CUNA Comment Letter
Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA)
October 6, 2004
Ms. Mary Rupp
Secretary of the Board
National Credit Union Administration
1775 Duke Street
Alexandria, Virginia 22314-3428
|Re:||Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA)|
Dear Ms. Baker:
The Credit Union National Association (CUNA) is pleased to respond to the National Credit Union Administration (NCUA) Boards request for comments to identify outdated, unnecessary, or burdensome regulatory requirements imposed on federally insured credit unions. By way of background, CUNA is the largest credit union trade association, representing approximately 90% of our nations nearly 9,300 state and federal credit unions.
NCUA and the other federal financial institution regulators are required by a 1996 paperwork reduction law, the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA), to review their regulations at least once every ten years. EGRPRA requires the NCUA and the other regulators to categorize the regulations, publish the categories for public comment, report to Congress on any significant issues raised by the comments, and eliminate unnecessary regulations. We understand that, under EGRPRA, NCUA will request comments from now until 2006 on ten categories of regulations that impose burden on federally- insured credit unions. At this time, NCUA is requesting comments on certain consumer protection rules, including rules regarding privacy, share insurance, and Regulation DD, the Truth in Savings Act.
Summary of CUNA's Position
- CUNA does not believe changes to the language and format of the annual privacy notices are necessary at this time, although we believe that the requirement to send them annually to members is unnecessary.
- With regard to the rules that will allow for the electronic delivery of the disclosures required under Regulation DD, the Truth in Savings Act, the definition of "electronic address" should be more flexible in order to accommodate the use of home banking programs and other Intranet websites. These electronic disclosure rules also require 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."
- CUNA believes the share insurance rules could be improved by including the examples as part of official staff commentary that would follow the rules, similar to the approach the Federal Reserve Board (Fed) has taken with regard to consumer protection rules. Under this approach, the commentary would be subject to public comment before being issued in final form. We also believe that the commentary should include staff interpretations, as an alternative to NCUAs private opinion letters.
On March 26, 2004, CUNA submitted a comment letter regarding an interagency proposal to consider alternative forms of the annual privacy notices that financial institutions are required to provide consumers under the Gramm-Leach-Bliley Act. The following are CUNAs significant comments that were submitted at that time regarding possible changes to these privacy notices that we believe are still relevant:
- The requirement to deliver privacy notices in their current form on an annual basis is unnecessary, especially for credit unions that are not required to provide their members with the right to opt-out of certain information-sharing.
- We do not at this time support changes in the privacy rules or statutes that would require changes in the language and format of the current privacy notices. Although credit unions recognize that the current privacy notices issued by certain types of financial institutions have been criticized as overly complex and have not proven useful for consumers, we are not aware of any such criticisms directed at credit unions. However, credit unions are always willing to review specific proposals that will help their members better understand how their information is shared.
- If the federal financial institution regulators are committed to changing the privacy notices, one possible suggestion to simplify them for both financial institutions and consumers is to require some type of notice only if the institution is required to provide the consumer with the right to opt-out of certain information-sharing. We believe this is the most practical approach because the opt-out option is generally the point in the process when credit union members can control and actually take action to limit information-sharing.
- To provide additional information to consumers without increasing the length of the privacy notices, the federal financial institution regulators could provide additional information, either through their websites or other means. Certain provisions of the current notices could also be deleted in that they are not particularly useful, such as the provisions with regard to safeguarding information, which is virtually the same in all the notices, and the provisions regarding the information that is collected, since the consumer is already aware of the information they provide to the financial institution.
- The current provisions regarding the sharing of information under joint marketing agreements need to be preserved. This allows information to be shared under these agreements without the need to provide consumers with the right to opt-out. This is necessary in order for credit unions and other smaller financial institutions to compete effectively with larger institutions that have the ability to share information among their various affiliates without providing their customers with the right to opt-out.
- Any changes to privacy notices should be considered in connection with the Fair and Accurate Credit Transactions (FACT) Act rules that will be issued throughout this year. These new rules will provide significant, additional protections in the area of identity theft and there may be ways to integrate the information in the privacy notices with the information delivered to consumers that will be required as a result of the new FACT Act rules.
Regulation DD, Truth in Savings Act Electronic Disclosures
In 2001, the Fed issued interim final rules on how financial institutions and others may provide electronically the disclosures that are required to be given in writing under Regulation Z (Truth in Lending Act), Regulation B (Equal Credit Opportunity Act), Regulation E (Electronic Fund Transfer Act), Regulation M (Consumer Leasing Act), and Regulation DD (Truth in Savings Act). These rules were issued to ensure consistency with the Electronic Signatures in Global and National Commerce (E-Sign) Act, which became effective on October 1, 2000. The E-Sign Act permits the use of electronic signatures and disclosures, provided that appropriate consent is received from the consumer.
CUNA supports the ability of credit unions to transmit these disclosures electronically. However, we continue to have concerns regarding the 2001 interim final rules that were issued by the Fed. Our primary concern is that the definition of electronic address should be more flexible in order to accommodate the use of home banking programs and other Intranet websites.
The interim final rules require that the electronic disclosures must be sent to the consumers electronic address or made available at another location, such as an Internet website. If the disclosures are made available at another location, the creditor must send a notice to the consumers electronic address alerting him or her that the disclosures are available and indicating how they may be accessed.
The official staff commentary defines an electronic address as an e-mail address that is not limited to receiving communications transmitted solely by the creditor. This would appear to prohibit communications through mechanisms such as home banking programs.
We believe the interim final rules 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 consumers 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.
Our other primary concern regarding these rules is the means by which consumers may indicate that they are able to receive these disclosures electronically. The E-Sign Act requires that a consumer must provide consent, or confirmation of consent, electronically and in a manner that reasonably demonstrates he or she can access the disclosure information. More guidance is needed regarding these consumer consent provisions, specifically the term reasonably demonstrates. For example, we believe this could include accessing the Internet and clicking an icon indicating consent to receive disclosures electronically. We would welcome the opportunity to work with both NCUA and the Fed regarding our concerns with these electronic disclosure rules.
Share insurance rules are very complex, and credit unions appreciate the examples that are included in the appendix that accompany these rules. We believe the share insurance rules could be improved by including the examples as part of official staff commentary that would follow the rules, similar to the approach the Fed has taken with regard to consumer protection rules. Under this approach, the commentary would be subject to public comment before being issued in final form.
We also believe the commentary should include staff interpretations that could serve as an alternative to NCUAs private opinion letters on certain share insurance issues. This should eliminate confusion for those who may be unfamiliar with the private opinion letters that address these issues.
Thank you for the opportunity to comment on these rules as part of the EGRPRA review process. If Board members or agency staff have any questions about our comments, please contact Senior Vice President and Associate General Counsel Mary Dunn or me at (202) 638-5777.
Assistant General Counsel