For example, credit unions could be required to send the disclosures, or notice of availability of the disclosures, to a members postal address or an alternative e-mail address, at the credit unions option, if the information is not accessed by the member within sixty days after it was made available. There are home banking systems designed to provide the credit union with the ability to monitor if and when members have accessed this information.
There may be other means to address this issue of control while preserving the ability to send e-mails through home banking programs. As member-owned cooperatives, credit unions want to establish programs that meet the best interests of the membership. Credit unions also recognize that members must voluntarily agree to receive electronic disclosures and, therefore, must develop acceptable systems in order to realize the significant reductions in costs that will result from the electronic delivery of information.
More Guidance is Needed Regarding Consumer Consent
The E-Sign Act requires that consumers provide consent to receiving disclosures electronically. The consent, or confirmation of consent, must be provided through electronic means and in a manner that reasonably demonstrates-- that the consumer can access the disclosure information.
We believe credit unions and others in the financial services industry need more guidance on these consumer consent provisions, specifically guidance regarding the meaning of the term reasonably demonstrates.-- This need for guidance was evident during a public workshop hosted by the Federal Trade Commission on April 3, 2001 for the purpose of examining the E-Sign Act consumer consent provisions. The participants at this workshop comprised of representatives from the financial services industry, government, consumer advocate groups, academia, and other interested parties.
During the workshop, the participants offered several paradigms as to what course of action would satisfy the reasonably demonstrates-- criteria. However, there was very little agreement as to which one would satisfy the various constituencies that were represented at the workshop. This indicates the need for regulatory guidance. Otherwise, these issues will likely be resolved through litigation, a scenario fraught with uncertainty that holds little appeal for credit unions.
We believe there is one example that NCUA should incorporate into the interim final rule that would clearly satisfy the reasonably demonstrates-- criteria. At this time, the Internet provides the ideal means for satisfying the consumer consent requirements of the E-Sign Act. If a consumer can access the Internet and click an icon indicating consent to receiving disclosures electronically on the website, we believe that the consumer has obviously provided a means that reasonably demonstrates-- that he or she can access the disclosure information. The fact that the consumer was able to access the Internet website should be enough to meet the E-Sign Act consumer consent provisions.
The interim final rule generally requires notification from the credit union by some means, such as e-mail, when the disclosures are available on the Internet, although this is not required under the E-Sign Act. If the member provides the credit union with an e-mail address, this should be sufficient to demonstrate that he or she can access the e-mail notification. We encourage NCUA to specifically include the consent on the Internet in this manner as an example of compliance with these rules regarding electronic disclosures.
Similarly, credit unions may want to attach the disclosures to an e-mail in another format, such as Adobe Acrobat, Microsoft Word, or WordPerfect. If the member consents to receiving disclosures in this manner and affirmatively indicates that he or she has access to such formats, we believe this is sufficient to reasonably demonstrate-- that the member can access the information in this manner.
We see no downside risks with regard to the examples described above because if there is any problem with accessing the disclosures, the member may always withdraw the consent and request the disclosures in paper form, as permitted under the E-Sign Act. Credit unions would actually appreciate more guidance from NCUA regarding the E-Sign Act provisions regarding the withdrawal of consent and the ability to request paper copies.
Current rules require credit unions to provide account-opening disclosures to members, or potential members, before an account is opened or a service is provided. Credit unions may delay the delivery of these disclosures if the member is not present when the account is opened. Examples of these exceptions include accounts that are opened by mail or by telephone. However, the interim final rule will not include accounts that are opened by electronic communications, such as the Internet, among these exceptions even though the member is also not present.
Although this may not be a problem if the member elects to receive the account-opening disclosures electronically, there may be situations in which the member may want to receive these disclosures in paper form. In these situations, the credit union would be required to delay the opening of the deposit account, although this delay would not be necessary if the member opened the account by mail or by telephone. This discrepancy would discourage these members from opening deposit accounts through the use of electronic communications. For this reason, we request that NCUA include accounts that are opened by electronic communications among the exceptions to the requirement that the disclosures must be provided before the account is opened or a service is provided.
Thank you for the opportunity to comment on the interim final rule regarding the electronic delivery of the disclosures that are required under TISA. If you or other staff have questions about our comments, please give Associate General Counsel Mary Dunn or me a call at (202) 682 - 4200.
Assistant General Counsel